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Six Big Ideas for Infrastructure

The United States faces a $2 trillion infrastructure funding gap over the next 10 years. That represents the difference between what is planned to be spent and what is actually needed to maintain, modernize, replace, and upgrade the nation’s infrastructure. It’s also clear that more than just money is needed. Addressing this gap will require a transformation in how we plan, fund, and build infrastructure across the country. Critical assets, like our roads, bridges, and water systems, have been poorly maintained. With state and local governments struggling to tackle even long-deferred maintenance projects, let alone invest in new infrastructure or harness burgeoning technologies, the scale of this problem can seem insurmountable. These big problems require big ideas.

To solve the $2 trillion funding gap and position the United States for the future, any infrastructure effort should include these six big ideas:

  • Authorize a new direct payment infrastructure bond. The federal government has a number of programs designed to provide state and local governments with access to low-cost financing for big infrastructure projects. But a new direct payment bond would attract new investors, support a wide range of both public and privately developed projects, and give governments another tool in the toolbox. Direct payment bonds offer a new product—a taxable bond for which the issuer receives a direct payment from the federal government, or the buyer receives a federal tax credit, providing a borrowing discount to tax-exempt bonds. Unlike traditional municipal debt however, direct payment bonds are attractive to several types of investors, including those who do not have federal tax liability, such as pension funds.
  • Deliver projects faster through additional permitting reform. Unnecessary delays the approval process for infrastructure projects cost money for both the public and private sectors. For example, direct costs of a project can go up dramatically if the costs of materials, supplies, or labor rise during a delay. There is also a public cost to delaying needed infrastructure improvements—for example, older facilities generate more emissions and often require more frequent and costly repairs. A report by the nonprofit organization Common Good estimated the cost of delaying the start of all U.S. public infrastructure projects by six years to be $3.7 trillion. The environmental review and permitting process can be improved by expanding use of the federal government’s permitting dashboard, requiring federal agencies to conduct reviews simultaneously, and delegating additional responsibilities to states.
  • Break the cycle of deferred maintenance. Improving how we plan and pay for our infrastructure must start at the local level. Public agencies typically lack a comprehensive overview of their assets’ condition and future cost. In some cases, agencies don’t even have a complete list of the assets they own. This inhibits the ability of public agencies to make strategic decisions about how and where to deploy their limited funds, and masks potential opportunities for innovative solutions. As part of required certifications for federal infrastructure funding or financing, applicants should demonstrate that they are using best practices in asset management, life-cycle accounting, and project selection.
  • Encourage public-private partnerships to engage private capital and transfer risk. Public-private partnerships or P3s can be a key tool for state and local governments to address overwhelming infrastructure needs. The public sector should not be expected cover these costs alone. Sector partners can bring an appetite for risk, necessary capital, and valuable expertise to a project. Investors with hundreds of billions of dollars to deploy are actively seeking infrastructure projects to support. P3s are not the right model for every project, but under the right conditions, a P3 can deliver a more cost-effective and better performing project. Applicants for federal funding or financing should be required to demonstrate that they have evaluated all delivery options, including P3s, to determine which would provide the best value for taxpayers over the lifecycle of the project.
  • Address need for technical support with a capacity-building fund. Lack of capacity at the state and local levels is one of the primary barriers to adopting emerging best practices and advancing alternative methods of developing and delivering infrastructure projects. The federal government has a successful history of supporting state and local agencies with technical assistance regarding individual projects or applications. Many federal agencies have expert staff who can assist project sponsors with specific tasks or questions. Few programs, however, focus on building long-term capacity at the state and local level to improve decision-making and infrastructure performance across the board. A capacity building fund of $20 million annually would assist applicants for federal funding and financing in meeting regulatory requirements.
  • Incentivize innovation with a challenge program to improve infrastructure delivery. The Department of Transportation’s 2015 Smart City Challenge demonstrates how even a relatively modest federal investment can play a valuable role in promoting the adoption of technological innovation in cities across the country. Currently, there is a clear need for more innovation in how we plan, deliver, and manage infrastructure projects. To spur this change, the federal government could create a competitive grant program to incentivize the development of innovative improvements to state and local project development processes. Grants would be awarded to proposals that improve project management, procurement, accounting, risk management, and asset performance.
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