Senators Ron Wyden, D-Ore., and John Hoeven, R-N.D., are calling for an innovative approach to highway funding, with legislation designed to emulate public-private partnerships as a source of funding the long-term upkeep of the nation's infrastructure.
The bill, the Move America Act of 2015, would expand tax-exempt private activity bonds and create a new infrastructure tax credit, giving states flexibility to pursue critical transportation projects.
“What the Joint Committee on Taxation has told the two of us, is that for an $8 billion investment, you would leverage $226 billion worth of infrastructure projects -- whether it’s the gas tax, whether it’s repatriation, any of the approaches that are on the table -- this is the number produced by the official scorekeeper,” Wyden said during an event on Wednesday sponsored by the Bipartisan Policy Center.
A federal gas tax increase has been a remarkably unpopular approach to infrastructure funding despite being directly allocated to the highway trust fund, especially in the Midwest where Hoeven says people feel disproportionately impacted by the gas tax due to the amount of driving the region tends to require. Repatriation, the process of returning money kept offshore to American accounts for taxation, is similarly impractical due to deep partisan division on the issue.
Meanwhile, the public-private partnerships (PPPs) would use $226 billion to a great effect by employing the benefits of private-sector money and rapid construction schedules to save money in the long term. Great expense in infrastructure projects tends to come from the slow stop-and-go pace in which they are typically funded.
The $180 billion in bonds available over 10 years would not count against a state’s bonding limit, and no new bureaucracy or federal mandates would be handed down by Congress, leaving the allocation of these resources up to the states to manage. In addition, $45 billion in tax credits would be available to PPP partners as well.
“The majority of infrastructure in America is built at the state and local level and financed using the municipal tax-exempt bond market,” said Wyden. “We basically said, here’s an opportunity for you all to build on what works.”
The success of PPPs at the state and local level, and the advantages given by leveraging private sector capital and expertise make the proposal by the senators alluring to both sides of the aisle.
“In Washington D.C., it’s hard to get people to agree to buy a 7-UP, let alone deal with the big issues,” Wyden said.
But the Move America Act has elements in it that both parties find fit well with them ideologically. For Republicans, the PPPs are not mandated, but a tool states can implement as they see fit. This manages to implement the program in a way that does not meaningfully increase the scope of the federal government but instead relies on the existing PPP bureaucracy existent in most states. For Democrats, the infrastructure projects they desire will be funded through means other than cutting existing programs or raising the gas tax, which is seen as a regressive tax on the poorest Americans.
“I am hopeful that we can get something done in a bipartisan fashion, that both goes to getting a six-year long-term highway bill and some amount of tax reform, which serves both as tax reform but also to pay for that highway bill,” Hoeven said during the event. “I think the likelihood is that we will probably
see an extension to the end of the year, perhaps before we go out of this
month, which you can view one of two ways. That’s bad in that we
would like to get a six-year bill right now. But perhaps with an extension
until the end of the year, we keep this pressure on to get the six-year bill," Hoeven said.
There are still questions however, and those answers would be left to the states to figure out. For instance, 16 states do not have legal framework that would allow for PPPs, and both senators felt it would be ‘micromanagement’ to determine if this program would grant those states the necessary legal authority to implement PPPs.
Both Wyden and Hoeven say they are optimistic that this bipartisan effort will succeed.
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