As states acquire more familiarity with
credit transactions and develop more capacity to pursue
public-private partnerships, and as federal budgetary
constraints continue, long term financing
of new transportation facilities and of multi-year
reconstruction programs could become the states’ primary method of
expanding and modernizing aging infrastructure. At the same time, states' growing fiscal
independence points to a new approach to funding the
nation's transportation needs in the 21st
century.
In this prospective new
model, routine highway maintenance and system
preservation would continue to be funded on a pay-as-you-go
basis with current state and local tax revenue as supplemented with
federal-aid highway dollars from the Highway Trust Fund
. However, capital-intensive
multi-year reconstruction programs and new capacity
expansion projects ---investments that are beyond the
states' fiscal capacity to fund out of current revenue ---
would be financed largely through public-private
partnerships employing long-term credit and availability
payments.
Provision of credit would remain a
shared responsibility of the public and private sectors. Private
Activity Bonds, the TIFIA program and State Infrastructure
Banks would continue to serve as the main public sources
of credit assistance while additional public credit
facilities could be created, if need be, to handle a growing backlog
of reconstruction needs. Potential candidates include Sen. Mark
Warner's National Infrastructure Financing Authority (IFA)
and Rep.John Delaney's $50 billion American Infrastructure
Fund (AIF). The latter proposal would capitalize the AIF by selling
bonds to U.S. companies. In exchange for purchasing the bonds,
companies would be able to repatriate a portion of their overseas
earnings tax-free. (A somewhat similar approach forms part of
Rep.Camp's tax reform proposal).
The
Highway Trust Fund--- freed from the obligation to fund new
infrastructure and large reconstruction programs on a
cash basis---would be placed on a more stable financial
footing, while an ample supply of long-term credit ---both
public and private---would reduce the need for contract authority
and multi-year transportation authorizations. Meanwhile, states and
localities would gain more independence to plan and fund
infrastructure improvements on their own terms, free of excessive
federal regulatory oversight.
It's a highly plausible answer in our judgment to the
nation's search for a long-term solution to the
infrastructure
funding problem.
Earlier versions of this commentary
were presented at the Transportation Research Board
workshop, "States are leading the charge on transportation
revenue initiatives," January 12 2014; at the Conservative
Policy Summit of the Heritage Foundation on February 10, 2014; and
in a Governing magazine interview dated February 27,
2014.
Kenneth Orski
Editor/Publisher
Innovation NewsBriefs (celebrating our 25th
year of publication)
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