The COVID-19 pandemic has exacerbated America’s infrastructure funding woes, but the next economic stimulus bill to be debated by Congress is an opportunity to adopt improved policies on infrastructure investment, an expert said during a webinar sponsored by the Eno Center for Transportation this week.
Some advocates have called for infrastructure to be included in a future COVID-19 response package, however, it’s not clear whether transportation and infrastructure funding will be part of that or separate legislation. Any infrastructure bill would be timely given that the Fixing America’s Surface Transportation (FAST) Act expires on Sept. 30.
“The major question for a bill at least in my mind is not necessarily whether it’s going to be part of a stimulus or not. I think the major question is going to be how are you going to pay for it and whether the bill is going to be fully paid for by the revenue streams that we have or is it going to be debt-financed?” said Rick Geddes, professor in the Department of Policy Analysis and Management at Cornell University and the founding director of Cornell’s Program in Infrastructure Policy. “I think at this point at least part of it is going to be debt-financed, but the question is how much?”
If lawmakers believe that Highway Trust Fund revenues and gas and diesel taxes should fund infrastructure projects, then that could constrain the size of the bill. Highway Trust Fund revenues have declined due to the economic slowdown and transit ridership is down significantly. It remains to be seen whether changes in commuter behavior are permanent or temporary.
This is where infrastructure policy can play a major role, Geddes said. “It would be nice to see a bill include innovative policies that incentivizes new sources of funding.”
There is an opportunity to improve infrastructure delivery by incentivizing asset recycling, value capture, and innovative finance such as public-private partnerships, Geddes said.
Policy reforms should include incentives for owners to realize more value from existing infrastructure assets. For example, a state department of transportation could more effectively manage its real estate portfolio. In addition, the federal government should incentivize the adoption of new technologies that save money and improve the delivery of services, and the value-added tolling of interstates should be considered.
Geddes also recommended other specific steps the government should take toward making infrastructure investment better in the future. Those included lifting the cap on private activity bonds and allowing for their use on a wider variety of infrastructure projects; reforming the National Environmental Policy Act in order to speed permitting; and repealing laws that prohibit the development of interstate rest areas by states. “This would be an example of value capture. If we did some creative policy reform, states would be able to generate more value from the existing infrastructure,” he added.
The professor also raised the issue of whether infrastructure should be part of a larger economic stimulus plan. He cited a May 5 report from the Congressional Research Service, titled “Transportation Infrastructure Investment as Economic Stimulus: Lessons from the American Recovery and Reinvestment Act (ARRA) of 2009.” The report found that infrastructure spending is slower than other types of stimulus because the level of actual infrastructure investment largely depends on state and local government spending, which can be constrained.
“My view is that projects that are needed to stimulate the economy are projects that wrap up quickly and get money out the door,” he said. “But with more major infrastructure projects, transformational infrastructure projects, you find that these projects take years to work through the funding and permitting process, so that typically by the time the project is ready to go, the economic cycle is over.”
Geddes also said that because the industry has changed and is much more technology and machine-driven than labor-driven, the employment effects of infrastructure investment are limited.
Still, the report noted that stimulus-funded projects can provide transportation benefits, with most ARRA transportation funding during the last recession having gone to routine projects such as highway paving and bus purchases that were quick to implement.