Paying for infrastructure package may mean thinking outside the box, panelists say

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In order to pay for President Joe Biden’s $3 trillion infrastructure package, Congress will have to look at new ways methods to raise capital, including public-private partnerships and Vehicle Miles Traveled (VMT) fees, experts say.

As part of the Bipartisan Policy Center’s virtual event on “How to Pay for Infrastructure: Strategies for Addressing the $2 Trillion Funding Gap,” panelists gave their thoughts on not only how to pay for infrastructure spending, but what the packages that will be passed might look like.

Jane Garvey, former Administrator for the Federal Aviation Administration and current North American chairman for Meridiam, said strategies for paying for infrastructure would need to include the private sector.

“I think one of the reasons that this conversation is going to be challenging is that we know that we need robust federal financing strategies,” she said. “There are multiple strategies that can be brought to the table to be used. But I think it’s important to look at the programs that work and to ask if there are ways we can change those programs in order to make them work better.”

Former U.S. Rep. Bill Shuster, a previous chairman of the U.S. House Transportation and Infrastructure Committee, said that as the United States moves forward, the country needs to think about different ways to address the funding issue.

“I think the most easily understandable thing is a one-time increase in the gas tax to make a transition to vehicle miles traveled. You have to have some time to make the transfer over,” he said. “But I also think you need to tax bicycle tires, as more bicycle riders use the roads. It really is an ‘if you use the system, you pay for the system’ approach.”

Shuster also recommended switching to a national infrastructure bank that would take funding away from the federal appropriations process, and allow entities to borrow money from the bank that would be funded by taxes. Shuster also recommended the use of public-private partnerships (P3s).

Emeka Moneme, vice president of corporate strategy and innovation at Transurban, said using P3s as a funding model would not only allow projects to get done more quickly and keep projects maintained longer, but would also allow projects to be funded through private financing not accessible to public entities.

Most of the panelists agreed that moving to VMTs was one of the best options for ensuring a sustainable funding model. Patricia Hendren, executive director of Eastern Transportation Coalition, said that group’s multiple pilot programs on VMTs found any VMT model would have to take passenger vehicles and heavy use vehicles into mind when drafting policy. Users, she said, were generally accepting of VMTs.

“The concept of user pay, people get that. The challenge is that the public is not convinced that we have a problem. The roads look fine to them, and they have the perception that the federal government already has a lot of money,” she said. “Secondly, we found that we can frame that conversation effectively with users if we talk about it as why this affects your lives. People want to know how it is going to impact them.”

Whatever policies the government adopts, said Scott Goldstein, policy director for Transportation for America, the important thing will be explaining to voters what the tax is for. His organization, he said, has found that in communities where local leaders went to voters and told them what was needed, how they were going to raise the money for it and held themselves accountable for it, voters were more likely to accept those taxes.

“We find that when infrastructure revenues are for the general fund, they don’t get approved,” he said. “Our current system is 70 years old. We should be thinking about whether or not this is the system we want to go forward with. At the federal level, instead of saying ‘We don’t have enough money’… we should instead be saying ‘Here’s what we need to do, and here’s how we’re going to raise money, and this is what we’re going to spend it on.’”

However the federal government chooses to pay for the package, getting it passed with be the hard part, Shuster and Garvey said. Both said they felt the chances were high that some sort of infrastructure package would be passed by the end of the year.

Shuster said that what is in the package and how big it will be will depend on the process it is voted on in Congress.

“Congress and the administration are at a fork in the road,” he said. “The House will be able to pass whatever it wants to, but the Senate is a different story… If they go through the budget reconciliation process, it limits (the Senate) on the policies they can ask for. If they go through regular order, we’ll get a smaller package, but it will be broader – maybe including broadband and the electric grid. If they go the other route, there are a lot of things that they won’t be able to get in there, but it will be a bigger package.”

Because of bipartisan support for infrastructure spending, Garvey said she felt Congress would pass something on the larger side.

“There’s enough common ground,” she said. “I think there’s enough common interest to where a comprehensive bill can be fashioned. And I’d say it’ll be bigger rather than smaller. I think it can be transformational. The pandemic has given us a real opportunity to come together on this.”