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Obama pitches private-sector investment as partial highway fix

July 18, 2014
And buckle up-- as Senate politicking over patching up the highway fund is under way

With the clock ticking rapidly down to when the Dept. of Transportation (DOT) will have to  start cutting highway payments to states, President Barack Obama this week launched by executive order an effort to pull more private-sector monies into the funding of transportation infrastructure projects.

Meanwhile on Capitol Hill, the short-term patch for funding the highway trust fund passed by the House this week has formally wended its way to the upper chamber.  But at this juncture, the bill’s fate in the Senate is anyone’s guess.

The new “Build America Investment Initiative,” according to The White House, is “a government-wide initiative to increase infrastructure investment and economic growth by engaging with state and local governments and private sector investors to encourage collaboration, expand the market for public-private partnerships (PPPs) and put federal credit programs to greater use.”

These are the three key elements of the initiative:

  • Establishing a “Build America Transportation Investment Center” within DOT to serve as “a one-stop shop for state and local governments, public and private developers and investors seeking to utilize innovative financing strategies for transportation infrastructure projects”
  • Creating a “Build America Interagency Working Group” to expand and increase private investment and collaboration in infrastructure beyond the transportation sector.  Co-chaired by Secretary of the Treasury Jack Lew and Secretary of Transportation Anthony Foxx, it will work with state and local governments, project developers and investors “to address barriers to private investments and partnerships.” It will focus especially on “improving coordination to accelerate financing and completion of projects of regional and national significance, particularly those that cross state boundaries”
  • The Treasury Dept. hosting an “Infrastructure Investment Summit” on September 9th “to bring together leading project developers and institutional investors with state and local officials and their Federal counterparts.” The meeting will also delve into “innovative financing approaches to infrastructure and highlight other resources that support project development”

This new federal initiative, per The White House, is modeled on recent efforts by some states and local communities that successfully leveraged PPPs and other innovative financing concepts to fund infrastructure projects. 

“The Build America Transportation Investment Center will use the lessons-learned from these leaders to help other communities and private project sponsors understand and better use federal financing programs and to structure deals that incorporate best practices and avoid pitfalls,” stated the fact sheet issued by the Administration.

“There are some limited situations where privately funded infrastructure can be useful, but public-private partnerships will do nothing to address the looming Highway Trust Fund shortfall, nor are they appropriate for basic maintenance and reconstruction projects,” Sean McNally, spokesman for the American Trucking Assns. (ATA) told FleetOwner in reply to our query on the potential impact of the President’s PPP-based initiative.

He also remarked that PPPs are “most useful in the construction of new capacity, but many PPP projects in the U.S. have or are failing because they overestimated revenue and traffic projections.

“Furthermore,” McNally continued, “in almost all cases PPPs mean tolls [are put in place], one of the least efficient methods of funding infrastructure. Rather than looking for solutions around the edges, we should be focused on the big picture and raise user fees to provide the funding necessary for our roads and bridges.”

On the other hand, the Oval Office statement noted that while “encouraged” that Congress is working short-term to “prevent transportation projects across the country from grinding to a halt, the President will continue to act on his own… where there is need or opportunity. And right now, there is a real opportunity to put private capital to work in revitalizing U.S. infrastructure.”

The White House also took pains to point out that the launch of the PPP-centered initiative comes about even as the President still supports the steps that Congress is taking in the short term to avoid a lapse in the Highway Trust Fund” and that he will also keep pushing for “long-term solutions for our nation’s infrastructure and the American economy.”

Regarding the upper chamber’s actions on passing its own measure to patch the highway fund, Senate Majority Leader Harry Reid (D-NV) wants to see votes take place on alternative measures from both Finance Chairman Ron Wyden (D-OR) and Environmental & Pubic Works  (EPW) Chairman Barbara Boxer (D-CA), per a report by Politico.com.

A big sticking point for Sen. Reid is that the House legislation pays for its ten-month highway reprieve with funds that had been earmarked for a five-month extension of jobless benefits.

When asked this week if unemployment insurance would come up in the Senate’s debate over funding transportation, Reid replied “I doubt it.”

If touching unemployment funds remains off the table, Senate leaders will have to come up with other ways to fund a highway-trust patch as they work to develop and pass their companion legislation to the House bill.

One approach came out in June, when Sen. Wyden proposed legislation to pump $9 billion into the highway trust fund to keep it solvent through year’s end. Funding for that measure entailed raising a heavy-vehicle use tax and implementing other tax and compliance changes around retirement accounts and mortgage interest.

However, Wyden’s bill did not include spending cuts deemed necessary by Republicans. As reported by Bloomberg, Sen. Orrin Hatch (R-UT), Ranking Member of the Finance Committee, indicated he would work with Wyden to develop acceptable cuts and “expressed disappointment” that the measure wasn’t put together in a bipartisan fashion.

At that time, Wyden called his proposed tax-related offsets “benign” and an “olive branch,” in that he would continue discussing changes with committee Republicans.
As for Sen. Boxer’s position on patching, a statement she released after the House bill passed derided that legislation as “kicking the can down the road” because it “failed to send a message of certainty and confidence to the thousands of businesses and millions of workers who have asked us to act this year on a long-term solution for transportation."

Boxer then pointed out that she still supports putting in place a highway-fund patch that would be good only through December to “allow consideration of a long-term bill [during] this Congress.”

The senator noted that, back in May, EPW had “unanimously passed S.2322, the MAP-21 Reauthorization Act, a long-term bipartisan bill to reauthorize the nation's transportation programs for six years at current funding plus inflation.”

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