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AASHTO Journal

Key Senate, House Lawmakers Say Private Project Financing Not Enough for Many Areas

A number of congressional leaders on transportation issues are saying that relying on private financing to pay for infrastructure projects won't get the job done in many areas of the country.

That view by key lawmakers could affect the shape of any eventual investment plan to improve transportation systems and other types of infrastructure, as President Trump has strongly advocated. Various Trump administration officials have said they support measures to greatly expand the use of private finance to pay for projects.

In a Feb. 8 hearing on modernizing infrastructure at the Senate Environment and Public Works Committee, Chairman John Barrasso, R-Wyo., took issue with the idea that private partnerships to build projects faster would work in many areas that lack sufficient funds to repay investors.

capitol0816.jpgThat committee plays the lead role in the Senate in writing legislation authorizing highway investments.

"Funding solutions that involve public-private partnerships, as have been discussed by administration officials, may be innovative solutions for crumbling inner cities, but do not work for rural areas as today's testimony will show," the chairman said in his opening statement.

Barrasso added: "As was stated in written testimony submitted today on behalf of Wyoming, Idaho, Montana, North Dakota, and South Dakota — 'Public Private Partnerships and other approaches to infrastructure investment that depend on a positive revenue stream from a project are not a surface transportation infrastructure solution for rural states.'

Barrasso was referring to testimony by Wyoming Department of Transportation Director William Panos for those five states. Both he and Colorado DOT Executive Director Shailen Bhatt told senators that in a new investment plan states would need direct federal funding in addition to whatever financing incentives it may provide. (See related story.)

Panos also said rural as well as urban states benefit from the distribution-formula programs of the Highway Trust Fund and the Fixing America's Surface Transportation Act that Congress passed in December 2015. He said funneling new investment funds through those programs would move projects faster for states than through a federal discretionary program.

Bhatt said that "Congress can't fix a funding problem through financing . . . financing mechanisms cannot correct what is essentially a funding problem due to insufficient investment."

The ranking EPW Democrat, Tom Carper of Delaware, in his opening statement said the project financing issue goes beyond rural states. "While financing techniques are a tool that may be appropriate for some types of projects, financing will not solve all infrastructure needs, regardless of whether you are a rural or urban state," Carper said.

In a recent interview with the Washington post, House Transportation and Infrastructure Chairman Bill Shuster, R-Pa., also raised doubts about how well private financing could help his largely rural congressional district.

"Investors won't come in unless there's some sort of return," Shuster told the Post. "There are things that you can do with tax [breaks] that will attract the dollars, but I think the states can't do it without the federal government coming to the table with a piece of the funding solution."

Lawmakers from both parties are proposing new measures to increase the amount of direct federal funding that goes to transportation, including one that diverts some tariff revenue into the Highway Trust Fund and another that would issue surface transportation bonds backed by revenue from indexing the level of federal gasoline and diesel taxes against construction cost inflation.

Officials at a number of infrastructure groups including the American Association of State Highway and Transportation Officials have taken the position that while they are open to additional private financing measures, states will need additional federal funding to significantly improve the transportation systems across the nation.

And a coalition of hundreds of industry groups have called on President Trump to include a dedicated, long-term revenue stream to sustain the trust fund well beyond the 2020 expiration of the FAST Act. 

2/10/2017
Questions regarding this article may be directed to editor@aashtojournal.org.