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The Path to A Bipartisan Infrastructure Solution

By Aleksandra Srdanovic, , Olive Morris and Zane Heflin — May 5, 2021

Infrastructure is a two-party problem that demands a two-party solution. But getting there will require creative thinking to determine which investments we should prioritize and how to pay for them. This paper from The New Center provides a bold and bipartisan plan for rebuilding and investing in America.

OVERVIEW

Our Solutions In Brief

1. Prioritize the Most Important Projects

Creating a nonpartisan “National Infrastructure Board”—modeled on the proven military Base Realignment and Closure (BRAC) commissions—to determine which projects to prioritize.

2. Build on What We Already Have

Federal “New Starts” transit funding is granted based upon a scoring system that favors a new facility over adding core capacity. The Federal Transit Administration should update the scoring system to assure that core capacity projects are competitive with new starts.

3. Remove Roadblocks to Rebuild America

Congress should introduce a program to incentivize states and localities to streamline their procurement processes and speed up the delivery of infrastructure projects.

4. Implement a Capital Budgeting System

The federal budget should be separated into two parts—a capital budget for long-term investments such as research and infrastructure, and an operating budget for annual expenses.

5. Empower States and Localities

There are many policies—some of which can be incented federally but implemented at the state or local level—that would create and dedicate separate funding streams for infrastructure, including user fees, tax increment financing, and dedicated property or sales tax assessment to fund essential infrastructure.

6. More Flexibility in Federal Funding

Congress requires federal funding to be spent on particular classes of infrastructure projects (e.g., water). These restrictions should be changed or eliminated to give localities more flexibility to spend on their greatest needs.

7. Closing the Tax Gap

The “tax gap”—the difference between taxes owed and taxes paid—is around $574 billion annually. Improving the IRS’s resources, technology, and funding could raise an estimated $1.6 trillion over ten years.

8. Privatize some projects without government support

A certain class of infrastructure assets (e.g., airports) may be better served by privatization. These assets will, upon sale or lease, generate a financial return for investors without government support or incentives.

9. Attract private investment for some assets with government incentive or support

Some assets can attract private investment if they are supported through some type of incentive or credit enhancement such as federal and state tax credits, government credit enhancements, or low-cost leverage.

10. Statutory/Regulatory Changes to Broaden Investor Base

Statutory or regulatory changes (e.g., classifying certain infrastructure projects as meeting banks’ Community Reinvestment Act requirements) could broaden the pool of investors who could finance infrastructure projects.

11. Lift the Cap on Private Activity Bonds

Congress should encourage the wider use of private activity bonds by eliminating state volume caps for water and other projects, and excluding private activity bonds from the Alternative Minimum Tax.

12. Build America Bonds

Congress should reauthorize the Build America Bonds (BAB) program, which permitted governmental bodies to issue taxable and tax-exempt bonds.

13. Pooled Investment Vehicles

States could pool several investments of varying risk characteristics to diversify systemic risk and reduce the cost of financing, much like infrastructure banks.

14. Open Up Infrastructure Investment to Individuals

Create equity instruments that allow individual investors to participate in infrastructure investment via mutual funds, ETFs, and/or 401(k)s.

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Facts At-A-Glance

  • C-

    The overall grade for American infrastructure from the American Society of Civil Engineers

  • $2.6 trillion

    America's infrastructure funding gap

  • $416 billion

    in public money spent on infrastructure was spent at the state or local level

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