A bipartisan group of senators, led by Mark Warner (D-Va.) and Roy Blunt (R-Mo.) introduced legislation Thursday that would provide a new way for state and local governments to get low-interest financing to help build infrastructure projects.
The proposal would create an independent, nonpartisan financing authority, seeded with $10 billion, to offer loans and loan guarantees to states and localities. The idea is that the fund could help provide the final piece of financing needed to get a project underway in cases where projects also have private investment.
Warner, in a statement, emphasized that the legislation isn't a "silver bullet" but instead "creates smart new tools to help our states and localities unlock billions of dollars in additional private investments at a time of very favorable interest rates."
The proposed Infrastructure Financing Authority would be designed to facilitate big projects -- those with a price tag of $50 million or more -- that are considered regionally or nationally significant. A Warner spokesman said the program could offer lower interest rates than conventional financing -- just slightly above the rates of Treasury securities -- as well as longer terms and flexible repayment schedules.
The new authority would finance no more than 49 percent of a project's cost, and loans and loan guarantees would carry fees that helped make the authority sustainable on its own.
The legislation would also create an office filled with in-house finance experts to help ensure state and local governments are entering into deals that serve taxpayers' interests. As it's envisioned, the authority would operate outside of existing federal agencies and have its own CEO and bipartisan, seven-member board.
Lawmakers suggest the effort could help solve the country's chronic under-investment in infrasructure, citing the more than $1.1 trillion estimated shortfall in infrastructure spending through 2020, according to American Society of Civil Engineers.
Several groups in the infrastructure community praised the legislation, which has eight co-sponsors.
"These and other innovative proposals are critical to long-term economic growth and a more competitive nation," Bipartisan Policy Center President Jason Grumet said in a statement.
The proposal seems remarkably similar to the Transportation Infrastructure Finance and Innovation Act program (TIFIA), which already offers similar credit assistance for infrastructure projects. That program recently got a huge influx of funds, expanding from $122 million annually to $1 billion annually under last year's highway bill, though it's struggled to complete loans in a timely manner. One observer suggested lawmakers' efforts might be better spent improving the TIFIA program than creating another financing instrument.
But the new proposal has a few key differences from TIFIA. Most significantly, TIFIA is part of the U.S. Department of Transportation, while the proposed program would be would be independent, similar to the Export-Import Bank of the United States.
That could make the process of selecting programs less political. Moreover, while TIFIA is limited to transportation infrastructure, the proposed authority would be available to a broader array of projects including water, wastewater and energy transmission projects.
And by bringing together a body of in-house finance experts, the program could be especially useful. "Many states and localities currently simply do not have the expertise to go toe-to-toe with sophisticated potential private sector partners, and have stayed away from pursuing (public-private partnerships) as a result," a Warner spokesperson wrote in an email.
The idea is that the authority could offer attractive loans but also provide expertise to identify viable projects and assist with negotiations. As Governing reported last year, states and localities often lack the technical expertise to pursue the types of public-private partnership that is an increasingly attractive way to finance projects.
Still, it's unlikely the proposed authority would do much to solve the country's infrastructure challenges. Infrastructure advocates have long clamored for more federal funding, but the bill exclusively helps with borrowing.
Generally speaking, state and local governments don't struggle to obtain loans; rather, the challenge is finding money to pay for the projects themselves. The Warner-Blunt bill wouldn't help solve the underlying problem of how states and localities can pay for infrastructure since it doesn't provide them more funding, says Joshua Schank, head of the Eno Center for Transportation think tank.
"The question is why do they think there is all this infrastructure that needs to be built but can't because of financing," Schank says.
As it stands, Congress has struggled to provide increased funding for transportation, despite the almost universal acknowledgement among lawmakers that it's a problem that needs to be addressed. That's largely because of the politics of transportation funding, in which calls for increased infrastructure revenue -- through things like gas tax hikes or vehicle miles traveled fees -- could be politically unpopular.
Schank says that the sponsors of the bill may be hoping that their proposal will draw awareness to the country's infrastructure needs, rather than solve them outright.
Indeed, for several years, lawmakers have introduced similar bills that address infrastructure financing -- as opposed to funding -- like the recent infrastructure fund proposal from Rep. Earl Delaney (D-Md.) and repeated calls for a federal infrastructure bank from Warner, President Obama and others.
Yet groups like American Association of State Highway and Transportation Officials, for example, have consistently focused their efforts on increasing infrastructure funding, which has remained stagnant in recent years.
Still, the bill's sponsors acknowledge the authority would only be part of the solution, and AASHTO officials say it might be valuable. "It's absolutely true that we need every available tool in the toolkit, and we certainly appreciate the senators' longstanding efforts in pushing for infrastructure investment," says Joung Lee, AASHTO'S deputy director of management and program finance.