President Donald Trump's State of the Union address on Tuesday called major infrastructure legislation a “necessity,” and that sentiment was in full force at the U.S. Chamber of Commerce’s infrastructure summit earlier that day, when the prevailing mantra was that the cost of inaction far outweighs the cost of investment.
According to the American Society of Civil Engineers, more than two of every five miles of urban interstate is in a state of congestion, almost 6 billion gallons of treated water is lost per day because of leaking pipes and 188 million trips are taken on structurally deficient bridges each day. Failing to act on that deteriorating infrastructure costs the average family upward of $3,400 of disposable income per year and could result in $3.9 trillion in losses to the US gross domestic product by 2025, ASCE says.
Among the solutions proposed during the event was a call from Chamber CEO Tom Donohue for a comprehensive infrastructure package that outlines an expansion to federal loan programs, increased private investment, a streamlined permitting program, and greater emphasis on work-based learning and technical education.
ASCE called for increasing infrastructure investment from all levels of government and the private sector from 2.5% to 3.5% of the GDP by 2025. Attendees also had the chance to hear insight from a Transportation Research Board study calling for $45 billion to $70 billion per year over the next two decades to upgrade the interstate highway system.
But while most stakeholders agree that infrastructure needs significant investment, figuring out where the money should come from has perpetually stumped Congress. During the Chamber’s event, a series of panels offered insight weighing traditional and unorthodox funding mechanisms.
Some of the funding options
A common statistic thrown around in infrastructure circles is that the federal gas tax hasn’t been raised since 1993. ASCE has proposed a 25-cent increase to the federal gas tax, which would be indexed for inflation. The Chamber recently held a $25,000 contest that gleaned more than 200 submissions offering outside-the-box funding alternatives, such as a so-called “sin tax” on goods such as marijuana, a tax on political contributions and even a GoFundMe page.
Recently, the use of public-private partnerships, or P3s, to fund infrastructure has gained traction. But while increased private investment makes sense for some projects, “[P3s] won’t work everywhere,” said Rep. Peter DeFazio, D-Ore., chairman of the House Transportation and Infrastructure Committee, asserting the need for federal investment in surface transportation, harbor maintenance and airports.
Another option officials are exploring is a mileage-based user fee, or MBUF, under which commuters pay for each mile of roadway they use. Attendees at the Chamber event had the chance to hear from the I-95 Corridor Coalition, Jacobs Engineering and the America Trucking Associations about an MBUF pilot trucking program on the East Coast.
Participants in the pilot were asked to use mileage reporting devices, which prompted privacy and security concerns that the coalition says were mostly assuaged. After receiving their faux invoices, 31% of participants were surprised, thinking they had paid more in state fuel taxes.
Moving on from the debate
While it is necessary for stakeholders to discuss the merits of traditional and untraditional funding options alike, some in the US tend to fragment the conversation in a way that pits ideas against each other when they could be combined for a more comprehensive solution, said Jennifer Aument, president of Transurban’s business in North America.
“It still feels like a debate in this country – tolls or taxes, transit or roads, traditional delivery or P3 delivery,” Aument said. “We’ve found that … policymakers that have been the most successful have moved on from the debate. Instead of debating the options, they have … put to work every tool possible to be able to fund, deliver and operate effective infrastructure.”
For example, officials in the Australian state of New South Wales have seen success in an incentive-based asset recycling program where governments can lease current infrastructure assets to private companies and invest the revenue in new projects. Under the program, Australia offered New South Wales and other states grants of as much as 15% of the proceeds from leasing existing structures if they promised to use the money for new infrastructure.
“But [New South Wales] didn’t stop there,” Aument notes. “Asset recycling wasn’t the only answer. It was but one tool in their toolbox.” That toolbox included a gas tax to raise transportation revenue, a third of which Aument notes was generated by tolls.
According to the Reason Foundation, the US has more limited experience with P3 leasing, and Aument concedes that a similar program might not be politically feasible in the US despite past support from Vice President Mike Pence.
What state and local governments can do
With federal funding for infrastructure in question, some states and cities are looking to take matters into their own hands.
“We don’t have the luxury of not delivering to our communities, so we use every tool at our disposal,” said San Antonio Mayor Ron Nirenberg. That includes a bond package to local voters every five years to fund various projects. In 2017, voters signed off on $850 million in infrastructure bonds. But Nirenberg concedes that “it’s not enough,” calling for partnership at the state and federal level, particularly on surface transportation.
For its part, Gary, Ind., extended its airport runway to nearly 8,900 feet in 2014 and is currently on the verge of developing an inland port to complement the airport, according to Mayor Karen Freeman-Williams. The city was able to leverage private investment along with federal and state funds for the airport project, and Freeman-Williams is hopeful the same can be accomplished for the port.
And in Virginia, legislators approved a bill to finance improvements to Interstate 81. It’s unclear whether officials will opt for tolls or taxes, but according to Rich McArdle, president of UPS Freight, the move is a sign that leaders are tired of waiting.
“The uncertainty … means states are pursuing what they think needs to get done,” McArdle said.