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Changes to Federal Cost Share for Transit Projects Debated at Hearing

Sen. Kirsten Gillibrand, D-N.Y., took pointed aim at changes being made to federal cost share for transit projects during a July 11 Environment and Public Works Committee hearing, noting that such changes could "make it more difficult for state and local agencies" to use low-interest federal loans to pay for all manner of infrastructure projects going forward.

Gillibrand referenced a letter issued by the Federal Transit Administration back on June 29 that the agency will now consider U.S. Department of Transportation loans "in the context of all federal funding sources requested by the project sponsor" and "not separate from the federal funding sources" for transit projects involved in its Capital Investment Grants or CIG program.

FTA's letter went on to note that this change in federal transit funding guidelines would "encourage innovative approaches including value capture and private contributions" and that the agency plans to publish an official revision to this CIG "policy guidance" later this year for notice and comment.

During the hearing, Gillibrand (seen at right) said she was "very dismayed" with FTA's new guidance. "This ignores the distinction between grant funding and loan financing and does not take into account whether the loan is actually repaid by using non-federal funds," she said, adding that "FTA's interpretation is not consistent with the law."

Furthermore, Gillibrand noted that FTA's guidance seems to be part of a broader effort to "push more private sector financing for public infrastructure projects," which in her view "makes it more difficult to build major transit projects and ends up making them more expensive."

Gillibrand asked the witnesses at the hearing – gathered to discuss the "long-term value to U.S. taxpayers" of low-cost federal infrastructure loans, such as those offered via the Transportation Infrastructure Finance and Innovation Act or TIFIA – for their opinions on the FTA's guidance.

Brian Motyl, transportation trust fund administrator for the Delaware Department of Transportation, for one, noted that there must be "a good mix between funding and financing" for public infrastructure projects.

"All of our infrastructure needs can't be met with loans; we need grant funding and other mechanisms," he said during the question-and-answer portion of the hearing. "There has to be a variety of programs for states to use."

Doug Holtz-Eakin, president of the public policy group American Action Forum and a former director of the Congressional Budget Office, noted that "there are an enormous number of things that cost the federal [government] money that are worth doing – we've got localities across the country to who are willing to put in their own money and have private entities pay tolls to make these projects go. Clearly, they are in the interest of the population."

Yet he stressed that attracting private capital to public infrastructure projects is "difficult" because they require cash flows that provides a better rate of return that what they can get elsewhere.

"That becomes the core sticking point to getting more private capital participation in infra project," Holtz-Eakin explained. "In my opinion, just not enough places where you can or willing to toll a bridge or pay a fee for wastewater attract private capital. The core framework should be if these projects [are] worth it for the country, gets as much private capital as you can, but then the rest has to come from the taxpayers, one way or another."