How to Solve America’s Infrastructure Problem
Today’s political environment may be polarized, but there’s at least one issue Americans appear to agree on: investment in the nation’s infrastructure is critical.
In an op-ed column for The Bond Buyer magazine, financial industry leaders Kenneth Bentsen and Chris Hamel make the case for renewing the nation’s commitment to infrastructure investment to jumpstart the economy.
They point to recent polling showing that more than 70% of Americans would like the government to address the growing public investment crisis, which has left U.S. highways, bridges, airports, water systems and other vital infrastructure in a state of deterioration and disrepair.
Bentsen, president and CEO of the Securities Industry and Financial Markets Association (SIFMA), and Hamel, head of municipal finance at RBC Capital Markets and chair of SIFMA’s Infrastructure Policy Committee, argue that planners, policymakers and financiers must take steps to “do more with existing resources.”
Bentsen and Hamel suggest that fresh approaches to procurement and construction would streamline the process and lower the cost of launching new public infrastructure projects. They also point toward the need for improved tracking and disclosure of costs of new projects as a way to heighten taxpayer and investor confidence.
Public infrastructure investment is expensive and finding the resources to finance large projects is a perennial challenge. According to the American Society of Civil Engineers, an estimated $3.3 trillion is needed to address weaknesses in the nation’s infrastructure.
Bentsen and Hamel underscore the important role that tax-exempt municipal bonds play in overcoming that funding shortfall, and warn against misguided attempts to remove tax exemptions from munis:
Three quarters of annual infrastructure spending in the U.S. is funded through the $3.7 trillion municipal bond market, where private investors purchase tax-exempt bonds issued by state and local governments.
Tax exempt interest is a key advantage for attracting investors, and allows municipal issuers to borrow at the lowest possible rates. Bentsen and Hamel call for the administration to expand the use of tax exempt bonds for public-private partnership (P3) projects, noting:
Our economic competitors are using P3s as a way to capture private sector efficiencies while providing public infrastructure and retaining government ownership.
To bolster such partnerships, the authors cite the Move America Act as an example of the type of fresh thinking needed to move public investment forward. The bipartisan legislation sponsored by Senators Ron Wyden (D-Ore.) and John Hoeven (R-N.D.) would create a new category of tax-exempt bonds that would be exempt from most private use restrictions, as long as the facilities are available for public use.
Infrastructure investment is a proven engine of economic growth and job creation, but it requires bipartisan leadership. It’s time for Washington to provide that leadership.