I sat in traffic on I-95 outside Wilmington, DE this afternoon following a short address by President Obama where he signed an Executive Order at the Port of Wilmington. The Order creates a new federal “Build America Investment Initiative promoting public-private partnerships (PPP’s) for infrastructure improvements nationwide. He chose the Port because it afforded him the backdrop of a closed I-495 bridge which currently is closed to traffic. Hence the back-up I was in on 95.
The bridge, which carries 90,000 vehicles a day is causing headaches in Northern Delaware as the bypass around Wilmington is forcing those 90,000 cars and trucks onto regular I-95 instead. This is the major east coast north/south artery and all I could do was sit there after visiting Capriotti’s sandwich shop on Route 141 for a sub after the event. The sub shop is opposite the Delaware Air National Guard field where Air Force One landed and took off. One perk of being Barack Obama these days is that he didn’t have to get stuck on I-95’s traffic as he traveled on to New York for some evening fund raisers. I did see three Secret Service men in Capriotti’s getting nourishment, likely clued in to the place by the Vice President. POTUS had lunch at The Charcoal Pit on Concord Pike before heading to the Port of Wilmington. That is one of the VP’s favorite haunts, as it was for my grandparents who resided in Wilmington.
The new federal initiative announced this afternoon is designed to improve communications and smooth planning for PPP projects in transportation. Congress has stalled in passing a new, comprehensive transportation bill, something that usually is filled with tons of pork for home Congressional Districts. When the late Congressmen Shuster (the present one’s father) was Chair of the House Transportation Committee he used the bill to build a four lane highway to his home in south Central Pennsylvania. Others have used it to build highways that greatly enriched properties they owned. Such is the nature of our democratic system. Delawareans just want their bridge fixed and re-opened.
The I-495 bridge was closed a bit over a month ago after tons and tons of soil dumped there by a contractor destabilized the bridge supports. Workers are jacking up the bridge and shoring things up so it doesn’t collapse under the weight of those 90,000 vehicles per day.
From the White House:
Today, the President will deliver remarks at the Port of Wilmington in front of the I-495 Bridge in Delaware. With 90,000 cars moving over it per day before repairs began, this bridge is a key example of the importance of infrastructure, which keeps the economy moving, spurs innovation, and bolsters our national competitiveness. At the port – and in this Year of Action – the President will announce a new executive action to create the Build America Investment Initiative, a government-wide initiative to increase infrastructure investment and economic growth. As part of the Initiative, the Administration is launching the Build America Transportation Investment Center – housed at the Department of Transportation – to serve as a one-stop shop for cities and states seeking to use innovative financing and partnerships with the private sector to support transportation infrastructure.
The President’s visit and announcement today are a part of the Administration’s continued push to highlight the importance of investing in our nation’s infrastructure so that we can build on the progress our economy is making by creating jobs and expanding opportunity for all hardworking Americans. The steps announced today continue the momentum the President has made using his executive authority – his pen and phone – to invest in modernizing our infrastructure, including speeding up the permitting process for major infrastructure projects to create more jobs.
The President supports the steps that Congress is taking in the short-term to avoid a lapse in the Highway Trust Fund, and he will continue to push for long-term solutions for our nation’s infrastructure and the American economy.
Investing in a 21st century American infrastructure is an important part of the President’s plan to build on the progress our economy is making by creating jobs and expanding opportunity for all hardworking Americans. Modern and efficient infrastructure – whether moving goods to our harbors and ports or connecting people to services or gigabits to our offices and homes – helps small businesses to expand, manufacturers to export, investors to bring jobs to our shores, and lowers prices for goods and services for American families.
The President has been very clear that we need to do more to improve our infrastructure in order to create jobs, provide certainty to states and communities, help American businesses, and grow our economy. He has put forth a long-term proposal that would do just that and pay for it by closing unfair tax loopholes and making commonsense reforms to our business tax system, while providing the certainty of reliable federal funding to states and communities.
And while the President is encouraged that Congress is heeding these calls by taking action in the short-term to prevent transportation projects across the country from grinding to a halt, the President will continue to act on his own to promote American economic growth where there is need or opportunity. And right now, there is a real opportunity to put private capital to work in revitalizing U.S. infrastructure.
That is why today, the President will sign a Presidential Memorandum to launch the Build America Investment Initiative, a government-wide initiative to increase infrastructure investment and economic growth by engaging with state and local governments and private sector investors to encourage collaboration, expand the market for public-private partnerships (PPPs) and put federal credit programs to greater use. Starting with the transportation sector, this initiative will harness the potential of private capital to complement government funding.
Ø As part of the Initiative, the Administration is launching the Build America Transportation Investment Center: Housed at the Department of Transportation, this center will serve as a one-stop shop for state and local governments, public and private developers and investors seeking to utilize innovative financing strategies for transportation infrastructure projects. Additional details are below.
Ø Build America Interagency Working Group: To expand and increase private investment and collaboration in infrastructure beyond the transportation sector, a federal inter-agency working group, co-chaired by Cabinet Secretaries Lew and Foxx, will do a focused review with the best and the brightest from the public and private sector. This group will work with state and local governments, project developers, investors and others to address barriers to private investments and partnerships in areas including municipal water, ports, harbors, broadband, and the electrical grid. The effort will include a particular focus on improving coordination to accelerate financing and completion of projects of regional and national significance, particularly those that cross state boundaries.
Ø Infrastructure Investment Summit: As part of the drive toward innovative infrastructure solutions and to highlight the opportunities for infrastructure investment, the Treasury Department will host a summit on Infrastructure Investment in the U.S. on September 9, 2014. This session will bring together leading project developers and institutional investors with state and local officials and their Federal counterparts, and will focus on innovative financing approaches to infrastructure, and highlight other resources that support project development.
Build America Transportation Investment Center: Housed at the Department of Transportation, this center will serve as a one-stop shop for state and local governments, public and private developers and investors seeking to utilize innovative financing strategies for transportation infrastructure projects. This center will provide:
Ø ‘Navigator Service’ for the Public and Private Sector: Through hands-on support, advice and expertise, the center will make DOT credit programs more understandable and accessible to states and local governments and leverage both public and private funding to support ambitious projects. The center will also provide private sector developers and infrastructure investors with tools and resources to identify and execute successful PPPs.
Ø Improved Access to DOT Credit Programs: The center will encourage awareness and efficient use of existing resources at the Department, including the Transportation Infrastructure Finance and Innovation Act (TIFIA) program. TIFIA provides long-term, flexible financing to highway and transit projects that feature dedicated revenue sources. Each dollar of Federal TIFIA funding can support about $10 in loans, loan guarantees or lines of credit. In many cases, the lower cost of capital and flexible terms offered by TIFIA are critical factors in determining whether a PPP is a viable and cost-effective option for a project. The center will also focus on the use of key DOT programs including the Private Activity Bond program (PABs), and the Railroad Rehabilitation and Improvement Financing Program (RRIF).
Ø Technical Assistance: The center will share best practices from states that are leading the way on private investment to states that have not yet adopted innovative financing strategies, encouraging a more robust national market. Today, the top six states for PPPs have nearly two-thirds the value of all U.S. PPP projects. Twenty states have no PPPs in transportation at all. The center will provide technical assistance to help remove barriers to ensure the public and private sector can come together to complete projects that make sense. Through a website and on-demand technical assistance, the center will provide information about DOT credit programs, case studies of successful projects and examples of deal structures, standard operating procedures for PPP projects and analytical toolkits. It will also help interested investors better understand how DOT credit and grant programs can be used together to support project development.
Ø Information to Reduce Uncertainty and Delays: The center will work in partnership with the interagency Infrastructure Permitting Improvement center to provide visibility for local and state governments, project sponsors and investors on the permitting process.
Case Studies and Additional Background
The Build America Investment Initiative taps into the opportunity to increase the pipeline of effective public-private-partnerships and other innovative financing mechanisms:
Ø High Demand: Institutional investors, both domestic and international, recognize the strength of our economy and want to invest in America. In 2013, the U.S. was the top destination for foreign direct investment with over $230 billion. The global investment community has over $83 trillion dollars with a growing appetite for infrastructure. That is potentially hundreds of billions of dollars to fund the building of U.S. public-private infrastructure.
Ø Proven Approaches: Some states and communities have established successful PPPs and have developed strong institutional knowledge of how these projects are best structured and managed. Expanding that know-how to other states has the potential to increase the flow of capital by tens of billions of dollars over the next few years. Today, for example, the top five states in PPPs have nearly twice the per-capita value of projects as the next 20 best states – and if those states caught up, it could mean up to $30 billion worth of infrastructure projects.
Building on Models of Success: Some states and localities across the country have developed successful track records utilizing PPPs and other innovative financing approaches for infrastructure projects. The Build America Transportation Investment center will use the lessons-learned from these leaders to help other communities and private project sponsors understand and better use federal financing programs and to structure deals that incorporate best practices and avoid pitfalls.
THE GROW AMERICA ACT
The Highway Trust Fund – which funds a significant portion of the construction and capital repairs of our surface transportation system – is projected to be insolvent by the end of the summer barring Congressional action. In addition to preventing the Trust Fund from expiring in the short term, the President has clear that we need long-term action and predictable funding to provide certainty to states and communities, help American businesses, and grow our economy.
Ø In spring 2014, President Obama transmitted to Congress his vision for a long-term solution. The GROW AMERICA Act, a $302 billion, four-year transportation reauthorization proposal provides increased and stable funding for our nation’s highways, bridges, transit, and rail systems, ends the cycle of short-term, manufactured funding crises and builds confidence in the public and private sector.
Ø The Administration’s proposal is funded by supplementing current revenues with $150 billion in one-time transition revenue from pro-growth business tax reform. In other words, the President’s proposal is fully paid for without increasing the deficit. The President’s proposal will also keep the Trust Fund solvent for four years and increase investments to meet the transportation priorities and economic needs of communities across the country.
Ø The proposal also contains a series of legislative proposals to improve the return on transportation spending and improve safety, including a title on improving project delivery, and the federal permitting and regulatory review process.