Adoption Faces Uncertain Future.

On 23 July 2018, U.S. House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA), released a legislative discussion draft for a long-term infrastructure proposal. The draft legislation, which addresses a wide range of infrastructure areas, is designed to encourage private investment in infrastructure through asset recycling, stimulate public-private partnerships (P3s), overhaul funding for the Highway Trust Fund, and streamline environmental review for infrastructure projects.

Shuster's proposal, if adopted, could help remove significant regulatory impediments that could unlock billions raised by private equity infrastructure funds, while raising considerable federal funding through increases in the gas tax, which the Administration has signaled a willingness to support without championing tax increases to skeptical Republicans. Even that increase, however, would be interim solution as a pilot program gets underway to get a per-mile fee system established.

Yet, the proposal faces an uncertain future, as Chairman Shuster is not running for re-election this November, and getting floor time for stand-alone, not “must-pass” bills is nearly impossible, even in a lame-duck session. House Democrats, who may well be in the majority in the next Congress, tend to favor more traditional Federal funding and control for infrastructure, and disfavor further environmental streamlining as envisioned by the proposals. As a result, fundamental legislative changes in infrastructure funding likely will not take place until permanent aviation, water, and highway reauthorization bills get considered.

Shuster's proposals are designed to "reignite discussions" on Capitol Hill regarding domestic infrastructure policy. As many observers have noted, the Trump Administration has touted its emphases on infrastructure, with plans to spend $1.5 trillion, but their plans and efforts have fallen flat, with infrastructure initiatives overshadowed by other controversies.

For private equity and infrastructure funds, among the most significant provisions include encouraging private investment in infrastructure through asset recycling grants. The proposal would create a new program, the National Infrastructure Investments Program (NIIP), which would distribute the incentive grants on a competitive basis available to applicants that own an infrastructure asset "and has leased such asset to a private sector entity." The program would apply to any form of infrastructure, including airports, highways, water, ports, railways, and "transformative transportation projects." These incentive grants are directed to owners of public infrastructure assets—such as state and local government, public transit agencies, or multistate public entities—that have leased assets to private entities.

The funds from the lease fund other infrastructure projects, through the "asset recycling" process. To receive the grant through the NIIP, an applicant must use the proceeds to make additional infrastructure improvements. In the current version of the proposal, the grant can be up to 15 percent of the total value of the asset that has been leased. The proposal authorizes three billion dollars of NIIP grants to be made available for fiscal years 2019-2023.

The proposal also encourages P3s for federal building projects between the General Services Administration (GSA) and private industry. The Public Buildings Public-Private Partnership Pilot Program requires the GSA Administrator to acquire three to five federal buildings through P3s. Following the initial federal building P3s, the bill requires a study to consider expanding the program. The Committee's vision statement also says that the bill "helps the federal government tackle its crumbing real property inventory by leveraging private sector dollars and expertise in the construction and rehabilitation of federal buildings." The Committee also released a section-by-section summary of the discussion draft explaining the key goals of the proposal.

On the environmental front, the proposal seeks to accelerate project delivery by speeding up environmental review. It embraces the White House's "one federal decision" vision for infrastructure projects, aiming to ensure that transportation projects take no longer than two years to reach a final decision, in part by broadening categorical exclusions that exempt projects from having to do labor-intensive environmental analyses. The proposal also considers revisions to the water quality certification process under section 401 of the Clean Water Act.

Chairman Shuster's proposal also touches on more traditional infrastructure investment. The proposal reauthorizes the Water Infrastructure Finance and Innovation Act (WIFIA), which accelerates investment in water infrastructure projects through long-term, low-cost supplemental loans to regional and national projects.

Additionally, the proposal makes the Highway Trust Fund solvent through a 15 cents per gallon increase in the federal gasoline tax and 20 cents per gallon increase in the federal diesel fuel tax. The proposal indexes the taxes to inflation for the following ten years, at which time the gas tax will be eliminated by transitioning to a per-mileage user fee in 2028. The proposal envisions a Highway Trust Fund Commission to ensure long-term solvency to consider the structure of the user fee.

The proposal's embrace of private infrastructure development and P3s is an indication that Congress will attempt to encourage innovative funding options for federal, state, and local governments looking to revitalize public infrastructure. Unfortunately, absent a push by major stakeholders, bringing Shuster's vision into reality must be viewed as unlikely for the remainder of the year.

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