Financial Times Editorial: “Delaney Bill Deserves to be Passed”


WASHINGTON, D.C. – May 1, 2014 – (RealEstateRama) — Today’s Financial Times featured an editorial on the “moribund” state of support for infrastructure in the United States and argued that Congressman John K. Delaney’s Partnership to Build America Act (H.R. 2084) should be a part of the solution. The Financial Times concluded, “the Delaney bill deserves to be passed.”

Delaney’s Partnership to Build America Act (H.R. 2084) is a bipartisan infrastructure bill that currently has 31 Democratic and 32 Republican cosponsors in the House. The legislation has also been introduced in the Senate by Senator Bennet (D-CO) and Senator Blunt (R-MO). The bill creates a $50 billion dollar infrastructure fund that can be leveraged to $750 billion. This fund will be capitalized by the sale of 50-year bonds that are not guaranteed by the Federal government and pay a 1% interest rate. To encourage U.S. corporations to purchase these bonds, they will be allowed to repatriate a certain dollar amount – determined by auction – in overseas earnings tax-free for every $1 they invest in the bonds. The fund will then provide loans or loan guarantees to states and municipalities to finance transportation, energy, education, communications, and water infrastructure projects.

The editorial is available online here and can be read below:

US infrastructure is crumbling
Obama must get Congress to meet its funding obligations

Editorial Board, Financial Times, April 30, 2014

The US is scouring the land for “every Band-Aid, every piece of duct tape” to keep its infrastructure fund afloat, says Anthony Foxx, secretary of transportation. Mr Foxx is hardly exaggerating. As the FT has reported in its US infrastructure series this week, the highway trust fund could run out of cash as soon as August. President Barack Obama has proposed a bill that would keep it going for another four years – albeit at a lower level than needed. Even if Congress enacts it – by no means a certainty – America’s roads, ports, bridges and railways would lack the funds they need to upgrade.

Washington should raise its sights. At a time when the US Treasury can borrow at near zero interest rates, there is a once in a generation chance to modernise. The country as a whole needs to spend $3.6tn by 2020 to maintain the existing quality of infrastructure, according to the American Society of Civil Engineers. Mr Obama’s bill would cover only a fraction of that. He should set out a much bolder agenda.

America’s existing transport financing system is moribund. Launched in the 1950s, the federal gas tax was predicated on an ever-increasing flow of road usage. Congress was then far less polarised than it is today and would usually approve increases to replenish the fund. It is more than 20 years since the rate was lifted to 18.4 cents a gallon tax, which means it is languishing at a fraction of where it should be in real terms. Moreover, US road usage is falling. In an ideal world, Congress would simply lift the gas tax and index it to inflation. But that is a political impossibility.

As a result, the federal and local governments are increasingly raiding general funds to maintain US roads. This is inadequate on two counts. First, it is rapidly weakening the user-pays model. The taxpayer is subsidising roads to an ever greater tune. Second, it means there is no money left over to upgrade quality. Almost a fifth of US bridges are structurally deficient. It is only a matter of time before another large one collapses, a great risk to life. Meanwhile, US economic growth is increasingly constrained by ever-lengthening commutes, transport delays and glitches.

What then should be the new model? Mr Obama has tried and failed to persuade Congress to set up a public-private infrastructure bank that could raise funds on the capital markets. The idea remains a good one. But Republicans object to anything that smacks of bureaucratic control. One solution would be for Washington to crowd in private financing via better tax incentives. Municipal bonds are tax-exempt but private ones are not. Many investors also remain wary of committing to large projects because of regulatory uncertainty. Only 30 of 50 states permit public- private funding. And there are large inconsistencies between those that do.

Another is for US states and cities to embrace models used elsewhere in the world. London, Stockholm and other global cities have set up effective congestion pricing schemes. US cities should follow suit. In Oregon, officials have set up an innovative pilot project that switches from taxing fuel usage to charging drivers based on how many miles they drive. If it works, it could be adopted at the federal level. Moreover, John Delaney, a congressman from Maryland, has drafted a bill that would give US companies a tax break on any repatriated foreign earnings invested in US infrastructure bonds. The Delaney bill deserves to be passed.

On their own, none of these would transform US infrastructure overnight. But together, they would go a long way towards treating America’s creeping rust. The rust originates in Washington. Mr Obama needs to do a better job of shaming Capitol Hill into meeting its responsibilities.

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