2.08 Infrastructure

1. Federal Infrastructure Program

In order to rectify the problems of infrastructure deterioration and obsolescence as well as satisfy infrastructural needs resulting from population and economic growth, Congress should enact a comprehensive infrastructure assistance program. Such a program should include the following elements:

First, in order to provide assistance to states and local governments suffering from fiscal stress, federal funding for existing infrastructure-related grant programs should be increased. Additionally, a new multi-year revolving loan program should be created to provide supplemental funding to the existing grant programs. Under the loan program, low interest or interest-free federal funds should be distributed to the states on the basis of population for the purpose of establishing revolving loan programs within each state. States should distribute interest-free loans to localities to fund eligible infrastructure projects and should be required to repay the federal loan within a certain specified time period. Revolving loan funds should be used for the repair, rehabilitation, replacement, reconstruction and construction of eligible facilities. States and localities should have maximum flexibility in determining which types of local public facilities should be funded; however, they should be required to demonstrate that their use of federal infrastructure loan funds satisfies such broad objectives as protection of public health and safety, provision of essential public services, and fulfillment of local priority needs. The federal loan program should be large enough, at a minimum, to maintain the ratio between federal and non-federal financial assistance for capital investments made over the last ten to fifteen years.

Second, in order to maximize the use of existing federal funds for infrastructure investment and extend the life of existing federally aided infrastructure, the federal government should evaluate current programs and make such changes as necessary to promote more cost-effective public investments (such as increasing aviation and waterway user fees, permitting the use of wastewater treatment construction grant funds for sewer system rehabilitation and correction of spillover from combined sanitary sewer/storm drainage systems).

Third, in order to focus public attention on the use of federal funds for public infrastructure investment and to improve public decision-making with respect to such investments, a federal capital investment budget should be submitted annually by the president.

2. Infrastructure and Tax Reform

A significant amount of infrastructure construction, reconstruction and repair is financed through tax expenditures allowed under the Internal Revenue Code. In order to ensure that tax exempt financing continues to be available for infrastructure purposes, Congress should exempt from taxation bond proceeds which are used to finance particular types of public purpose infrastructure facilities. The exemption should include: wastewater and stormwater treatment facilities; solid and hazardous waste facilities; drinking water facilities; resource recovery, cogeneration and district heating facilities; roads and bridges; airports; docks and wharves; mass transportation commuting facilities; hydroelectric power plant facilities; and pollution control facilities.

Congress should not prohibit the advance refunding of tax exempt bonds and should not eliminate the deduction for interest paid by financial institutions carrying tax exempt bonds. Both provisions have helped reduce overall project costs and have increased the attractiveness of the public purpose tax exempt bond market to investors.

In order to encourage privatization of infrastructure facilities, Congress should allow private, for/profit companies either to use the accelerated cost recovery system for depreciating capital assets or to use the investment tax credit for infrastructure facilities financed with taxable bonds or for facilities leased from municipalities.

Back to Top