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Post CARES Act: Infrastructure Stimulus Contemplated for Phase 4

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Within a week of enacting the Coronavirus Aid, Relief and Economic Security (CARES) Act, Congressional leaders and President Trump have begun socializing a fourth coronavirus response package which could deploy significant funds for the infrastructure sector in the United States.

While legislative measures so far have focused on addressing the current health and economic emergencies, lawmakers are starting to consider the longer-term impacts of the pandemic, and the need for investment and job creation. On an April 1, 2020 press conference call, House Speaker Nancy Pelosi expressed the “need to invest in our infrastructure to address some of the critical impact and vulnerabilities in America that have been laid bare by the coronavirus” and to “lay the foundation for a strong recovery.”1  To this end, House Democrats are building on the Moving Forward Framework, a five-year, $760 billion infrastructure plan originally introduced in January 2020.2 House Speaker Pelosi initially expressed a desire to move ahead with Phase 4 of the coronavirus response and infrastructure plan shortly after Congress returns to session, which is anticipated on April 20, 2020.3 However, as an illustration of the fluidity of the current crisis and policy responses, House Speaker Pelosi then acknowledged on April 3, 2020, that infrastructure funding may need to wait until a later stage of the pandemic recovery.

The Moving Forward Framework calls for investment in the nation’s roads, bridges, transit systems, railways, airports, ports, inland waterways, wastewater and drinking water systems, brownfield assets and broadband.4 Highlights by asset class include:

  • Highways: $329 billion including for the repair of roads and bridges; reduction of carbon pollution; and the continuation of funding for the Transportation Infrastructure Finance and Innovation Act (TIFIA) and improvements to the TIFIA application and approval process to increase efficiency and transparency.
  • Transit: $105 billion including for funding to transit agencies to add routes and increase reliability of services; investments in zero-emission buses and reforms to the Capital Investment Grant program to streamline project delivery.
  • Rail Transportation: $55 billion including for expansion of the passenger rail network and investment in Amtrak stations, facilities, services and rail cars. In addition, the Framework supports the development of new higher-speed passenger rail corridors.
  • Airports: $30 billion including for airport investments, the FAA’s airspace modernization efforts, the development and use of sustainable aviation fuels and noise reduction. The Framework specifically contemplates increasing the Passenger Facility Charge cap (which has been held steady at $4.50 per enplanement since 2000) and indexing it to inflation going forward, which would permit increased investment at congested airports at or over capacity with travelers.
  • Harbor Infrastructure: $19.7 billion including for harbor maintenance and essential dredging.
  • Water Infrastructure: $10 billion including for backlogged Army Corps’ projects to protect communities from severe weather and flooding.
  • Clean Water and Wastewater Infrastructure: $50.5 billion including for the development of clean water and wastewater infrastructure and to address local sewer and storm water infrastructure needs.
  • Brownfield Restoration: $2.7 billion including for repair of abandoned or contaminated properties and revitalization of distressed areas.
  • Drinking Water: $25.4 billion including for investment in the Drinking Water State Revolving Fund and clean drinking water programs and funding to communities with contamination issues.
  • Clean Energy: $34.3 billion including for modernization of the electric grid; investment in local energy efficient infrastructure and the development of an electric vehicle charging network.
  • Broadband and Communications: $86 billion including for the expansion of broadband access in rural, suburban and urban areas. The Framework seeks to address specifically digital equity, a problem that has been highlighted by the pandemic where children in underserved areas have been unable to access online learning resources.
  • Public Safety Communications: $12 billion including for the implementation of a Next Generation 9-1-1 system.

In direct response to the pandemic, House Democrats have been keen to publicize the Framework’s allocations for improved broadband and clean drinking water and a forthcoming proposal to invest $10 billion in community health centers. Transportation funding is nonetheless expected to comprise a significant percentage of dollars allocated under the Framework and Democrats are eyeing implementation of the Framework as a critical weapon in the country’s recovery from the impending recession.

Infrastructure investment has backing across the aisle as well. President Trump supports the focus of infrastructure funding, tweeting on March 31, 2020 “with interest rates for the United States being zero, this is the time to do our decades long-awaited Infrastructure Bill.”5

Congressional Republicans have similarly expressed support for infrastructure funding, although Republican leaders have cautioned that the timing for and form of investment remain to be determined. Some Republican leaders favor a wait and see approach to allow time to evaluate the impact of the Phase 3 response and gain control over the current health crisis. Others are hesitant to wrap infrastructure funding into a solution for the economic downturn on the basis that any additional economic relief should be tailored to address issues caused by the pandemic.

In a statement released on April 3, 2020, Committee on Transportation and Infrastructure Ranking Member, Sam Graves, reflected on lessons learned from the 2008 stimulus, noting that “‘shovel-ready’ doesn’t work, and that more effective ways to get federal funding into projects and creating jobs [are] speeding up the project permitting process and funneling available funding through good existing programs, such as the Federal-Aid Highway Program and the Airport Improvement Program.”6 This view is consistent with the infrastructure principles released by Republicans in response to the Framework earlier this year. President Trump and Congressional Republicans have also expressed little appetite for marrying infrastructure funding with climate goals, a key focus of the Framework.

While there is bipartisan recognition of the need for greater funding for infrastructure assets, the challenge remains identifying funding sources. The Framework acknowledges the need to establish long-term durable sources of infrastructure funding revenue and to develop and strengthen new and existing financing tools. The proposals set forth in the Framework include reinstatement of the Build America Bonds that were created as part of the American Recovery and Reinvestment Act of 2009 and expired in 2011, expanding the national cap on private activity bonds for qualified highway or surface freight transfer facilities and the use of tax credit bonds as an alternative to tax-exempt bonds. It is clear that there will be a need to leverage private investment to achieve the ambitious goals set forth in the Framework, which contemplates that public private partnerships will play a role. We expect that the infrastructure industry will need to mobilize to ensure that the focus expands from utilizing old tools to emphasizing long term performance and efficiency in the delivery of infrastructure assets.

Our US infrastructure team will continue to monitor this topic and provide updates as the legislative process unfolds with respect to infrastructure stimulus funding.

 

1 Press Release, Nancy Pelosi, Speaker, House of Representatives, Transcript of Pelosi Press Conference Call on Infrastructure Priorities for Phase 4 Coronavirus Package (April 1, 2020), https://www.speaker.gov/newsroom/4120.
2 Id.
3 Id.
4 The House Comm. on Transp. and Infrastructure, Moving Forward Framework 1 (2020), https://transportation.house.gov/imo/media/doc/Moving%20Forward%20Framework.pdf.
5 Donald Trump (@realDonaldTrump), Twitter (March 31, 2020), https://twitter.com/realDonaldTrump/status/1245000074167541761.
6 Press Release, Sam Graves, Ranking Member Graves Looks Ahead to Next Steps on Infrastructure (April 1, 2020), https://republicans-transportation.house.gov/news/documentsingle.aspx?DocumentID=404815.

 

Find out more about business response to the Coronavirus outbreak:
Coronavirus: Managing business impact and legal risks

 

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