News

May 02, 2017


Solving the Federal Government’s Infrastructure Funding Problem: New Policies to Expand Private Investment in Infrastructure Assets

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Abstract

Declining levels of public funding for infrastructure investment and rising construction costs have created a large backlog of infrastructure investment needs in America. Acknowledging that the fiscal pressures on Federal, State, and local budgets which have constrained public infrastructure investment are unlikely to abate anytime soon, this paper outlines three Federal policy initiatives that could substantially increase the level of private funding for infrastructure investment. The first three sections of this paper describe (i) the current set of Federal infrastructure programs, (ii) the publicly-owned and operated infrastructure sectors in which private investment could be significantly expanded and (iii) the constraints on private capital formation that policy needs to take into account in order to expand the role of private capital in infrastructure investment. Section IV outlines three new Federal policy initiatives that could substantially increase the level of private funding for infrastructure investment: (a) changes to the tax laws governing municipal debt to facilitate the privatization of existing infrastructure assets owned by States and municipalities; (b) the creation of a federally-sponsored infrastructure investment bank to allow the Federal Government to leverage an investment in the bank’s equity to raise substantial sums in the private credit markets to allow the bank to fund a large portfolio of targeted infrastructure investments; and (c) an expanded program of investment tax credits to encourage private investment in targeted sectors where potential returns on investment are currently insufficient to justify private investment.

Archive

May 02, 2017


Solving the Federal Government’s Infrastructure Funding Problem: New Policies to Expand Private Investment in Infrastructure Assets

About:

Abstract

Declining levels of public funding for infrastructure investment and rising construction costs have created a large backlog of infrastructure investment needs in America. Acknowledging that the fiscal pressures on Federal, State, and local budgets which have constrained public infrastructure investment are unlikely to abate anytime soon, this paper outlines three Federal policy initiatives that could substantially increase the level of private funding for infrastructure investment. The first three sections of this paper describe (i) the current set of Federal infrastructure programs, (ii) the publicly-owned and operated infrastructure sectors in which private investment could be significantly expanded and (iii) the constraints on private capital formation that policy needs to take into account in order to expand the role of private capital in infrastructure investment. Section IV outlines three new Federal policy initiatives that could substantially increase the level of private funding for infrastructure investment: (a) changes to the tax laws governing municipal debt to facilitate the privatization of existing infrastructure assets owned by States and municipalities; (b) the creation of a federally-sponsored infrastructure investment bank to allow the Federal Government to leverage an investment in the bank’s equity to raise substantial sums in the private credit markets to allow the bank to fund a large portfolio of targeted infrastructure investments; and (c) an expanded program of investment tax credits to encourage private investment in targeted sectors where potential returns on investment are currently insufficient to justify private investment.