Despite a few small pro-public-private partnership provisions, the bipartisan infrastructure law will not lead to the kind of highway investment this country needs. In fact, despite adding $110 billion in new federal money per year for five years (for all kinds of infrastructure), the infrastructure bill could well end up making things worse for needed public-private partnership highway projects. The bipartisan infrastructure law is likely to drive up costs significantly while seriously restricting needed highway capacity expansions in fast-growing states.
The bipartisan infrastructure law includes an unprecedented increase in discretionary grant programs, which means the Biden administration’s Department of Transportation (USDOT) gets to select the kinds of transportation projects it prefers, rather than what state transportation departments and metropolitan planning organizations (MPOs) have decided they need.
As the American Association of State Highway and Transportation Officials (AASHTO) Executive Director Jim Tymon put it to The Wall Street Journal:
“We’ve never seen anything on this scale before,” said Jim Tymon, executive director of the American Association of State Highway and Transportation Officials. “The amount of funding and the total number of new discretionary programs that are being created are unprecedented.”
Mr. Tymon said he expects the grants would direct money to programs that match the administration’s goals, from fighting climate change and improving safety to tearing down urban highways built through historic Black communities.
“The discretionary programs are going to allow the administration to pick the projects that really fit their policy lens,” he said.
Even for the traditional formula programs, on Dec. 16 the Federal Highway Administration (FHWA) released a six-page guidance document to state DOTs urging them to prioritize “fix it first” efforts over adding new road capacity and reminding them that bicycle paths get categorical exclusions from National Environmental Policy Act (NEPA) environmental reviews, unlike highway expansions. This kind of “guidance” is unprecedented for federal highway and mass transit formula programs and is likely to discourage needed highway expansions in growing states.
And for an array of reasons, the bipartisan infrastructure law is likely to significantly increase the cost of highway and transit projects. First, there is already a serious shortage of experienced construction workers. Pumping additional billions into that kind of construction market will push up wages, meaning the new money will not translate into as many new projects. Second, in keeping with President Joe Biden’s repeated promises about creating “good union jobs,” the Biden administration says it will stringently enforce Davis-Bacon Act prevailing wage provisions for all infrastructure projects receiving federal funds from the law.
In recent years, researchers have repeatedly documented that major transportation infrastructure projects in the United States cost several times as much as comparable projects in Europe and Japan. Those countries have construction unions too, but they don’t have the kinds of restrictive work rules that may require three union workers here to do the job of one such worker in France or the United Kingdom. There is nothing in the infrastructure law that seeks to deal with this costly problem.
Another factor that makes U.S. projects much more costly is what Leah Brooks of George Washington University refers to as the “citizen voice.” U.S. highway spending exploded in the 1970s when the National Environmental Policy Act (NEPA) began enabling citizen groups of all kinds to file legal challenges to transportation projects, dragging out a project’s review process for many years (often in hopes that the agency in question would drop the project and move on, as sometimes happens). The environment is taken very seriously in Europe, too, but this kind of litigation is uncommon there. Yet any reform of this aspect of NEPA is mostly considered politically toxic.
In fact, the current presidential administration seems to be making this problem even worse. Despite the infrastructure law’s codifying the Trump administration’s ‘One Federal Decision’ executive order (aimed at streamlining the federal review process), the White House Council on Environmental Quality has proposed restoring regulations requiring environmental reviews to include “indirect and cumulative” impacts of projects, and would also make federal NEPA policy the floor rather than the ceiling—i.e., states could go well beyond it.
Ironically, these kinds of changes could undermine the Biden administration’s own climate change priorities. NEPA also applies to the much-needed expansion of high-voltage interstate electric transmission lines, as well as pipelines to transport energy sources such as cleaner-burning natural gas (in the near term) and new sources such as hydrogen (longer-term), as well as large-scale solar panel farms and pumped storage facilities. Projects such as these are under environmental challenges today in a number of states.
As Eli Dourado of Utah State University told Reason.com’s Christian Britschgi, “Given the need to build a lot of infrastructure and new technologies and physical stuff in the world, NEPA is probably on net harming our response to climate change.”
There are a few provisions in the bipartisan infrastructure law that could be positive for transportation public-private partnerships( P3s). These include the much-needed increase to $30 billion in the federal cap on tax-exempt transportation Private Activity Bonds, the continuation of the Transportation Infrastructure Finance and Innovation Act (TIFIA), and a new requirement for Value for Money (VfM) analysis for projects exceeding $750 million that seek TIFIA or Railroad Rehabilitation and Improvement Financing (RRIF) loans.
But at the same time, states eyeing $15 billion in “free federal money” for major infrastructure projects, such as billion-dollar bridge replacements, could undercut some of the most promising potential toll-financed P3 projects. Why should a state transportation department go through the Strum und Drang of persuading citizens and legislators that a toll-financed P3 is the best long-term path forward for funding an infrastructure project if their states’ members of Congress are simply eager to get their names on news releases that announce they’ve received a major federal grant to fund some of the project’s costs?
Dumping lots of federal general fund money into state highway projects is another step in undercutting the long-standing and wise principle of users-pay/users-benefit as the American way of building and maintaining highways. Giving up that users-pay principle will lead to even worse politicization of highway decision-making, with more projects being selected to maximize political benefits for politicians and bureaucrats rather than for the improved mobility and economic benefit of users and the economy. The over politicization of infrastructure projects is a way to make a country poorer, not economically more-productive.
A version of this column first appeared in Public Works Financing.