Four questions (and answers) about the Infrastructure Investment and Jobs Act

The Infrastructure Investment and Jobs Act (IIJA), also known as the bipartisan infrastructure bill, would increase federal infrastructure spending by about $550 billion over the next decade, almost all of it through grants to state and local governments, which own much of the the nation’s infrastructure. At our annual Municipal Finance Conference in July 2022, four experts answered several questions about IIJA: Ryan Burney, Senior Advisor to Mitch Landrieu, the White House Infrastructure Implementation Coordinator; DJ Gribbin, former Special Assistant to President Trump on Infrastructure; Shoshana Liu, executive director of the Colorado Department of Transportation; and Eden Perry, head of the US public finance operation and S&P Global Ratings.

A video of the panel is posted here. Here are some highlights.

Some IIJA funds are distributed among the states on a formula basis. Others require state and local governments to apply for funding. How well is this process going?

SHOSHANNA LEW: “There are an awful lot of federal discretionary programs now. Some of them are new; some of them are variants of ones that have been around for several years… [W]what we’re trying to do is figure out how to write a finite number of good applications… Our federal friends have a tough set of challenges ahead of them to deliver all these new programs. I would applaud the DOT [U. S. Department of Transportation] for trying to combine sources where they can. They put out one funding notice in one instance for three different programs, so instead of having to apply three times, we do it once. The more they can do that, the easier it is for people where we sit to take advantage of these programs. I think on the back end how they manage projects can be a challenge if it’s not very organized because the dollars will [flow] through different operating administrations with different rules. Making sure they’re as committed to back-end consolidation as they have been on the front-end … would be important.”

RYAN BURNEY: “We really feel like we’ve hit the nail on the head [the] starting work… We look at this as a five to seven year endeavor and in many cases the money will be spent for 10 to 12 years given the way things work. We started building a team in the White House to focus on delivering projects, to focus on putting the right structures in place. Every state has appointed a state infrastructure coordinator under our direction, with one or two exceptions. And we’re working really hard to ensure underserved communities have the resources they need to both plan and apply for funding. The bill [has]… 375 programs, 125 of which are brand new.”

DJ GRIBBIN: “This bill is a big mess. I think Ryan is polite… Remember where that bill came from. It’s like two handfuls of senators got together, almost got together for a beer and threw a bunch of stuff that was on the shelf into a bill, sent it to the House. The House did nothing about it, it accepted it. And now we have 125 new grant programs. We tried to make one [new] program, our urban partnership agreement in the Bush administration, and it was incredibly difficult. This bill has a competitive culvert program. And I don’t know who the boss of the culvert lobby is that got this in there, but that guy should get a huge bonus. For those who don’t know what [a] the drain is [it is] a pipe that runs under a road or railway line to direct water away from infrastructure. There’s now a new federal competitive culvert grant program, so there’s that [going to] it will be a lot of programs, a lot of money, a lot of chaos.”

What effect will higher inflation and labor shortages have on state and local infrastructure spending?

EDEN PERRY: “What’s going on with inflation, supply disruptions, hard to find workers for projects, increased wages for workers? We expect that states and local governments may … focus on smaller, more impactful projects or even … extend the time if possible … I think the concern is to find the workers … and to be paid their wages. I think that’s a huge problem right now.”

SHOSHANNA LIU: “We’re getting non-trivial pressure from parts of the industry to approve cost overruns without looking at them. We won’t do it [do that]… [We need] to make sure that even in an inflationary environment we get the best return on taxpayer investment.

Will the Infrastructure Investment and Jobs Act Increase Inflationary Pressures?

RYAN BURNEY: “The answer is no. And outsiders said, “Yes, of course, of course spending a little money right now can lead to inflation.” But the impact of this bill is positive on the inflation problem for several reasons. One is that we’re actually going to fix the supply chains that have created much of the situation we have today in ports and railroads, airports and railroads, the increased manufacturing capacity of the economy, with a lot of what we have. The second thing is that we’re… we’re just not spending that much money this year. A lot of money [is spent] in years gone by.”

Will an influx of federal money diminish the role that public-private partnerships play in state and local infrastructure projects?

DJ GRIBBIN: “[Yes]I think so [going to] to be pushed out in two ways. First, as everyone has mentioned, there is more funding. It is [a] a tsunami of funding… So there is less need to look for alternative funding than you would have otherwise. And secondly, a push in terms of time. I’m sure… DOTs, cities, counties across America are getting their teams to focus on how to apply for federal funding and grants as opposed to how do we think of new innovative ways to get the private sector involved in financing these infrastructures? … This is a great tool to have in your toolbox. It might be helpful, but it might be [limited in the] the current environment, given the amount of money coming in and the need to push aggressively for competitive grant programs… There is a common misconception that public-private partnerships will bring more infrastructure funding. [It] does not bring more funding. It provides more funding tools so that states can accelerate these projects. Ultimately, infrastructure funding comes from two sources, users and taxpayers, period.”

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