On November 15, 2021 (the “Effective Date”), President Biden signed into law the Infrastructure Investment and Jobs Act (the “Act”) to invest in our nation’s infrastructure and competitiveness. The federal government regularly passes transportation bills to fund traditional road, bridge, and mass transit projects. However, the Act dwarfs those efforts in size, at over one trillion dollars, and redefines infrastructure for the modern era.
Climate change heavily influences the spending guidelines of the Act due to its undeniably large impact on traditional infrastructure. Thus, the Act dedicates around $28 billion to improving the resilience of the power grid against the increased impact from climate change. The Act also emphasizes moving freight, a supply chain that was stretched thin and decimated by the COVID-19 pandemic. Freight infrastructure is targeted in the Act through economic incentives and rail investment to alleviate the recent supply chain woes and “build back better” a reliable and improved freight system. The Act further seeks to expand broadband internet access to remove disparities for underprivileged and rural communities by offering subsidies to consumers and funding new projects to build a comprehensive and stronger network. Due to the massive influx in federal funds, Congress will assert more control over which state and local infrastructure projects get funded.
Act highlights include:
New Bond Provisions
The Act adds broadband projects as an allowable use for private activity bonds (“PABs”), allowing issuers to finance rural broadband deployment projects with tax-exempt debt. These PABs will be subject to a state volume cap with a 75% exemption for private projects. The cap will not apply to government-owned projects.
The Act also adds carbon capture and direct air capture technology projects as an allowable use for PABs. Carbon capture removes carbon dioxide from an emissions stream at a power plant or industrial facility, reducing emissions from energy-intensive industries.
The Act increases the current national cap of tax-exempt highway or surface freight transfer facility bonds from $15 billion to $30 billion, allowing new projects to be funded through tax-exempt bonds.
Prior to the Effective Date, the nationwide cap on tax-exempt highway or surface freight transfer facility bonds was limited to $15 billion total, not annual. Close to the entirety of the $15 billion cap has been previously allocated.
Public-Private Partnership (“P3”) Provisions
Transportation Infrastructure Finance and Innovation Act (“TIFIA”) and Railroad Rehabilitation & Improvement Financing loans for projects over $750 million are now required to conduct a Value for Money (“VfM”) analysis to determine the feasibility of P3 as an alternative financing source. VfM analysis is a process used to compare the financial impact of a P3 project against a traditional public sector alternative. The purpose of the new requirement is to encourage utilizing P3 as a financing tool for large projects.
The Secretary of Transportation (the “Secretary”) will now have the ability to allocate $20 million per year to create a technical assistance and incentive program for state and local transportation agencies to explore P3s, asset concessions and other innovative infrastructure financing options.
Public partners in P3 projects over $100 million shall be required to disclose information relating to the private partner’s satisfaction of the terms of the P3 agreement within three years of a project’s opening. Further, project sponsors receiving federal funds shall conduct VfM analysis if the project sponsor intends to use a P3. The cost of such analysis is an eligible expense reimbursable under the Surface Transportation Block Grant program.
Carbon Reduction & Congestion Relief Programs
The Act has a powerful emphasis on the urgency of combatting climate change and protecting valuable infrastructure. Under the Act, the Secretary is charged with the establishment of several well-funded programs to accomplish these goals, such as a carbon reduction and congestion relief program. The carbon reduction program will be established to reduce transportation emissions and the congestion relief program will be established to reduce the economic and environmental costs associated with congestion. Both programs include projects and strategies utilizing tolling, high occupancy vehicle lanes, and other tools to reduce demand for roads and optimize highway usage. The programs will broadly fund projects to achieve their respective goals without a significant impact to safety or mobility.
Transportation Infrastructure Finance and Innovation Act (“TIFIA”)
The Act generally seeks to broaden and modernize TIFIA by expanding the scope of eligible projects, streamlining processing timelines, expediting decisions for certain public agency projects, and limiting the funds allocated to specific larger projects to promote their broad usage. Eligible projects now include public infrastructure, such as those located within walking distance of transit facilities, passenger rail stations, bus stations, public utilities, or other capital projects. TIFIA may also help fund private investment in economic development projects that meet certain requirements to support public infrastructure and access for underprivileged communities. The Act further expands TIFIA to include airport-related projects and projects to acquire plant and wildlife habitat for approved conservation. TIFIA status reports shall be regularly published for all applications.
How to Access Funds
Unlike a stimulus package responding to a specific economic crisis, the Act represents a long-term investment program to rebuild American competitiveness through infrastructure. Most of the funding will be allocated directly to state governments, which in turn distribute money to local governments though pre-existing programs. States will have significant discretion over which projects are prioritized for funding. The disposition of federal funds will be primarily overseen by the Department of Transportation, Department of Energy and Environmental Protection Agency. The Department of Transportation is expected to distribute funds through the existing Rebuilding American Infrastructure with Sustainability and Equity (RAISE) discretionary grants program. Likewise, other federal funds will increase resources available under existing grant programs and design new programs to achieve the goals set forth in the Act such as those related to broadband expansion. It is expected that funding through existing federal programs will be more efficient than new grant programs, which will require the development of processes and hiring personnel to administer the program.
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