Governments: Prepare to Compete for the Influx of Infrastructure Funding
State and local governments may soon have access to billions of dollars in federal funds for infrastructure projects. Your government will have a better chance of competing for dollars if you can identify with the spirit of new regulations, establish and monitor performance metrics, and maintain accountability in the management of federal, state, and local funds.
Proposed American Energy and Infrastructure Act pledges a $1 trillion investment
If the early days of the Trump presidency have shown us anything, it is that our new chief executive is committed to fulfilling the promises outlined in his “Contract with the American Voter” at a frenetic pace. Part of President Trump’s contract includes the proposed American Energy and Infrastructure Act, which could greatly impact the U.S. economy and flood state and local governments with infrastructure projects and the means to help fund them.
The proposed legislation would “leverage public-private partnerships and public investments through tax incentives to spur $1 trillion in infrastructure investment over 10 years.” It purports to be revenue-neutral, and one funding method under consideration is the potential repatriation of U.S. corporate profits from overseas at reduced tax rates and penalties, as compared to existing law. It is thought that this method will generate funds while avoiding an increase in the federal deficit.
If our new president acts at his current pace, your state or local governments should consider preparing to compete for funds sooner rather than later. Here’s how to best position your government to show you have the taxpayers’ interests and good stewardship of funds in mind.
Be prepared to demonstrate transparency and accountability
While the federal government initiates national infrastructure spending, only 25 percent of that funding is actually spent at the federal level. Forty percent is spent at the state level and 35 percent by localities. The Trump administration says it is eager to reduce waste and ensure accountability in spending. It is critical, then, that state and local governments be prepared to accept and deploy these funds efficiently and effectively, complying with related federal mandates and regulations while demonstrating a level of transparency and return on investment for the U.S. taxpayer — something historically lacking in massive infrastructure initiatives. Most recently, for instance, the American Recovery and Reinvestment Act, launched in 2009 in response to the 2008 financial crisis, spent $830 billion to reduce unemployment and stimulate the U.S. economy through “shovel-ready” infrastructure jobs, but less than one-third of the spending went to infrastructure. This administration has vowed to spend directly on infrastructure.
And the need is clearly there. The American Society of Civil Engineers projects a $3.1 billion infrastructure spending gap through 2020, including those related to electricity, water, airports, waterways and ports, transit, and highways.
Understand the changing financing landscape
Traditional funding mechanisms for infrastructure initiatives have included federal block grants, sales and payroll taxes, user fees (e.g., tolls and rents), and other sources, which have remained relatively constant. The interesting activity has been on the financing side, where traditional debt instruments such as general obligation bonds, revenue bonds, federal loans, and infrastructure banks now include creatively structured deals. These deals support the emerging public-private nature of infrastructure, including project financing bonds, taxable bonds, private activity bonds, mezzanine debt, and investor equity, and often further “green” or “social impact” objectives.
Defining and understanding the underlying project components (i.e., design, build, operate, maintain, and own) helps determine the best financing options for a given project. Your state or local government’s finance and capital planning professionals must understand the changing landscape of project financing. This will help them to best align infrastructure funding and deployment in a transparent and accountable manner, and act in the taxpayers’ best interests.
Use integrated performance management to define success
The concept of integrated performance management (IPM) adds the disciplines of organization alignment and accountability to the planning, budgeting, and forecasting components of capital planning. This is meant to create and communicate a more transparent project plan that monitors and rewards project results for enhanced stakeholder value. Such a system must take into account the differing priorities of various stakeholders in defining success. Weighted priorities for a given project might include economy, safety, health, and other program goals.
The availability of affordable, data-driven performance systems with access to large public and private data bases has revolutionized performance-monitoring capabilities. Professionals responsible for state and local government can now manage capital planning and finance projects in real time with greater transparency and accountability.
Establish a strong grants management system
Federal grants compose a major component of infrastructure project funding. The strings attached to these federal dollars necessitate a clear understanding of the true cost and capabilities inherent in both the initial and ongoing grant requirements and a sound business case in each application for federal funding.
The Office of Management and Budget’s uniform guidance requires the reporting of performance metrics. Your state or local governments must establish and maintain a grants management system that monitors, tracks, and reports results that prove the proper expenditure of dollars, as well as project data supporting milestones and outcomes consistent with the overall project goals.
The availability of affordable digital and analytic tools to enhance efficiency and effectiveness of infrastructure spending by governments and contractors has never been greater — and is evolving at warp speed. In addition to the tracking and reporting IPM tools, think about the potential for using drones and wearable technology to feed performance-monitoring systems driven by data analytics for testing safety and reducing risk of personal injury for workers on large construction projects. Or consider the efficiency of utilizing 3D printing applications for the production of project materials and components on a just-in-time basis. Fully leveraging available and affordable technology in all aspects of infrastructure projects will provide a competitive advantage for state and local governments in obtaining and securing federal dollars for essential infrastructure improvements.
How we can help
CLA’s federal and state and local government professionals can assist you in planning, monitoring, complying, and reporting on all aspects of a project, including funding, management, and performance measurement. We can also assist with IT assessments, financial modeling, grant application support, sub-recipient monitoring, outsourcing and co-sourcing, and interim and permanent project staffing.