Ed Rendell, Co-Chair of Building America’s Future (BAF) Educational Fund and former Governor of Pennsylvania
American Infrastructure: Marcia Hale and the team at BAF think that finding private equity investment is viable as a source of funding?
Ed Rendell: Sure, it’s viable for big projects, big projects that can be tolled, big projects that will sustain that tax. So I’ll give you an example: the people of Charleston, in a referendum, voted to increase their sales tax by half a cent to revitalize the port of Charleston. That was just a regular tax that the government was going to spend to the money on the port itself, but that could have been a perfect vehicle for private investment because once the sales tax is passed, and the sales tax increases pass and are dedicated to repaying the bonds, you’re in great shape.
AI: What would you say if you were to advise government, on how to find a trillion dollars to make some of these shovel ready projects go?
ER: No one source of revenue can do that. It should be a mixed bag. The first thing I would advise is that the federal government should lift the ban on states placing tolls on highways that were built with some federal contribution. Right now, no state can do that. So for example, Pennsylvania has a toll on I-95, it’s the only state I think along the line that has it, but because of something that was passed during Bill Clinton’s presidency we can’t toll it now because there’s a ban, a moratorium on any state tolling, on any highway that was built with partial federal funds. They should remove that ban and let states place tolls. That would be one thing they could do that would have no impact on the federal deficit. They should bring back building America’s bonds where the federal government paid a portion of the debt service to the states that issued the bonds; then they would be regular, non-taxable, municipal bonds, and the states would be prompted to issue bonds where the federal government would repay some of the debt service. It was nearly 5 percent, this was during stimulus, and it was very successful. That has a small impact on the federal deficit because it does not take money out of the federal government’s treasury. The federal government is repaying the states for some of the debt service. But that’s certainly an old way to do it. The third thing they should do is increase the funding and TIFIA. TIFIA is the Transportation Infrastructure Finance and Innovation Act and TIFIA is a loan guarantee program where the transportation department can guarantee loans, or actually make loans, directly to projects where there is, again, a rate of return. And it’s perfectly able to prompt an increased private investment. Those are three things that I would do right away and they have a very small impact on the federal budget deficit.
AI: Based on your long experience as Governor and in government, mayor and DA, going back through your history of service, what do you think the chances are of us seeing meaningful infrastructure financing?
ER: The things I just sketched could all make private financing a reality. But private financing is not going to take us to $1 trillion or anything close to it. So then there’s got to be federal investment. Now the states, you understand, have all stepped up – not all, but most of them have stepped up – red states and blue states alike have increased their gas taxes. States like Montana and Wyoming, the reddest of the red states, have increased their gas tax. So have states like Pennsylvania and Massachusetts, so it’s a mixed bag. Over 17 states have increased their gas taxes significantly. In Pennsylvania, after my time as Governor, the Republican Governor in 2014 came out in favor of a gradual 32 cents a gallon increase on the gas tax over five years, and I came up and stood with him and advocated that we pass it. We passed it with a mixture of Democrats and Republicans votes, and not one legislator who voted for it was defeated for reelection at the next election. Not one.
AI: Is it a trillion dollars over ten years, is that the number?
ER: It’s probably a little higher, it’s probably more like a trillion-and-a-half to two trillion. But a trillion would put us well on our way to repairing our infrastructure. And by the way, we’re not just talking about transportation, we’re talking about water and sewer, we’re talking about electric grid, we’re talking about broadband, ports, airports—we’re talking about a lot of things.
AI: Yes, it’s a pretty big subject.
ER: And the President is correct in saying that we desperately need to improve our public safety, to improve our quality of life, to make us more economically competitive, and it’s the single best producer of well-paying, middle class, blue collar jobs in America. The U.S. Department of Transportation estimates that for every billion dollars that is spent, it would produce 25,000 well-paying jobs. So if we add an additional
$100 billion a year, which is a ten-year, $1 trillion infrastructure program, if we add an additional hundred billion a year, that would produce 2.5 million jobs. Good jobs that pay $60, $70, $80,000 a year that you don’t have to be a college graduate to hold.
AI: Is there a last thought you have on the subject of American infrastructure that you’d like to share as we’re headed into this new, Trumpian administration?
ER: I’ll say this, I’m optimistic because things can be done because of what President Trump has said about it, and because the Democrats and the Congress has indicated that they’re happy to work cooperatively and in a bipartisan fashion to get this done, and it has to get done. There’s nothing that we can do in Washington that will do moimpact our public safety, our quality of life, our economic competitiveness, and our need to create well-paying jobs.