Fitch: US Infrastructure Discussion Needs Fiscal Details
The discussion around infrastructure development during the U.S. election has been centered on job creation, while, in Fitch's view, a sustainable fiscal framework to pay for the infrastructure development remains the crux of the issue.
Deferred maintenance on the country's infrastructure has accumulated significantly while state budgets (particularly departments of transportation) have narrowed. Some combination of new federal and, increasingly, state funding will remain essential to manage national and local interests. We also believe it is important that targeted infrastructure development initiatives, such as the credit-enhancement programs provided under the Transportation Infrastructure Finance and Innovation Act (TIFIA), play a role. Taxes, user fees, state infrastructure credit-enhancement programs and banks, the creation of new, limited-scope, publicly managed enterprises, and the use of private sector risk-taking through public-private partnerships are all critical to maximizing the level and quality of investment.
The Ohio River Bridges Project, shared by Kentucky and Indiana is a good example of a combination of federal, state, and private funding. In June 2012, the U.S. Federal Highway Administration approved the use of federal transportation funds for the project. On Oct. 16, the financing terms for the $2.5 billion project were agreed to by the two states. Under the agreement, Kentucky is in charge of financing and constructing the Downtown Crossing and Indiana will oversee the East End Crossing. Federal aid formula funds will be matched by a combination of State highway funds and toll credits in Kentucky and by state funds in Indiana. Kentucky's project will be managed as a public enterprise and secured under a demand-based toll structure, and Indiana's will be managed by the private sector using a P3 availability payment structure. Both projects are seeking TIFIA funding.
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Cherian George, +1 212 908-0519
Global Infrastructure Group
33 Whitehall Street
New York, NY
Rob Rowan, +1 212 908-9159
1 State Street Plaza
New York, NY
Elizabeth Fogerty, +1 212 908-0526