April 02, 2021

Major Biden Administration Infrastructure and Jobs Plan Released

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MAJOR BIDEN ADMINISTRATION INFRASTRUCTURE AND JOBS PLAN RELEASED

On Wednesday, March 31, the Biden administration released its American Jobs Plan (AJP), a detailed blueprint to spend more than $2 trillion over eight years for a wide range of infrastructure-related initiatives, including both “core” or “traditional” infrastructure programs as well as “non-core” and social welfare proposals.[1] The administration has signaled that the AJP is the first of two large legislative packages it intends to introduce over the coming weeks, with the second to focus on other issues such as health and education.[2]

The AJP covers a broad and ambitious set of spending initiatives, and several themes are emphasized throughout the plan. Most prominently, there is a clean and renewable energy focus underlying several of the proposals aimed at the mitigation of and adaptation to climate change and a stated goal of reaching 100 percent carbon-pollution-free power by 2035. Also emphasized in the AJP are programs to assist disadvantaged communities, including rectifying historical and persistent inequities. Finally, the plan stresses that programs will require goods and materials to be made in America, though it does not provide detail on the parameters of any modifications to Buy America regulations.

In connection with the release of the AJP, the Biden administration also released its Made in America Tax Plan, which administration officials suggest would fully offset the full cost of the AJP over 15 years.[3] Notably, this plan does not include proposals frequently discussed for infrastructure spending “pay-fors” adhering to the user-pays principle, such as an increase in federal excise tax on gasoline or the introduction of a vehicle-miles-traveled fee. Instead, it relies on a set of modifications to the corporate tax code, including an increase of the corporate tax rate from 21 percent to 28 percent and changes to the tax treatment of income of multinational corporations.

The AJP states that its implementation will require partnership across government, unions and industry to provide meaningful outcomes for the American people. It does not, however, include specific proposals related to the participation of private industry in the efforts described in the plan or the funding of those efforts. In testimony on March 25 to the House Committee on Transportation and Infrastructure, Secretary of Transportation Pete Buttigieg indicated that the establishment of a national infrastructure bank remained a possibility to fill funding gaps. He also acknowledged that the $15 billion cap on tax-exempt Private Activity Bonds (which have been used to leverage private investments in public-private partnerships (P3s) in particular) has been nearly reached and suggested that an increase of the cap may be a straightforward way to stimulate private investment in infrastructure projects.[4]

According to a White House briefing, the AJP is intended to supplement, rather than replace, the funding and policy-making process for the reauthorization of surface transportation programs due to expire on September 30, 2021.[5] This procedural element is important because the AJP will not be tied to the must-pass, bipartisan reauthorization legislation, which requires at least 60 votes in the Senate to overcome the legislative filibuster—signaling that the Biden administration may consider the use of the 50-vote threshold budget reconciliation process if the AJP cannot garner sufficient Republican support. However, because budget reconciliation restricts non-budgetary legislative changes, modifications to existing programs through normal course legislation may be necessary in order to pass the AJP via reconciliation.

The AJP presents congressional leaders with the Biden administration’s favored path for infrastructure spending and corporate taxation reform but does not include proposed legislative text. Accordingly, the plan will be subject to extended negotiation among, and substantial revisions by, House and Senate leadership and relevant congressional committees. We expect that the final legislative text may differ significantly from the AJP put forth by the administration this week and will provide further updates as a legislative proposal takes shape.

Below we provide a brief summary of the major “core” infrastructure spending proposals set forth in the AJP and certain of the “non-core” spending elements of the plan that may be of interest to our clients and other infrastructure industry stakeholders.

Transportation Infrastructure—$621 billion

  • $174 billion for a set of electric vehicle initiatives, including the electrification of the federal vehicle fleet, the establishment of grant and incentive programs to build a national network of 500,000 electric vehicle chargers by 2030, and the replacement of 50,000 diesel transit vehicles and electrification of at least 20 percent of the country’s yellow school bus fleet
  • $115 billion to modernize and fix more than 10,000 bridges and 20,000 miles of highways and roads, including for the purpose of improving air quality, limiting greenhouse gas emissions, and reducing congestion
  • $85 billion to modernize existing transit facilities and fund transit system expansions
  • $80 billion for passenger and freight rail service, including addressing Amtrak’s repair backlog and modernizing the Northeast Corridor
  • $25 billion for airports, including funding the Airport Improvement Program (which provides grants for the planning and development of public use airports) and a new program to support terminal renovations and multimodal connections
  • $25 billion to support projects too large or complex for existing funding programs
  • $20 billion for road safety initiatives
  • $20 billion for projects that redress historic transportation inequities, including by reconnecting neighborhoods cut off by prior transportation projects
  • $17 billion for inland waterways, coastal ports, land ports of entry and ferries

Water Infrastructure—$111 billion

  • $56 billion in grants and low-cost loans to upgrade and modernize drinking water, wastewater and stormwater systems. Specifics were not provided as to whether the vehicle for such loans would be the Environmental Protection Agency’s (EPA) Water Infrastructure Financing and Innovation Act (WIFIA) program, which has actively supported these types of investments since 2018, or another government program
  • $45 billion in Drinking Water State Revolving Fund (DWSRF) and Water Infrastructure Improvements for the Nation Act (WIIN) grants to eliminate all lead pipes and service lines in the country, estimated by EPA to number between six and 10 million nationwide[6]
  • $10 billion to remediate chemical substances in drinking water and to invest in rural systems

Power Infrastructure—$100 billion

  • Creation of an investment tax credit to support the buildout of at least 20 gigawatts of high-voltage capacity power lines and establishment of a Grid Deployment Authority at the Department of Energy
  • Ten-year extension of investment tax credit and production tax credit for clean energy generation and storage, further mobilizing private investment to modernize the power sector. The AJP suggests that these tax credits would include a direct-pay option, which would permit developers to treat tax credits as an overpayment of taxes and monetize them directly as cash refunds from the Department of Treasury on an annual basis
  • Establishment of a federal energy efficiency and clean electricity standard
  • Former mine and oil & gas well remediation and reclamation
  • Remediation and redevelopment of Brownfield and Superfund industrial and energy sites and investments in environmental justice grant programs
  • Next-generation technology investments in distressed communities, including hydrogen fuel and carbon capture deployment and storage
  • A new Civilian Climate Corps to employ Americans in conservation and resilience programs

Digital Infrastructure—$100 billion

  • Building high-speed broadband infrastructure to reach 100% coverage across the country, including the more than 35 percent of rural Americans who currently lack access to broadband at minimally acceptable speeds
  • Reducing the cost and increasing adoption of broadband internet service, in particular in rural areas

Climate Resilience Infrastructure—$50 billion

  • Investments supporting a range of programs, including FEMA’s Building Resilient Infrastructure and Communities program, HUD’s Community Development Block Grant program, new initiatives at the Department of Transportation, tax credits and vulnerable community transition assistance
  • Protection from climate-related weather events and of major land and water resources

Social and Non-Core Infrastructure

  • $400 billion to expand access to home- or community-based care for aging individuals and people with disabilities
  • $300 billion to strengthen manufacturing and small business, including through supply chain investments, semi-conductor research, pandemic-related initiatives, clean energy purchasing and a $20 billion investment in regional innovation hubs to leverage additional private investment across the country
  • $213 billion to produce, preserve and retrofit more than two million housing units, including the establishment of a $27 billion Clean Energy and Sustainability Accelerator to further mobilize private investment
  • $180 billion to invest in technology, climate science and other innovation research and development
  • $100 billion to upgrade and build new public schools, through $50 billion in grants and an additional $50 billion leveraged through bonds
  • $100 billion in workforce development programs
  • $25 billion to upgrade child care facilities and increase the supply of child care
  • $18 billion for the modernization of Veterans Affairs hospitals and clinics
  • $12 billion to invest in community college facilities and technology
  • $10 billion in the modernization, sustainability and resilience of federal buildings, including through a Federal Capital Revolving Fund

Footnotes

[1]   The White House, Fact Sheet: The American Jobs Plan, March 31, 2021.
[2]  Axios, Biden Unveils Sweeping American Jobs Plan, March 31, 2021.
[3]  The White House, Background Press Call by a Senior Administration Official on the President’s American Jobs Plan, March 31, 2021.
[4]  Inframation, US DOT Secretary Supports PABs Increase and Infra Bank, March 25, 2021.
[5]  Transportation for America, Biden’s Infrastructure Plan is Out. Here are our Thoughts, March 31, 2021.
[6]  United States Environmental Protection Agency, Lead Service Line Replacement, accessed April 1, 2021.

Autoren und Mitwirkende

Paul Epstein

Partner

Project Development & Finance

+1 212 848 5266

+1 212 848 5266

New York

David Ullman

Associate

Project Development & Finance

+1 212 848 5131

+1 212 848 5131

New York