Category Archives: Infrastructure

Large, established toll road systems are better positioned for the next recession

Source: Maria Matesanz, Eriq Alexander, Kurt Krummenacker, Moody’s, Sector In-Depth, July 17, 2018
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Large road systems will experience more stable traffic and revenue trends in a recession than smaller or less well established systems, based on our analysis of their performance during and after the last recession. From a financial and operational standpoint, we expect larger toll roads to maintain steady traffic growth and performance with minimal negative credit effects associated with typical traffic and toll revenue drops seen during recessions. We define large, established toll roads as those that operate multiple assets and have been in operation more than 15 years….

Water Infrastructure Financing: The Water Infrastructure Finance and Innovation Act (WIFIA) Program

Source: Congressional Research Service, CRS Report, June 11, 2018

The Water Infrastructure Finance and Innovation Act (WIFIA) program provides financial assistance for water infrastructure projects, including projects to build and upgrade wastewater and drinking water treatment systems. Congress established the WIFIA program in the Water Resources Reform and Development Act of 2014 (WRRDA 2014, P.L. 113-121).

The WIFIA concept is modeled after a similar program that finances transportation projects, the Transportation Infrastructure Finance and Innovation Act (TIFIA) program. Proponents of the WIFIA approach, including water utility organizations, cite several potential benefits
• WIFIA provides credit assistance to large water infrastructure projects that may otherwise have difficulty obtaining financing.
• WIFIA provides credit assistance, namely direct loans, at U.S. Treasury rates, potentially lowering the cost of capital for borrowers.
• WIFIA assistance has less of a federal budgetary effect than conventional project grants that are not repaid, because only the subsidy cost of a loan (representing the presumed default rate on loans) is required to be appropriated.
• WIFIA support limits the federal government’s exposure to default, because projects must be found creditworthy with a revenue stream for repayment to be eligible for assistance.

On the other hand, opponents of the WIFIA approach, including organizations that represent state environmental agency officials, have cited several concerns
• Federal funding for a WIFIA program could have a detrimental effect on federal support for established State Revolving Fund (SRF) programs that provide the largest source of water infrastructure assistance today.
• If WIFIA funding resulted in a decrease in SRF assistance, smaller projects may face financing challenges.
• The Congressional Budget Office has warned that the future costs of a WIFIA program to the federal budget may be underestimated.

Between A Budget And A Hard Place: The Risks Of Deferring Maintenance For U.S. Infrastructure

Source: Anne Selting, S&P Global Ratings, May 15, 2018
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State and local governments are deferring maintenance on critical infrastructure assets they own and operate. Due to a lack of standardized reporting, it’s difficult to quantify the extent of the maintenance backlog, but it could be significant. ….

Infrastructure Reality Check

Source: Sarah Crane, Regional Financial Review, Volume 28 Number 7, March 2018
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This article assesses the magnitude of needed U.S. infrastructure spending and compares it to current proposals. Further, it assesses the multiplier effect of such spending and finds that it is stronger during a recession and the immediate recovery period when there is considerable idle resources in the economy.

Competing spending demands and slowing revenue growth will stymie capital investment for many cities

Source: Coley J Anderson, Rachel Cortez, Alexandra S. Parke, Katie Townsend, Moody’s, Sector In-Depth, April 12, 2018
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US local governments are facing acute infrastructure needs following years of deferred maintenance. Local governments’ capital spending fell by 19% between 2009 and 2015, hastening a decline in the condition of public assets. This trend will continue through at least 2018. An increase in competing spending demands and a slowdown in property tax revenue growth will hamper many cities’ ability to stave off further deterioration in capital assets. Cities with growing revenue bases, ample financial reserves and low fixed costs are best positioned to increase capital spending. Cities with weak population growth, narrow financial reserves and high fixed costs will find it difficult to make capital investment a priority.

State, local infrastructure borrowing boom unlikely without greater federal funding

Source: Marcia Van Wagner, Coley J Anderson, Rachel Cortez, Baye Larsen, Timothy Blake, Alexandra S. Parker, Moody’s, Sector In-Depth, March 30, 2018
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US states, local governments and transit authorities’ funding constraints add a layer of difficulty to the Trump administration’s infrastructure plan. The proposal relies on municipalities’ ability to increase leverage, identify new revenue streams and attract private sector partners.

Funding and Financing Highways and Public Transportation

Source: Robert S. Kirk, William J. Mallett, Congressional Research Service, R44674, CRS Report, January 11, 2018

Almost every conversation about surface transportation finance begins with a two-part question: What are the “needs” of the national transportation system, and how does the nation pay for them? This report is aimed almost entirely at discussing the “how to pay for them” question. Since 1956, federal surface transportation programs have been funded largely by taxes on motor fuels that flow into the Highway Trust Fund (HTF). A steady increase in the revenues flowing into the HTF due to increased motor vehicle use and occasional increases in fuel tax rates accommodated growth in surface transportation spending over several decades. In 2001, though, trust fund revenues stopped growing faster than spending. In 2008 Congress began providing Treasury general fund transfers to keep the HTF solvent….

Community-Owned Fiber Networks: Value Leaders in America – Pricing Review Shows They Provide Least-Expensive Local “Broadband”

Source: David Talbot, Kira Hessekiel, and Danielle Kehl, Responsive Communities, January 2018

From the abstract:
By one recent estimate, about 9.2 percent of Americans, or almost 30 million people, lack access to wired home broadband service, which the FCC defines as an Internet access connection providing speeds of at least 25 Mbps download and 3 Mbps upload. Even where home broadband is available, high prices inhibit adoption; in one national survey, 33 percent of non-subscribers cited cost of service as the primary barrier. Municipally and other community-owned networks have been proposed as a driver of competition and resulting better service and prices.

We examined prices advertised by a subset of community-owned networks that use fiber-to-the-home (FTTH) technology. In late 2015 and 2016 we collected advertised prices for residential data plans offered by 40 community-owned (typically municipally-owned) FTTH networks. We then identified the least-expensive service that meets the federal definition of broadband (regardless of the exact speeds provided) and compared advertised prices to those of private competitors in the same markets. We were able to make comparisons in 27 communities and found that in 23 cases, the community-owned FTTH providers’ pricing was lower when the service costs and fees were averaged over four years. (Using a three year-average changed this fraction to 22 out of 27.) In the other 13 communities, comparisons were not possible, either because the private providers’ website terms of service deterred or prohibited data collection or because no competitor offered service that qualified as broadband. We also found that almost all community-owned FTTH networks offered prices that were clear and unchanging, whereas private ISPs typically charged initial low promotional or “teaser” rates that later sharply rose, usually after 12 months.

We made the incidental finding that Comcast advertised different prices and terms for the same service in different regions. We do not have enough information to draw conclusions about the impacts of these practices. In general, our ability to study broadband pricing was constrained by the lack of standardization in internet service offerings and a shortage of available data.

Related:
City-owned Internet services offer cheaper and more transparent pricing
Source: Jon Brodkin, Ars Technica, January 15, 2018

Data shows why customers want muni broadband—and why telecom industry fears it. …. In cases where the researchers were able to compare municipal prices to private ISP prices, the city-run networks almost always offered lower prices. This may help explain why the broadband industry has repeatedly fought against the expansion of municipal broadband networks. This fight includes pushing legislators to draft anti-municipal broadband state laws, lobbying against local ballot initiatives, and filing lawsuits against cities that build their own networks. ….

Understanding Muni Bonds: Prospects for Funding Infrastructure Improvements

Source: Ed Friedman, Regional Financial Review, August 2017
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Both monetary and fiscal policies will affect the municipal bond market over the coming year. Anticipated further tightening by the Federal Reserve will raise all interest rates, including the borrowing costs of state and local governments. The Trump administration’s goal of boosting infrastructure spending will potentially magnify this movement to the extent that it stimulates overall growth. Moreover, the municipal bond market will be one of the alternatives considered for the financing, the others being an infrastructure bank and one or more public-private partnerships.

This article assesses the structure of the muni market, macroeconomic trends in the market, and the role it may play in federal fiscal policy. The costs and benefits of using the muni market are weighed against the other alternatives…..

Public Works 2017 Salary Survey Results

Source: Victoria K. Sicaras, Public Works, Vol. 148 no. 5, June/July 2017

Paychecks continue rising, but not enough to make up for ground lost during the recession and increasing benefits costs.

It’s been nine years since the U.S. economy bottomed out, and the heavily hit real estate and construction markets have finally entered full recovery mode. The unemployment rate has dropped back down to prerecession levels and gas prices are even lower than in 2006. Plus, consumer confidence has so far remained strong in 2017, according to The Confidence Board, the nonprofit economic research association owned by Nielson Holdings.