A new program launched by the Milken Institute is aimed at coming up with solutions for municipalities struggling with pandemic costs while being asked to build resilient infrastructure.
Milken introduced its Program for Excellence and Equity in Public Finance with an event Wednesday. The think tank is hosting events over the next two days as part of that initiative, known as P-FIN. The program aims to bring together policymakers, market-makers and academics to help lead discussions on how to have a resilient economic recovery from COVID-19 while financing more innovative projects and maintaining current infrastructure.
“A lot of our overall thesis is federal, state and local public dollars are catalytic to the private sector and community problem solving whether that’s job creation or infrastructure,” said Dan Carol, director in the Milken Institute Center for Financial Markets. “The idea is that the new program is a center of gravity to amplify the work that is going on out there.”
A fragmented muni space with tens of thousands of issuers combined with a loss of $280 billion dollars from the last financial crisis along with COVID-19 plus a need for infrastructure creates a difficult situation for state and local governments, Carol said.
President Joe Biden has called for resilient, innovative infrastructure and House Democrats have previously supported legislation conducive to that that failed to gain traction in the previously Republican-led Senate.
“For infrastructure, how do we fund not only the core needs and deferred maintenance but also how do we do post-COVID infrastructure and resilient infrastructure?” Carol asked. Municipal bonds are the backbone for how to finance essential public services, Carol later said.
Broadband internet has increasingly become an area of focus with many working from home and schools going online. Increasing broadband infrastructure could be a point of bipartisan support, said Michigan Gov. Gretchen Whitmer, a Democrat.
“I’m hopeful that maybe this is a place in this hyper-polarized world we’re living in where we can find some common ground because it’s just so crucial for so many,” Whitmer said during Wednesday's event.
Infrastructure investment is plausible, Whitmer added.
“If we think big, we’re going to be able to increase our global competitiveness, create jobs and reduce emissions, which is the trifecta,” Whitmer said. “Of course policymakers should remember that a robust infrastructure package is crucial in helping our economy recover from the pandemic.”
Counties such as Boone County in Kentucky could not build out surface transportation without a federal, state and private investment partner to prepare for the county’s Amazon headquarters, said Gary Moore, president of the National Association of Counties and judge in Boone County.
Financing resilient projects so that the government pays for its outcome rather than the front end is key, said Eric Letsinger, CEO of Quantified Ventures and chairman of ReHarvest Partners. Letsinger specifically noted environmental impact bonds, which can give public entities upfront capital for environmental projects, as a way of doing so.
P-FIN’s advisory council is led by Lois Scott, Chicago’s former chief financial officer. Other members of its council include former Municipal Securities Rulemaking Board Chair Gary Hall, former MSRB CEO Lynnette Kelly and the Federal Reserve’s Kent Hiteshew.
The Milken Institute also released a
Current legislation for funding surface transportation was extended by one year to the end of September. The HTF fund runs mostly on gas taxes, but also receives money from the Treasury’s general fund.
The federal government should also expand programs like the Transportation Infrastructure and Finance Innovation Act (TIFIA) and the Water Infrastructure Finance and Innovation Act (WIFIA), Milken said in its report. TIFIA, for example, should include more than just surface transportation.
Congress should also revive low-cost debt financing tools used during the 2008 Recessions such as Build America Bonds and private activity bonds, Milken said in the report.
At the state level, officials should bundle small projects to attract interest from capital markets, Milken added.
