Infrastructure and Uncertainty – What’s Ahead for the Muni-Markets

In case you missed it, earlier this year, hell froze over. More specifically, the United States Senate passed legislation on a bi-partisan basis. The Infrastructure Investment and Jobs Act, or IIJA, passed August 10 by a vote of 69-30.

This funds a package of physical or “hard” infrastructure that includes approximately $550 billion for capital projects including roads and bridges, public transit, airports, ports and waterways, clean drinking water, power infrastructure, environmental remediation, electric vehicle infrastructure and broadband. It provides a total of $110 billion for road and bridges including a $67.7 billion multi-year reauthorization of the very popular Fixing America’s Surface Transportation Act. The legislation also includes $55 billion for water infrastructure.

The Senate’s bi-partisan support is noteworthy given current divisions in our government. While there were concerns about deficit spending and taxes and inclusion of specific projects, it became clear that physical infrastructure funding – like transportation and clean water – was viewed by many on Capitol Hill as an urgent priority. This is especially true as the memory of the I35W Bridge collapse in Minneapolis in 2007 and the more recent tragedy of undrinkable, lead-poisoned tap water in Flint, Michigan is not easily forgotten.

Congressional Roadblocks?

As the legislation moved to the House of Representatives it was clear some members have in mind a broader infrastructure agenda for which they assign a higher priority. This broader agenda is outlined in the Build Back Better Act.

The Build Back Better agenda has been described as a social infrastructure funding plan which includes funding for universal pre-school, free community college, expanded home care for the elderly and disabled, lower prescription drug costs, expanded Medicare benefits and programs to enhance workforce training. Importantly, Build Back Better also included provisions designed to address climate change and help transform the electricity sector to clean energy. Funding costs for items included in the initial version of the Build Back Better Act totaled approximately $3.5 trillion. However, as of October 28, the proposal being put forward had been reduced to $1.75 trillion.