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Smith's Research & Gradings
Volume: 
XXIX
Issue: 
18
Author: 
November 8, 2021

Smith's Research & Gradings

Biden Infrastructure Plan Approved

Biden Infrastructure Plan Approved

While we were sleeping late Thursday night, the U.S. House of Representatives passed the Infrastructure Investment & Jobs Act (IIJA) exactly as the U.S. Senate did in August.  Now, it is going to the President for signature. 

On Friday, Maria Lehman, president-elect of the American Society of Civil Engineers, said, "This has been more than two decades of push for significant infrastructure development spending by the federal government.  Now we all need to get to work to help make the huge impact for our children and grandchildren!  There will be much celebrating today!!!!!!.

"The Infrastructure bill (aka IIJA) was a total of $1.2 trillion.  It includes a five-year reauthorization of the federal surface transportation bill, safe drinking water bill, clean water bill and several other smaller reauthorizations.  It then includes $550 billion in new money," Ms. Lehman said.  It is now our turn to transform the U.S. infrastructure!"

The IIJA is the largest investment in the resilience of physical and natural systems in American history.  The funding expands passenger rail infrastructure in high-population centers and decreases the NEC backlog of deferred maintenance. Hand-in-hand the IIJA will reduce the backlog of transit rehabilitation needs.

Smith's Research & Gradings has maintained a database with more than 75,000 dams in the United States. Smith's Dam Gradings annual reports on the nation's dams have underscored the lack of new construction and ongoing neglect of this critical infrastructure.  The IIJA will prioritize rehabilitation of high-hazard potential dams. Additionally, the IIJA will support State dam safety offices and activities.

The IIJA will tackle the bridge backlog of maintenance projects.  However, Smith's Research & Gradings has found the States (and local governments) may continue to not spend money on maintenance because building a new replacement bridge generates more money for the local coffers. It takes an almost heroic effort to build a new bridge, such as the replacement Tappan Zee Bridge.

The IIJA will also seek to address the capacity challenges at airport terminals. Currently, only the 25 largest airports have received any real meaningful benefits from municipal bond funding, so the new Federal program could actually improve the entire airport terminal system (think supply chain).

The IIJA will reinstate the Superfund Polluters Levy and direct funding to clean up legacy sites.  This is an important environmental tool that can repair damages wrought by a "disposable" society.

What's In the Plan

To quickly recap where we are in Washington DC:

- A bipartisan infrastructure bill was approved by the Senate on August 10, 2021 by a 69 to 30 vote. 

- On top of baseline spending which was approved at $650 billion, the bill adds $550 billion over five years to fund improvements in the nation's transportation, water, electric power and digital infrastructure. 

- The Senate also approved the $3.5 trillion Budget Bill 50 to 49 under Budget reconciliation.  

- House is working on Committee Markup and expected to vote by 12/3/2021.

Municipal bonds may be a loser in the IIJA sweepstakes because tax-exempt bonds are not included in the capital stack, yet.   For example, Amtrak's plan for the passenger and freight rail category includes new rail line construction in Florida and California which will effectively eliminate the BrightLine Rail projects for Miami-Orlando and LA to Las Vegas.

Take notice

Stay on top of the latest global news that can impact your investment strategy.

Treasury Secretary to Close COVID-19 Lending Facilities

On Thursday, November 19, Treasury Secretary Mnuchin sent a letter to Fed Chair Powell indicating that he would be allowing most of the Fed's 13(3) emergency lending facilities to expire at year-end, and requesting that the Fed "return unused funds to the Treasury" in order for Congress to "re-appropriate $455 billion, consisting of $429 billion in excess Treasury funds for the Federal Reserve facilities and $26 billion in unused Treasury direct loan funds."

Outlook Negative

California High Speed Train May Jump the Tracks

Oracle co-founder Larry Ellison and Tesla founder Elon Musk both agree when it comes to California's $77 billion high-speed rail project—the project is going to jump the tracks.

Should State and Local Bailout Come With Strings?

One of the great lessons from the Puerto Rico bankruptcy was never to draw to an inside straight — in other words, state and local government politicians need to play the hand that is dealt.

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