Has the time come for the ‘Infrastructure Bank’?
WASHINGTON–At first blush, it would seem the stars have finally aligned for a long-stalled bill creating a national “Infrastructure Bank,” a proposal pushed for years by top Connecticut lawmakers.
The idea has gained prominence at a time when available federal transportation funds are far short of the nation’s needs, and lawmakers are looking for new ways to stretch scarce federal dollars.
Rep. Rosa DeLauro, D-3rd District, introduced the infrastructure bank proposal at the start of the 112th Congress, and she signaled it will be a top priority this year. President Barack Obama put the weight of the White House behind the proposal in his 2012 budget. And outside groups, ranging from the U.S. Chamber of Commerce to the AFL-CIO, have embraced the concept.
Despite that backdrop, however, significant hurdles remain.
“The prospects for it are rather cloudy,” said Ken Orski, a transportation expert who served in the Nixon and Ford administrations and now publishes an influential transportation newsletter.
The opposition, Orski said, is broad and bipartisan. Some critics say it’s an unnecessary new initiative that mirrors a program already in place. Others fear it would give the White House a new pot of money to dip into for its most cherished projects, with little or no congressional input.
The proposal at issue would set up a new government lending entity, which could use federal dollars to attract private investment for high-priority infrastructure projects.
The White House envisions it as a $30 billion bank, able to fund major national and regional transportation needs over the next six years, such as high-speed rail lines around the country.
“Transportation programs have been sliced up in lots of little bits,” said Roy Kienitz, the undersecretary for policy at the Department of Transportation. “Certain funds are only for bridges over 20 feet in length… and certain funds are only for the operating costs of transit agencies.”
The concept behind the I-Bank, he said, is to set aside a large amount of money–starting with $5 billion in 2012–to be doled out in large chunks on a competitive basis for high-impact projects.
“The idea is to use it as a way to get money to the projects that have the biggest benefit rather than giving money sliced up in tiny bits,” he said. “This would allow us to do some of the big things that we’ve gotten out of the habit of doing in this country.”
DeLauro sees it in even broader terms–as an entity that would fund a wide range of initiatives, from energy projects to telecommunications upgrades, not just transportation. At a time when there’s deep fear about the U.S. falling behind globally, DeLauro said this kind of flexible financing mechanism, modeled after a similar European bank, is critical.
And because it would use “innovative financing” to spur growth, create jobs and increase U.S. competitiveness, she said, “this is perfect for a bipartisan approach.”
Rep. John Mica, R-Fla., the new chairman of the House Transportation and Infrastructure Committee, said he’ll look closely at the idea. “I’m a fan of creating financing,” he said.
But before Congress creates a new government program, Mica added, lawmakers need to look at existing programs. And one thing that’s already in place at the federal Department of Transportation is an infrastructure bank.
Created in 1998 when Congress passed the Transportation Infrastructure Finance and Innovation Act (TIFIA), this existing entity provides credit to projects of “regional and national significance,” as TIFIA’s website notes. “The TIFIA credit program is designed to fill market gaps and leverage substantial private co-investment by providing supplemental and subordinate capital.”
That description isn’t all that much different from the President’s proposal, although the White House has only outlined its idea in broad-brush strokes.
DeLauro said that TIFIA is too limited and can’t be used to leverage the kind of dramatic investments the U.S. needs to make right now.
“It’s small bore,” she said. “It’s not very well funded. And it’s just not really dealing with the broad range of infrastructure needs and the diversity” of projects a national bank could fund.
“It is not at the scale you will have to have for driving a national growth strategy,” she said.
But Sen. Barbara Boxer, D-Calif., chair of the Senate Environment and Public Works Committee, is not so sure.
“It actually can create, for every billion dollars, ten times the [financial] activity, so it’s huge,” Boxer said. “It leverages hugely at very little cost to the federal government.”
Boxer said that while she’s “very open” to the I-Bank idea, she simply doesn’t see how it can advance in the Senate this year. “We don’t have the votes over here right now,” she said. “There’s broad opposition.”
She said she’s already told the Administration that she’ll look at expanding TIFIA first, before she pushes for a new infrastructure bank.
TIFIA is currently funded at $122 million per year, which translates into about $1.5 billion in credit assistance. But in 2010, the agency that oversees TIFIA got 39 funding requests from states and local communities seeking more than $13 billion in credit assistance. Boxer has signaled that an expended TIFIA, more flush with funding and more flexible in its financing rules, would be the best way to go for now.
“I don’t think anything should be off the table, but TIFIA is a very good way to start moving forward,” Boxer said. “It’s already in existence, and we don’t have to have an argument about how it would work,” how it should be set up, and whether a new program is needed.
That’s exactly the argument Sen. Richard Shelby, R-Ala., will mount if a national infrastructure bank gains traction.
“It sounds good on paper, but right now we better worry about how we’re going to be pay our current bills, not create more,” said Shelby, the top Republican on the Senate banking committee. He said the infrastructure bank proposal sounds too much like Freddie Mac and Fannie Mae, the government-sponsored mortgage giants that played a key role in the housing crisis.
“It looks like a government-sponsored enterprise, a hybrid deal between the private sector and the government,” Shelby said. “And always, the government winds up footing the bill.”
Orski said other Republicans are worried about the spending power that such a bank would give to the Executive Branch. One key difference between TIFIA and a new bank is that the I-Bank could dole out transportation grants, in addition to loans.
“Basically it’s a new kitty, which the Republicans call executive earmarks,” Orski said. “The basic motivation is to provide an independent source of transportation funds,” over and above the Highway Trust Fund that Congress controls.
Keinitz dismissed the notion that the White House would use this bank to make its own earmarks. “We’re trying to create a system in which rewarding excellence” drives the funding decisions, he said.
But he conceded that lawmakers in Congress want to protect their purview over federal spending, and that creates a key obstacle.
“You’re asking Congress to give up control over something it’s used to, and asking states to give up some of the money they’ve gotten by formula,” he said.
“We’re saying ‘How about for 90 percent of the money, you guys continue to do that, but how about for 10 percent we run a competitive process that you can’t short-circuit through a committee chairman’,” who might make a decision based on politics rather than the quality of the project.
He and other proponents say they are optimistic, despite the objections, that the time is ripe for this concept. Ex-Sen. Chris Dodd, D-Conn., had championed the infrastructure bank proposal in the Senate before his retirement. Sen. John Kerry, D-Mass., has said he will pick up where Dodd left off; he’s drafting a new version of the proposal now.
“This is an idea whose time has not just come but is long overdue,” Kerry said at hearing last fall, chaired by Dodd, on the bank proposal. “We need to create new and strong incentives for investment here in the building blocks for economic competitiveness – roads, bridges, rail, aviation and other essential infrastructure.”
Kerry noted that the European Investment Bank, a similar entity, financed $350 billion in projects from 2005 to 2009. That helped “modernize seaports, expand airports, build rail lines and reconfigure city centers,” Kerry said.
One issue everyone seems to agree on: there is a huge backlog of transportation projects across the country. The American Society of Civil Engineers has estimated that the U.S. needs to spend $2.2 trillion through 2014, just to maintain the keep the current national infrastructure in good condition
Finding additional revenue to fund transportation projects is a major challenge confronting this Congress. In recent years, lawmakers have repeatedly stalled over reauthorization of a six-year transportation law, in large part because the money flowing into the Highway Trust Fund isn’t enough to pay for the transportation blueprint that lawmakers want to enact.
Although some have called for raising the federal gas tax, both House Republicans and the White House have ruled that out. So it’s possible the proposal for an infrastructure bank could fill the funding void and help break the stalemate over a new six-year transportation bill.
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