If Congress agrees an infrastructure bank should be part of an overall strategy to draw on private resources to build public infrastructure, lawmakers will have at least two models to consider. The Obama administration calls for a National Infrastructure Bank as part of its 2012 budget proposal for the Department of Transportation.
The DOT’s I-bank would be housed within the department to administer grants and loans for transportation projects. President Obama held out the infrastructure bank as a campaign promise. DOT officials have discussed it only broadly in congressional hearings, but details will likely be embedded in an administration proposal for a multiyear surface transportation bill.
Sen. John Kerry, D-Mass., is calling for the American Infrastructure Financing Authority, an independent nonprofit lender. The bank is described in the BUILD Act — for Building and Upgrading Infrastructure for Long-Term Development — Kerry introduced March 17. It would use $10 billion in federal seed money to attract as much as $160 billion in private investment over the next 10 years.
Kerry’s infrastructure authority would have a wider lending portfolio than the DOT bank, adding water and energy infrastructure to transportation. Both are intended to attract private investment, but the independent bank would work only with projects that have a clear revenue stream to repay the outlays. In fact, Kerry said the bank’s $10 billion will come from the DOT’s $30 billion for grants and loans.
The two ideas aren’t mutually exclusive, but transportation advocates aren’t taking positions until all the details are out for everyone to see.
“They’re coming at it from very different directions,” said Mortimer L. Downey, a senior adviser for Parsons Brinckerhoff who served as deputy transportation secretary in the Clinton administration. “Until there’s some resolution that says ‘We’re going to do this,’ and there’s more clarity about what we’re going to do, I think all of the ideas are still on the table.”
The DOT bank would disburse loans and grants that have been handled through the TIGER grant program and TIFIA loan program. The independent bank would provide loans and loan guarantees targeted at big-ticket projects, $100 million along high-traffic routes, and $25 million for rural projects.
“Part of our condition for support was that the bank has to be a bank,” said Janet F. Kavinoky, director of transportation and infrastructure policy for the U.S. Chamber of Commerce. “It has to provide loans and loan guarantees. If you want a grant-making program, the DOT, Department of Energy, and EPA have a lot of grant-making programs.
“This is about trying to create a level of financing that helps draw in private sector investments. If you’re doing project finance, there has to be some form of revenue to pay back the debt and the equity,” Kavinoky said. “The DOT proposal has been talked about as TIFIA plus TIGER. This proposal is TIFIA on steroids.”
Kavinoky said the DOT could guide funds and develop projects based on larger national transportation goals. The independent bank more likely would wait for borrowers to approach the bank.
Downey said if the bank gets no further subsidy, it would likely have to turn to fees for revenue. But that may make the bank less attractive to prospective borrowers.
“So what’s the deal? Why would you go there instead of the bond market or bank borrowing?” Downey said. “Part of it would be the attractive basic interest rate of being able to borrow at treasury rates, but if offset by ... fees, you bring the cost of borrowing up.
“Anybody heading there will be doing their arithmetic to say, ‘Is this better than private activity bonds or other sources?’ ” Downey said. “I don’t see people beating the door down for this.”
The independent bank is intended to keep decision-making out of the political arena, but convincing anyone in Washington that will happen is unlikely. “They very strongly believe that a properly constituted public authority can rise above politics I’ve heard it a million times. You can never take the politics out of politics,” Downey said. “If it turns out to be the case this time, it’s the first time.”
Philanthropist and public policy advocate Bernard L. Schwartz supports the independent bank, saying it ties the need for infrastructure to jobs.
“It’s just a good idea whose time has come. … It’s a very big step to say we’re going to have a universal bill rather than saying we’re going to have just a transportation bill,” Schwartz said. “That’s a big plus, in my judgment.”
Contact R.G. Edmonson at email@example.com.