My Public Works Financing column is up:
In recent weeks, the idea of a National Infrastructure Bank has gained new momentum. It has been endorsed in a Wall Street Journal op-ed by the president’s Economic Recovery Advisory Board. The group Building America’s Future assembled several dozen people for a January 20 news conference to endorse the idea (though not a specific proposal). Reason Foundation’s Adrian Moore and Shirley Ybarra took part along with other prominent transportation groups (AASHTO, APTA, T4America), think tanks (Bipartisan Policy Center, Brookings, Center for National Policy), construction interests (ARTBA, US Steelworkers, ACEC), and others.
Eighteen months ago in this space, I wrote a rather skeptical assessment of the National Infrastructure Bank idea, as it was incorporated in what seemed to be a piece of poorly thought out legislation. With more-detailed proposals emerging since then, it’s time for another look.
Proponents of a National Infrastructure Bank (NIB) present it as a solution to two major problems: insufficient investment in transportation (and other) infrastructure and poorly targeted (read politicized) infrastructure spending. It is plausible that some version of an infrastructure bank could help address both problems.
Today, America pays for most public sector transportation infrastructure (e.g., highways) out of current cash flow. Shifting to a model that finances that investment would be a way to do a large one-time catch-up, even if there was no significant increase in the ongoing cash flow. But if the investment was in major projects that generated net new revenues (e.g., from tolls or other new user fees), then total investment would increase, in addition to being front-loaded.
Second, if the NIB were set up as a genuine bank, operated on commercial principles, it would fund only projects that met pretty rigorous investment criteria, including well-documented revenues that would repay the bank’s investment. That way the NIB would be a going concern, like state revolving loan funds for infrastructure. As a national entity, the bank should be chartered to concentrate on projects too large to be readily funded by a state department of transportation, projects involving multi-state corridors, etc. So this whole set of factors would target the investments to projects with high ratios of benefits to costs.
How would such an entity be structured?