Plans for a national US infrastructure bank are well-intended but need to be tweaked to provide sources of capital currently unavailable to the market.
That was a message delivered at the New York State Infrastructure Summit today by Mark Florian, the head of infrastructure at energy-focused private equity firm First Reserve.
“The intent is good, but it doesn’t provide anything new,” he said of previous plans for an infrastructure bank introduced in Congress.
Those plans include the 2007 National Infrastructure Bank Act sponsored by US senators Chris Dodd and Chuck Hagel and the 2007 Build America Bonds Act sponsored by Senators Ron Wyden and John Thune. The Dodd-Hagel bill envisioned an infrastructure bank that would finance itself by issuing $60 billion of long-term bonds; the Wyden-Thune bill would have created a non-federal, multi-state entity financed with $50 billion of one-time bond issues.
Florian said an infrastructure bank can’t provide new revenues for infrastructure but can provide more financing. So he urged alternate forms of financing that aren’t available through current programs such the Transportation Infrastructure Finance and Innovation Act (TIFIA) – the US government’s infrastructure credit program – and Private Activity Bonds, a form of tax-exempt financing for infrastructure projects.
Among such alternate financing methods he listed direct grants, credit subsidies and interest cost subsidies for infrastructure projects. “If [the infrastructure bank] doesn’t do one of those three things, it’s just a 'me-too' project and doesn’t add much,” Florian said.
Florian made the comments to the 100 or so conference attendees during a presentation about the findings of the National Surface Transportation Infrastructure Financing Commission, of which he was a member.
That commission, which published its final report in late February, did not recommend the creation of a national infrastructure bank because its “finance-related recommendations can be achieved within existing agencies and programs”, according to an executive summary of their findings.
Other prominent voices in the infrastructure community have disagreed with the commission’s stance on this issue. Building America’s Future, an infrastructure investment advocacy group created two years ago by Pennsylvania Governor Ed Rendell, California Governor Arnold Schwarzenegger and New York City Mayor Michael Bloomberg, is sponsoring draft legislation for a national infrastructure bank and pitching it to Congress and the White House.
Their plan envisions an independent organisation that funds public-, private- and nonprofit-sector infrastructure projects based on an objective ranking of the social benefits they provide. It would be funded with $13.5 billion from the US Treasury and enable $48 billion of projects, according to a December draft of the legislation obtained by InfrastructureInvestor.
Rendell, Schwarzenegger and Bloomberg met with President Barack Obama in March to personally pitch the project to him. After the meeting, Rendell said Obama was receptive to their ideas but hinted that there may be a difference of opinion about its proper size.
“We think the infrastructure bank is terrific. We need to do it in a little bit bigger scale,” Rendell said on NBC's Sunday morning public affairs program Meet the Press on 22 March.