Wednesday, May 13, 2015
A National Infrastructure Bank - with a Republican Twist
As the clock continues ticking down to the depletion of the Highway Trust Fund, there is no shortage of ideas for funding our nation's infrastructure projects. As previously discussed, some have proposed raising the gas tax to make up for the funding gap. Now, Senator Deb Fischer (R-Neb.) has introduced legislation to instead establish a national infrastructure bank to fund the projects.
The Build USA Act (S. 1296) would allow states to enter into three-year agreements with a new American Infrastructure Bank (AIB). Under these agreements, states have the option to remit federal transportation dollars, apply for a transportation project loan through the bank, or both. More specifically, a state remitting federal highway dollars would receive 90% of it back for core infrastructure projects (defined by the bill as a "federal aid highway or highway project") with the remaining 10% available as project loans at below-market rates. The bank would be capitalized with corporate dollars repatriated from overseas - another oft-floated proposal for filling the trust fund's coffers - and the bank's board members would have the authority to raise capital by issuing debt securities.
Interestingly, it is the states, not the AIB or another federal entity, who have the authority under this bill to determine whether its own projects comply with federal requirements for environmental approval, construction design, right-of-way acquisition, and so on. This is the so-called "Republican twist" alluded to in the title of this post: Fischer is selling the bill as "reducing regulatory burdens," a common theme in Republican talking points regarding large infrastructure or economic projects.
The idea of establishing an infrastructure bank to fund highway projects is not new: Congresswoman Rosa DeLauro (CT-3), for example, has introduced several times the National Infrastructure Development Bank Act, which similarly establishes an infrastructure bank but to fund not just highway projects, but all kinds of transportation, energy, and telecommunications infrastructure projects. The differences between the two bills don't end there. Most notably, responsibility for regulatory compliance with the DeLauro bill is placed in federal hands, directing the Bank to "take into account the economic, environmental, and social benefits, and costs of each project under consideration... prioritizing projects that contribute to economic growth, lead to job creation, and are of regional or national significance." Fischer would likely say DeLauro's version "over-burdens" states looking to secure monies for their infrastructure projects.
In addition, rather than repatriating corporate profits, the bill appropriates federal money to capitalize the bank. DeLauro's bill also authorizes the Bank to sell America Infrastructure Bonds; it's not immediately obvious whether or how this is different from Fischer's issuance of debt securities. DeLauro's bill is generally much more specific than Fischer's, including processes for risk management and auditing, Davis-Beacon Act and Buy America provisions, and record-keeping guidelines.
Fischer asserts her proposal is more viable than raising the gas tax, which hasn't been raised since the 1990's and as a result has been outpaced by the rise in highway construction costs. So is establishing an infrastructure bank the way to go? The idea generally has bipartisan support, but the devil may be in the details as differing political parties have different views over what such a bank would look like.