US President Barack Obama presents his fiscal 2013 budget request before Congress tonight and he is expected to request hundreds of billions of dollars for infrastructure spending. To that end, the President’s highly touted but unrealised infrastructure bank might not be outside the realm of possibility in the coming months.
In fact, Michael Likosky, director of New York University’s Centre on Law and Public Finance and an expert on public-private partnerships (PPPs), said on a conference call recently hosted by RBC Capital Markets that the infrastructure bank could see the light of day this year.
“I expect that we will have the infrastructure bank move to passage after the transportation bill is settled. It is clear now how the National Infrastructure Bank will catalyse a broader market for PPPs across key sectors,” Likosky told Infrastructure Investor.
A National Infrastructure Bank would begin with a funding level of $10 billion, allocated by the federal government. It would take a broad-brush approach and would be designed to allocate capital through loans and loan guarantees across various infrastructure subsectors, including water, energy and transportation.
Likosky pointed out that this wide approach differs from the nation’s Transportation Infrastructure Finance and Innovation Act (TIFIA), which is biased towards highway projects. TIFIA also targets large marquee projects, while the infrastructure bank would promote deal volume. For instance, estimates suggest an infra bank could ignite some $500 billion in sector transactions.
“The proposed bank will be an important source of capital for US infrastructure projects. The idea has been floating around for several years, but I think it has a better chance of passing in its current form than it had in its previous incarnations,” RBC Capital Markets’ head of US Municipals Strategy, Chris Mauro, told Infrastructure Investor.
Likosky would like to see the bank leverage more capital than most estimates predict. In addition, he agrees with President Obama that an infrastructure bank would help unite the different localities involved in PPPs and streamline the political process so that large, ambitious projects can be completed.
He appears confident that the infrastructure bank will emerge, and says it may follow one of three legislative paths: the infrastructure bank could be delivered on a US transportation bill, the status of which, Mauro points out, remains muddled given that there are currently two competing pieces of legislation in the House and Senate; the bank could also come through as a component of a jobs bill this calendar year; or, and perhaps most uniquely, may become enacted by way of an executive order.
Likosky expects the infrastructure bank will find its way into the middle option and as a component of a US jobs bill.
“We are likely to see the infrastructure bank coupled with a modernisation of our extractives sector, and I view it as advisable to incorporate that sector into the infrastructure bank itself, as is standard with every infrastructure bank in the world,” Likosky commented.