Banking on Obama’s support

Advocacy groups hoping to gain political support for a national infrastructure bank are relying on the time-tested principle of “if you build it they will come” to push their idea forward. Building America’s Future (BAF) – 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 Reinvestment Corporation (NIRC) and pitching it to members of Congress and the White House.

The draft, a copy of which was provided to Infrastructure Investor, would authorise an experimental two-year programme for an organisation to provide grants, loans and tax incentives to invest in US infrastructure. Peter Luchetti, a private sector advisor working with BAF on the draft legislation, said that the NIRC would seek “to make projects possible that might not otherwise happen”.

He cited the Tri-City Medical Centre in California’s San Diego County as an example of such a project. The hospital needs money to upgrade its facilities to comply with earthquake safety legislation. But the public sector can’t afford to pay for it and the private sector doesn’t feel comfortable taking on the revenue risk because of the high number of customers who don’t pay.

“It’s the only public hospital in a county of 5.5 million people. It’s overwhelmed with people coming to the hospital, but no one wants to pay for it,” Luchetti said.

In this and similar situations in which the public and private sectors can’t reach agreement on risk and reward sharing, the NIRC could step in and enable the project to move forward by providing stopgap financing, Luchetti said. In that sense, the NIRC would function like a multilateral finance agency but on a domestic basis.

The NIRC would be funded with $13.5 billion from the US Treasury. BAF estimates that the money would enable $48 billion of projects.

In March, Rendell, Schwarzenegger and Bloomberg personally pitched their idea to President Obama. Speaking in an interview with NBC news afterwards, Rendell said that the president was receptive to their idea, but Rendell hinted that there may be some disagreement as to its appropriate size.

“We think the infrastructure bank is terrific. We need to do it in a little bit bigger scale,” Rendell said.