Letter from Washington: 2010: the year of the infrastructure bank?

IN A TOWN famous for spin, there’s no way to soften the hard fact that 2009 was a tough year for proponents of a national infrastructure bank to finance the US’ big-ticket building endeavours. In one form or another, three major proposals made their way to Capitol Hill last year, and each one died its own, quiet death.

In May, Democratic Congresswoman Rosa DeLauro of Connecticut proposed legislation for a National Infrastructure Development Bank that would have $625 billion in lending capacity. Like so many other pieces of legislation, it got referred to a committee for hearing and was not heard from again.

In June, the House Transportation & Infrastructure Committee unveiled a $500 billion transportation spending bill with an infrastructure bank embedded in it. But the bill got stuck in traffic because the healthcare debate overtook Congress shortly thereafter.

And in December, Congress finally told President Obama what it thought of his proposal for an infrastructure bank with $5 billion a year in funding for five years starting in 2010: the request “has not been provided” because of “the complexity of this proposal”.

A mere 20 days into 2010, though, the bank’s political champions were already in formation and ready to battle anew. And, despite the setbacks, they appeared as optimistic and passionate about the cause as ever.

DeLauro, flanked by Pennsylvania Governor Ed Rendell, former ambassador and financier Felix Rohatyn, and Connecticut Senator Chris Dodd, rallied support for her cause at a small press conference on Capitol Hill sponsored by Building America’s Future, the infrastructure
investment advocacy group co-founded by Rendell.

Why do they think their prospects are any better now? “I think the concept that we’re talking about is more and more understood. I mean before people had at least the excuse of not understanding. I think now they understand,” said Rohatyn.

This would be no regular brick-and-mortar bank like HSBC or Citibank on your local street corner. Rendell, one of the key visionaries for the bank, envisions a Federal infrastructure financing organisation
independent of any political body – “so it can make truly merit-based, cost-benefit analysis decisions on what to fund and what not [to fund]” – “properly capitalised”, so as to have enough money available to really leverage private capital – and focused on projects of regional and national importance.

And by “properly capitalised” he means billions of dollars over multiple years: “I would like to see a multi-year commitment of at least $10 billion dollars a year for five years, $50 billion dollars, I would say, at least.”

Over at the Department of Transportation, Transportation Secretary Ray LaHood is also a firm proponent of an infrastructure bank (see Keynote interview, p. 24). LaHood believes it would have to be substantial enough in size to deliver “big projects that cost a lot of money where we just don’t have the revenue to do it”, though he declined to elaborate how many billions of dollars constitute a substantial amount.

LIMITED OPPORTUNITIES
Democratic Representative Peter DeFazio, one of the architects of the House Transportation and Infrastructure Committee’s $500 billion transportation spending bill, takes a more careful approach. He included an infrastructure bank in his measure, but admits “there are limited opportunities for an investment by an infrastructure bank”. Its investments would have to be revenue-producing projects, but key priorities for investment like transit and highways, he believes, would be out of bounds.

“An infrastructure bank can address a tiny fraction of the problem,” he concludes.

Still, with support from the White House and one version of the bank already embedded in a transportation spending bill that may get consideration by Congress as soon as healthcare is tackled, there is reason to be optimistic about prospects.

As DeLauro pointed out, it’s been 14 years since she first looked into creating the bank (“at that time I think I was regarded as the crazy aunt in the attic”). Finally, she feels like “we are looking seriously at how we make solid public investments in the infrastructure of this nation”.