For transportation policy observers in the US, one cannot help but admit that 2009 proved to be a difficult year for the creation of a so-called national “infrastructure bank” that would stimulate public and private investment in the US’ infrastructure.
After all, an infrastructure bank proposal by Democratic Congresswoman Rosa DeLauro of Connecticut, a $500 billion transportation spending bill with an infrastructure bank embedded in it, and a fiscal year 2010 Presidential budget proposal for an infrastructure bank each fizzled and faded from public consciousness.
But the bank’s political champions are back in formation and ready to battle anew. And, despite 2009’s setbacks, they appear as optimistic and passionate about the cause as ever.
“Above all, the focus is on a singular entity that has the ability to go to the capital markets to be able to borrow in order to be able to attract a substantial private investment,” DeLauro said during the event.
All sorts of infrastructure projects would be covered – from surface transportation to water and wastewater, “smart” electric grids, and broadband internet technology infrastructure – so long as they are big projects of national or regional importance.
InfrastructureInvestor: The dialogue about the creation of a national infrastructure bank has been going on for about 20 years. What’s different about it this time around?
Felix Rohatyn: 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 and I think – I think – that the press will play an important role in this in explaining this to people because it’s not an easy answer, necessarily.
We want a new vehicle that will make decisions on infrastructure spending that aren't political
Edward Rendell: It’s become apparent, because of the burgeoning deficit, that we can’t just do this with government money. Look, I was a proponent of a Federal capital budget [a proposal to set aside Federal funds for investment in large-scale infrastructure projects]. But a federal capital budget, and an infrastructure repair program, could add as much as two and a half trillion dollars to the debt. Now, I think it’s adding to the debt that American people would understand and would support to some degree, but it’s not likely because of the current political climate. Which is why you’ve got to look to private-public partnerships and the infrastructure banks . . . The second reason I think that things have changed is because President Obama, from the campaign to last year’s budget, has recognised the need for an infrastructure bank.
II: Last year, President Obama proposed a $5 billion request for an infrastructure bank in his fiscal year 2010 budget. But Congress turned the request down, citing “the complexity of this proposal”. If that kind of proposal is too complex, what hope is there for something bigger, like a $60 billion bank you mentioned?
ER: I don’t think the intricacies of the bank revolve around how much money the Federal government puts in to capitalise it. I think, as Felix said, there’s more time gone by, people are understanding it better, they’re understanding the concept, and you have the President’s Economic Recovery Advisory Board coming out tremendously strongly for the bank . . . which is why we think it should be in the jobs bill [a $154 billion job creation measure with a sizeable infrastructure spending component that was passed by the House of Representatives in December]. . . The public understands that we want a new vehicle that will make decisions on infrastructure spending that aren’t political, that don’t depend on who’s the most powerful Congressman or who’s not.
FR: And you have a situation now where many states and many cities are getting into serious trouble. And not all of them might actually make it. And if we had an agency like the infrastructure bank ready to go, that could provide partly-government, partly-private capital, and step into these situations before they crumble, you would have [a] very, very important tool to do this.
II: There have been various proposals for infrastructure banks over the years. So if you had to boil it down, what would be the top three or four features that absolutely must be in an infrastructure bank?
It has to be the vehicle for national or regional projects
ER: Number one: independence, so it can make truly merit-based cost-benefit analysis decisions on what to fund and what not – that’s number one. Number two, I think it has to be properly capitalised, so that that initial capital can help us leverage private funds, and I’d say . . . all of the tools that involve the private sector have to be given to the bank for its purview [for example, disbursing loan guarantees under the government’s existing TIFIA lending programme]. And then number three, it has to be the vehicle for national or regional projects . . . so those are the three components that I think are absolutely inviolate.
II: What do you believe would be a substantial-enough size that would allow this bank to really make an impact in infrastructure financing?
ER: 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.
I think the concept that we're talking about is more and more understood
FR: At least.
ER: At least.
FR: But the ‘multi-year’ is important because you really can’t go on one of these things and six months later have to pack it in. So the government has a role, the private sector has a role, and it should be properly capitalised.
II: Ambassador Rohatyn, you make the point in your book, Bold Endeavours, that America’s transportation history has been marked by a series of bold endeavours, from the Erie Canal, to the transcontinental railroad and the Interstate Highway System. What do each of you see as the next ‘bold endeavour’ for the American economy’s infrastructure?
ER: The bold endeavour, I would say, is to build a first-class high-speed national rail system.
ER: Like Europe has, like Asia has. I mean, Americans go to Europe and Asia and they come back and they tell me, ‘why can’t we have that?’ The answer is: we can, we should, and we must.
The February issue of Infrastructure Investor magazine includes a full analysis of policymakers' views on the creation of a national infrastructure bank.