Tom McNamara, Blueprint America
Some $120 billion will be spent on infrastructure as a part of the $787 billion economic stimulus package passed by Congress – with only three Republican members of Congress voting in favor – and signed by President Barack Obama in mid-February.
It almost doubles what candidate Obama had called for while campaigning for president last year. “We have to rebuild America,” he told workers at the Janesville General Motors Assembly Plant on Feb. 13, 2008, in Wisconsin. “I’m proposing a National Infrastructure Reinvestment Bank that will invest $60 billion over 10 years.”
The $60 billion figure is what is already invested in infrastructure annually by the federal government.
The intention was to create a structure so projects could be, according to the then-candidate, “determined not by politics, but by what will maximize our safety and homeland security; what will keep our environment clean and our economy strong.”
In the end, however, the establishment of a National Infrastructure Bank was not included in the final recovery plan. As a result, other than an overall stimulus in infrastructure spending by the federal government, the funding practices for public works projects – largely for highways and mass transit – remain the same.
The problem: It is not yet clear how a National Infrastructure Bank would function. Moreover, the complexities of such a novel financing mechanism would be too slow in acting for a stimulus plan intended to make an immediate economic impact. But without it, or like-provisions, each state – under the existing funding formulas and Congressional earmarkings – will receive stimulus money for infrastructure regardless of its needs or the merits of its projects.
For example, of the $8.4 billion dedicated to mass transit in the recovery package, the majority – $6.9 billion – will be invested in transit capital assistance projects – from planning to purchasing equipment to construction. Of the $6.9 billion, 80 percent will be dispersed according to the Federal Transit Administration’s (FTA) Urbanized Formula. Presumably, as the formula is based primarily on population and population density, the larger the city is would mean the more federal funding that area would receive. Yet, funding for the country’s largest cities is deemphasized as a result of these formulas – in terms of federal allocation, the money is spread too thin. Simply, no matter if a city is large, small, or growing, funding comes up short.
The President, however, did call for the creation of a National Infrastructure Bank in his budget released on Feb. 26, saying it would “expand and enhance existing federal infrastructure investments.”
The budget, which still needs to be approved by Congress, requests $5 billion for the bank in fiscal year 2010 (beginning October 1). It will receive some $25 billion through 2019, which is far less than the $60 billion over 10 years he promised while campaigning.
The President, moreover, stopped short of calling for an overhaul of the current funding systems in place for infrastructure projects.
The National Bank
On the evening of Aug. 1, 2007, the I-35 W Mississippi Bridge collapsed in Minneapolis, Minnesota. That morning, in Washington, D.C., Sen. Chris Dodd (D., Connecticut) and Sen. Chuck Hagel (R., Nebraska), now retired, submitted the National Infrastructure Bank Act of 2007. As Sen. Dodd introduced the legislation, he said, “Indeed our roads, bridges, mass transit systems, our drinking water systems, (waste water systems), and public housing projects collectively comprise the overlooked but critically important adhesive that holds our society together.”
The Dodd-Hagel Act would establish an independent entity of the government, similar to what President Obama would later call for, led by a 5 member board of directors, tasked with evaluating and financing capacity-building infrastructure projects of regional and national significance. The Infrastructure Bank would develop a financing package for a selected project with credit from the government. The financing package could include direct subsidies, direct loan guarantees, long-term tax-credit general purpose bonds, and long-term tax-credit infrastructure project specific bonds. The Infrastructure Bank, however, would not replace existing formula grants or earmarks for infrastructure. Again, similar to what the President has so far called for, but it would target projects that are currently overlooked by those funding practices.
Prior to introducing the legislation, both Senators had served as members of the Commission on Public
Infrastructure at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Beginning in 2004, the commission, chaired by former Sen. Warren Rudman (R., New Hampshire) and Felix Rohatyn, former investment banker, chairman of New York’s Municipal Assistance Corporation and U.S. ambassador to France, outlined a new approach to prioritizing, financing, and managing infrastructure.
Additionally, a companion bill was subsequently offered in the House by Rep. Barney Frank (D., Massachusetts) and Rep. Keith Ellison (D., Minnesota); and a similar approach has been proposed in a bill introduced by Rep. Rosa DeLauro (D., Connecticut).
In a statement recently released regarding the inclusion of the National Infrastructure Bank in the President’s fiscal year 2010 budget, Sen. Dodd said, “Creating such a bank will allow us to better target and address our nation’s critical infrastructure needs and to make wise investments that will save and create jobs today and generate greater economic growth in the future.”