Interest overdrawn?

Interest overdrawn? Rep. DeFazio offers tepid support for infrastructure bank.

      President Barack Obama's fiscal year 2011 budget request includes $4 billion to capitalize a national infrastructure bank, $6 billion less than requested by Building America's Future, a coalition of elected officials promoting investment in infrastructure revitalization.
      But a key House Democrat dismissed the idea's ability to make much difference.
      In a Jan. 15 letter to the president, the BAF said infrastructure improvements cannot be adequately addressed through the appropriations process alone. An infrastructure fund would approve projects in urban, rural and suburban areas based on merit and transparent proceedings, and help attract private sector financing by underwriting long-term loans, said the organization's co-chairmen, Gov. Ed Rendell of Pennsylvania, Gov. Arnold Schwarzenegger of California and New York Mayor Michael Bloomberg.
      The bank would have the authority to use a range of funding and financial tools, including grants, credit assistance, low-interest loans and tax incentives.
      Supporters note that Europe, China and Japan have all used infrastructure banks to fund major cross-border projects. The concept was also endorsed by the president's Economic Recovery Advisory Board.
      'We believe that the NIB should be structured as a wholly owned government entity to keep borrowing costs low, align its interests with the public's, and avoid the conflicting incentives of quasi-government agencies,' wrote three board members ' Oracle President Charles Phillips, UBS Americas Chief Executive Officer Robert Wolf and University of California-Berkeley Professor Laura Tyson ' in a Wall Street Journal commentary.
      'We also recommend that the NIB be run by a government-appointed board of professionals with the requisite expertise to evaluate complex projects based on objective cost-benefit analysis. Today, projects are subject to the uncertainties of the opaque congressional appropriations process, which is how we end up with proverbial and actual bridges to nowhere.
      'The private sector raised over $100 billion in dedicated infrastructure funds in recent years, but most of that money is being spent on infrastructure projects outside the U.S. The NIB could attract private funds to co-invest in projects that pass rigorous cost-benefit tests, and that generate revenues through user fees or revenue guarantees from state and local governments. Investors could choose which projects meet their investment criteria, and, in return, share in project risks that today fall solely on taxpayers,' the business leaders said.
      One year ago, President Obama proposed a five-year, $25 billion infrastructure bank in his budget, but Congress did not accept it.
      The House Transportation and Infrastructure Committee included provisions for a national infrastructure bank in its six-year surface transportation reauthorization proposal last summer.

DeFazio

      Rep. Peter DeFazio, D-Ore., chairman of the Highways and Transit subcommittee, downplayed the significance of such an institution during a March 2 address to the American Association of State Highway and Transportation Officials meeting in Arlington, Va.
      A national infrastructure bank is 'no cure all,' and not a major player in terms of paying for infrastructure rehabilitation and upgrades, he said.
      Two years ago, before the recession, states had borrowing capability and didn't need any bond guarantees except for toll roads. Now that state economies have imploded and the government bond market has seized up, an infrastructure bank could help underwrite a limited number of projects, he acknowledged.
      'If you have a project that has a revenue stream then the infrastructure bank makes sense. It doesn't make sense for standard highway construction, bridge construction or transit because you don't have a positive cash flow out of those projects. So how are you gonna pay the loan back?' he said.
      DeFazio is among a large group of Democratic lawmakers who oppose state schemes to privatize highways to raise money for transportation and other needs. His comments reflect the fact that an infrastructure bank would likely support long-term leases of public highways to investors.
      The Transportation and Infrastructure Committee's plan to renew the transportation act includes a provision for an Office of Public Benefits that would approve state plans to institute tolls on highways that receive federal aid and oversee new federal requirements for public-private partnerships. Lawmakers included the language because of concern that tolls on privately operated highways could increase more than they would on a publicly operated toll road.
      Speaking at the National Governors Association's annual meeting on Feb. 21, Rendell said such a regulatory mechanism 'would pretty much disincentivize private investment forever.
      'There's no way we reach the amount we need without private funding ' Our Democrats in the Congress are crazed about private funding, private partnerships. I testified when we were trying to lease the (Pennsylvania) Turnpike and I got clobbered by our guys. They're dead set against it. And the Office of Public Benefit ' we can have an Office of Public Benefit that can look at things, that can evaluate and study things, but to give them a veto power over what states would do in public-private partnerships ' it's the end of private investment in our transportation system.
      'And I don't think there's a Democrat or Republican among the governors who would think that was a good idea. Plus, it seems to me it's a violation of states' rights as well.'
      Indiana Gov. Mitch Daniels, who signed a 75-year, $3.8 billion deal in 2006 with a private consortium to operate, maintain and finance the Indiana Turnpike, urged Transportation Secretary Ray LaHood to take the lead in convincing his former House colleagues of the need for greater private involvement in infrastructure investment.