Everyone expects that the President will include, in his jobs speech tonight, a call to create an infrastructure bank that can be used as a mechanism for getting infrastructure projects going nationwide, potentially creating millions of jobs. On Tuesday, we released a summary of H.R. 402, the National Infrastructure Development Bank Act of 2011, legislation sponsored by Congresswoman Rosa DeLauro (D-CT3).
Until we have all the details on the President’s plan, grand statements like, “this is the big idea!” are unwarranted. That being said, it is reasonable to predict that this will be one of the bigger ideas to come out of the President’s speech.
Congresswoman DeLauro has advocated for years in favor of the creation of an infrastructure bank. It was last year that we sat down for a Sponsor Special with the Congresswoman and discussed in more detail what the infrastructure bank is all about.
Here are some highlights from that interview (full transcript below the fold):
You can watch the full, fifteen-minute interview with Congresswoman DeLauro at Main Street Insider.
QUESTION: What’s that “Infrastructure Bank” that the President is expected to include in his jobs plan?”
DELAURO: Well let’s put it into perspective. I happen to think it’s an important moment for the concept of an infrastructure bank and the financing of public investment. There are a couple of dynamics that a moving this forward. One is the size of the federal deficit, which makes traditional financing or conventional financing, if you will, for infrastructure less likely and having to find new ways to look at investments to infrastructure. And secondly, the need for a national growth policy and how we put the US economy on a track for future economic growth, economic security for families. I’m not talking here about a stimulus program, recovery program. The focus is, how is it that we’re going to be able to, in the United States, create jobs, increase wages, and compete with the economic power centers of the world, the global market as well. And it is about creating good paying jobs, here, and middle-class jobs again. That’s what this is all about.
QUESTION: Doesn’t this strip congress of it’s power to fund these types of projects?
DELAURO: Normally the way we look at where the funding goes, where funding goes in terms of these projects is the decisions are made on geography and on politics. This is an opportunity to depoliticize this process as well. Get’s it out of this area of earmarks and more on the analytical side of a project that is of national significance and something that will increase the economic opportunity broadly. And there isn’t a place now where you have this broad range, I’m not talking about one specific area. It’s a broad range of infrastructure which we would need to focus on. And in addition to that, in order that one can get private investors, I’m not talking about privatization, I want to get their capital and I want to use it for building in the United States. This is a nation that’s been built on bricks and mortar and fiber optics. And this is about building America and creating jobs.
QUESTION: Can you give an example of how this would work in the real world?
DELAURO: Los Angeles has something called the 30/10 Project. Mayor Villaraigosa, who’s been testified on supporting of an infrastructure bank because they needed to rebuild their transit system. And they put together their plan and what they had to do was they went to the folks from Los Angeles and they, through referendum, they increased their sales tax by a half a cent in order to pay for this. So that’s a dedicated revenue stream for this project. It’s intended, and I think it’s a $40 billion project, to take thirty years. What he wants to do it, and how a bank could help him, is that if he could get a loan from the bank, this is a project that could be done in ten years, versus thirty years. That already brings down the cost of the project. That’s the 30/10, he wants to go from thirty to ten. And he has a defined revenue stream in order to pay back the loan and to give the investor return on an investment. So that really is a model for what could happen, which is why he’s so out front in the debate. This concept, by the way, has broad support. The US Chamber is very supportive of it. And at the same time the Unions. At the same time the Governor’s Association, Governor Rendell, Governor Schwartzenegger, Mayor Bloomberg. They have the program, Rebuilding America, and they, Governor Rendell has testified. The Governor’s Association put together a resolution in support of this effort. You’ve got the general contractors, the civil engineers. We’re told that it’s about $2.2 trillion shortfall. There aren’t enough, we can’t get the federal resources, we just don’t have the money to do it. We’ve got to have a cooperative relationship with the private sector.
To learn more, watch this week’s episode of 90 Second Summaries: The Infrastructure Bank – An Economic Elixir?
90 Second Summaries: Season 2, Episode 19
H.R. 402: National Infrastructure Development Bank Act of 2011
Sponsor: Rep. Rosa DeLauro (D-CT3)
Click here to download this summary (pdf)
Cosponsors: 61 (61 Democrats, 0 Republicans). Full list at http://thomas.loc.gov/cgi-bin/bdquery/z?d112:HR00402:@@@P
Status: In Energy & Commerce and Transportation & Infrastructure Committees. Financial Services has partial jurisdiction. T&I Chairman John Mica (R-FL7) has announced his opposition. No action scheduled as of 9/6/11. President Obama is expected to include a proposal of this nature in his jobs package, which will be today.
Senate Companion: S. 652, Building and Upgrading Infrastructure for Long-Term Development (the BUILD Act), sponsored by Sen. John Kerry (D-MA). 8 Cosponsors (6D, 2R). Similar in concept but different in details and smaller in size/scope. In Finance Committee, no action scheduled as of 9/6/11.
Purpose: In 2009, the American Society of Civil Engineers gave America’s infrastructure a grade of D, and estimated the 5-year need for investment at some $2.2 trillion. The Infrastructure Bank provides a funding mechanism for a variety of projects through public-private partnerships that will help close the “infrastructure gap”.
Summary: H.R. 402 would establish an independent, wholly-owned government corporation called the National Infrastructure Development Bank. Following a $25 billion initial capitalization over five years, it would be a self-sustaining entity capable of leveraging as much as $625 billion in private investment by issuing direct loans and subsidies, loan guarantees, bonds and debt securities, borrowing on the global capital market at low interest rates and pooling infrastructure-related loans and securities on the market to spread risk. The Bank would help capitalize the following:
1) Transportation Infrastructure Projects (e.g. public transit, highway and bridge repairs, port development)
2) Environmental Infrastructure Projects (e.g. drinking water treatment, waste disposal facilities, dams and levees)
3) Energy Infrastructure Projects (e.g. retrofitting buildings, smart grid, development of renewable capacity)
4) Telecommunications Infrastructure Projects (e.g. broadband expansion)
The legislation lays out a set of criteria for each project type by which each applicant must be evaluated to determine potential impact and eligibility. These generally involve environmental, health and income distribution considerations as well as more traditional cost-effectiveness criteria and other sector-specific factors.
The Bank will be governed by a five-member Board of Directors, all appointed by the President and confirmed by the Senate. The Directors will represent different regions of the country and be split between the private and public sectors in their backgrounds. The Bank’s charter is scheduled to sunset after 15 years.
CBO Score: None provided. A 2008 CBO report included a discussion of an NIB and similar proposals: http://1.usa.gov/qcmLVJ
Supporters: President Obama, Building America’s Future (state & local electeds), Chamber of Commerce, SEIU, etc.
• Supporters believe this measure will substantially boost crucial infrastructure spending and create jobs. It will also allow for a more efficient allocation of infrastructure resources by removing political considerations.
Opponents: No public opposition, but expected to draw fire from a variety of fronts, each for a different reason.
• Opposition will likely be opposed to a large new government program, especially a government-owned bank. Some have argued that this would be a handout to unions.
Full bill text: http://www.govtrack.us/congress/billtext.xpd?bill=h112-402
Official CRS summary: http://www.govtrack.us/congress/bill.xpd?bill=h112-402&tab=summary
American Society of Civil Engineers Report Card for America’s Infrastructure: http://www.infrastructurereportcard.org/
Main Street Insider interview with Rep. DeLauro: http://www.youtube.com/watch?v=_xclINQYSA4
Transportation for America statement on the Senate bill: http://bit.ly/gonrNW
AP Article on Obama’s jobs package and the Infrastructure Bank: http://yhoo.it/n0n35h
Rep. Mica op-ed opposing Infrastructure Bank: http://bit.ly/pOTF7Z