Senate proposes new $10 billion "infrastructure bank"
Several U.S. Senators are pushing for the creation of a $10 billion “infrastructure bank” to spur investment in new infrastructure and to repair America’s rapidly aging roads, power grids, and bridges; the bill could attract as much as $640 billion in private investment over the next ten years; the Obama administration has proposed a similar plan; the bank would be self-sustaining as it is not allowed to finance more than 50 percent of a project’s costs; this bill faces an uncertain future given the current Congressional budget climate
Several U.S. senators are pushing for the creation of a $10 billion “infrastructure bank” to spur investment in new infrastructure and to repair America’s rapidly aging roads, power grids, and bridges.
The bipartisan proposal, spearheaded by Senators John Kerry (D-Massachusetts) and Kay Bailey Hutchison (R – Texas), would create an independent entity called the American Infrastructure Financing Authority (AIFA) to provide loans and loan guarantees for large energy, water, and transportation projects.
The Senators say that the bill would attract as much as $640 billion in private investment over the next ten years.
In introducing the proposal, Senator Kerry said, “Reliable, modern infrastructure isn’t a luxury — it’s the lifeblood of our economy, the key to connecting our markets, moving people, products, information and energy, and the key to generating and sustaining millions of jobs for American workers.”
“We’re here today because we refuse to be second. Democrats and Republicans, business and labor are united to support the establishment of an American infrastructure bank in the United States in order to leverage investment and once again make America the world’s builder of roads and bridges, highways and rails,” Kerry continued.
In a rare show of cooperation, two frequent rivals Richard Trumka, the president of the AFL – CIO, and Thomas Donohue, the president of the U.S. Chamber of Commerce, were both on hand to show their support for the proposed infrastructure bank.
The Obama administration has proposed a similar plan, but there are a few key differences between the Senate’s proposal and the president’s.
Obama’s plan includes $5 billion in initial funding with an additional $30 billion over the next six years, and distribution of the funds would be overseen by the Department of Transportation (DOT) with a focus on transportation projects.
In contrast, the Senate plan would provide $10 billion in seed funding for the banks’ first year and would not be under the supervision of DOT. AIFA would also be self-sustaining as it is not allowed to finance more than 50 percent of a project’s costs, which would spur private investment.
AIFA will invest in projects other than just transportation including water and energy.
This bill faces an uncertain future given the current Congressional budget climate, which is aimed at cutting the deficit and reducing spending.
According to Tad DeHaven, a budget analyst with the Cato Institute, the bill may gain some traction on the Hill as the proposal is less costly than the Obama administration’s current plan and lawmakers always have an appetite for transportation projects.
But he remained doubtful that it would be enacted, because it was still constituted a large government expenditure.
“This is going to be dressed up with a box with a ribbon on it that’s going to say taxpayers aren’t on the hook completely,’’ he said.
On the other hand, Daniel V. Flanagan, the founder of the National Center for Innovations in Public Finance, who sought to pass a similar bill in 1993, was hopeful of the current proposal’s chances.
“I think people have come around to the idea that you need this,’’ he said.
