A National Infrastructure Bank Does Not Solve Revenue Problems

Proposals for a national infrastructure bank have continued to generate significant interest and debate in recent months. On May 20, Representative Rosa DeLauro introduced a bill that would create such a bank, and Pennsylvania Governor Ed Rendell, co-founder of Building America’s Future (BAF), has been outspoken in his support. Meanwhile, the Obama Administration has outlined its own plan for a national infrastructure bank.

These plans have several merits. Governor Rendell argued at an event sponsored by BAF on June 24 that an infrastructure bank governed by appointed officials could help depoliticize transportation funding and potentially limit the power of earmarks to allocate spending. Additionally, by working outside of the established donor/donee system, the bank could fund projects across traditional modal and geographic boundaries. DeLauro’s bill, for instance, would allow up to $625 billion in loans, bonds and other securities to be distributed to projects of national and regional significance on a competitive basis. Finally, the bank could encourage private investment in public infrastructure projects.

Realistically, however, a national infrastructure bank would likely not solve the fundamental flaws in our current transportation financing system. Even if Congress could be convinced to relinquish control of transportation project funding to an infrastructure bank, the act of establishing a bank does not create blank check power to give out hundreds of billions of dollars in loans. The capital must come from somewhere. DeLauro’s bill calls for the appropriation of $5 billion to the bank each year for 5 years, starting with FY 2010, but it does not identify a source in the budget. Additionally, states receiving funding would have to repay the loans eventually. This merely diverts responsibility for finding a revenue source to the state level instead of finding a national solution. A national infrastructure bank cannot be treated as a revenue source; rather, a successful bank would have to be accompanied by a sustainable revenue source.

An alternative approach that deserves more attention is expansion of the Transportation Infrastructure Finance and Innovation Act (TIFIA). Established as part of TEA-21 in 1998 and extended by SAFETEA-LU in 2005, TIFIA is a federal credit program that funds transportation projects of national and regional significance on a competitive basis. As of April 15, 2009, TIFIA has provided $6.6 billion in assistance to 19 projects, which sum to $24.4 billion in total investment, and all loan repayments have been made on time. Instead of creating a bank to provide similar credit assistance, it makes more sense to capitalize on the success of this existing program. On June 2, 2009, Representative Eddie Bernice Johnson introduced a bill (H.R. 2663) to extend TIFIA, increase yearly appropriations for the program from $122 million to $285 million, and raise the maximum federal funding share from 33 percent to 49 percent. While these numbers would need to be raised further to match the scale of a proposed national infrastructure bank, this bill is a good start towards expansion. It has not received any action from the Transportation and Infrastructure Committee since its referral to the committee on June 2.

As the highway trust fund dries up and the gas tax continues to provide insufficient revenue, federal infrastructure financing needs an overhaul. Finding a new, sustainable revenue source is the first and most important step in this reform. A national infrastructure bank, by itself, does not take this step at all. While a carefully constructed national infrastructure bank may help to stimulate efficient and competitive transportation investment, something which the TIFIA program already does, it is not the best tool for solving the transportation financing crisis.

-Sarah Fletcher