Category Archives: bridges

Infrastructure bank could be part of jobs package

Infrastructure bank could be part of jobs package – Yahoo! News.

WASHINGTON – A national infrastructure bank that would entice private investors into road and rail projects could be a major part of the jobs package that President Barack Obama hopes will finally bring relief to the unemployed.

The White House hasn’t divulged the contents of the package that Obama is to unveil in an address to a joint session of Congress next week. But the president has pushed the idea of an infrastructure bank in recent speeches and has praised Senate and House bills that create such a government-sponsored lending institution.

Whether the bank, which would need time to organize, could have any real impact on the jobs situation in the coming year — and particularly before the November 2012 elections — is in dispute.

Obama seems to think it would.

“We’ve got the potential to create an infrastructure bank that could put construction workers to work right now, rebuilding our roads and our bridges and our vital infrastructure all across the country,” he said at a news conference in July.

But Janet Kavinoky, director of infrastructure issues at the U.S. Chamber of Commerce, cautioned that “even in the next two years I don’t believe the bank is going to be that kind of job creator.”

The best way to spur job growth in the short term is for Congress to pass long-stalled bills to fund aviation and highway programs, she said.

The Chamber of Commerce strongly supports the infrastructure bank. Kavinoky said the United States is one of the few large countries that lack a central source of low-cost financing for construction projects. But she said it’s going to take time to get it running and come up with a pipeline of projects where funds can be invested.

Sen. John Kerry, D-Mass., who’s sponsoring an infrastructure bank bill, argued that “we have projects all across America that are ready to go tomorrow.” He said the bank “could have money flowing in the next year easily.”

Michael Likosky, senior fellow at the NYU Institute for Public Knowledge and author of “Obama’s Bank: Financing a Durable New Deal,” says he is working with transportation agencies in California and New York that “are waiting for the federal government to say they are going to support these projects.”

A commitment to a national infrastructure bank could also provide a positive spark to financial markets and encourage investment, he said.

The bank would supplement federal spending on infrastructure by promoting private-sector investment in projects of national or regional significance. The private sector currently provides only about 6 percent of infrastructure spending.

Supporters, which range from the Chamber of Commerce to the AFL-CIO, say pension funds, private equity funds and sovereign wealth funds have hundreds of billions of dollars ready to be invested in low-risk infrastructure projects.

It’s better than having pension fund money go to Treasury bonds, Likosky said. “It’s really about changing our approach; we’re in tough economic times and we will be for a while. We have to make sure the money we have goes further.”

The Kerry bill would require $10 billion in start-up money from the government to get the first loans going and cover administrative costs. The bank would be government owned, run by a board of directors, independent of any federal agency and self-sustaining after the initial expense. Public-private partnerships, corporations and state and local governments would be eligible for the loans.

The bank’s directors would pick which projects to finance based on an analysis of costs, benefits and revenue streams, such as from tolls or fees, for repaying the loan. Once the terms of the loan, including interest rates and fees to cover risk, are set, the Treasury Department would disburse the loan.

Urban projects would have to be at least $100 million in size, rural ones $25 million. The infrastructure bank’s loan could cover no more than 50 percent of a project’s costs.

“There is going to be a revenue stream for payback and therefore the project is going to stand on its own because it will be a good enough project to attract private-sector funding,” said Sen. Kay Bailey Hutchison of Texas, one of several Republican co-sponsors of the Kerry plan.

Supporters estimate the bank could set up as much as $160 billion in government loans over a decade and anchor as much as $650 billion in projects.

In the House, Rep. Rosa DeLauro, D-Conn., has a similar bill that relies on $25 billion in start-up money and makes use of bonds as well as loans to stimulate construction projects. Both Kerry and DeLauro would cover transportation, water and energy projects.

DeLauro would also include communications projects. She says her bill is modeled after the European Investment Bank, which has been financing infrastructure projects for 50 years and last year invested more than $100 billion.

Obama, in his 2012 budget proposal, envisioned spending $30 billion to start an infrastructure bank within the Transportation Department that would provide grants as well as loans to transportation projects.

That idea drew opposition from the House Transportation Committee chairman, Rep. John Mica, R-Fla. He said in a recent article in the congressional newspaper Roll Call that it would be better to increase help for existing state infrastructure banks “rather than increasing the size of the bloated federal bureaucracy, as some advocate, by creating a national infrastructure bank.”

Kerry pointed to a 2009 American Society of Civil Engineers report that said $2.2 trillion needs to be spent over five years to bring the nation’s roads, bridges and water systems up to an adequate level. He said Congress needs to both pass a new highway bill and agree on alternatives like the bank.

“If we can leverage $650 billion and get money going in the transportation bill, we can begin to nibble away at the problem,” Kerry said.

Fixing America with an infrastructure bank

Job creation: Fixing America with an infrastructure bank | Reuters Money.

 

We have iPhones, iPods and iPads. Why not an “iBank?”

This wouldn’t be an electronic gizmo that’s obsolete in a year, though. It would be a public-private partnership to bolster America’s infrastructure. It will create jobs, cut the deficit and repair what needs to be fixed all over the country.

An infrastructure bank, or iBank, solves a lot of problems without busting the budget. Instead of providing direct government grants or earmarks for specific projects, loans are made by a government-banking entity.

The U.S. is inexcusably late to the game on this time-tested idea. The European Investment Bank has financed some $350 billion in projects from 2005 through 2009. China spent 9 percent of its gross domestic product — also roughly $350 billion — to build subways, highways and high-speed rail in 2009 alone. Brazil invested $240 billion over the past three years.

The idea is not without high-level support. President Obama recently called for the creation of an iBank. In backing a U.S. iBank, Senator John Kerry of Massachusetts testified last year that “a national infrastructure bank will make Americans builders again.”

If the iBank became reality — and really it’s a necessity to compete in a globalized economy — there’s no shortage of projects. According to the American Society of Civil Engineers, more than $2 trillion is needed to fix U.S. bridges, dams, waterways and wastewater plants.

The sheer scale of a big fix is staggering: Some 69,000 bridges need to be repaired. The outdated electrical grid needs to be modernized everywhere. You can build solar plants and windmills all you want, but if you have no power lines to transport the electrons from the deserts and plains, you’re whistling in the wind.

Several spin-offs of an iBank have been floating around for years, and the idea already has support across the political spectrum. A “Clean Energy Bank” would fund solar energy equipment. Sen. Bernie Sanders of Vermont, supports legislation that would install 10 million roof solar panels. Sen. Mark Kirk of Illinois proposed a “Lincoln Legacy” infrastructure bill.

How is the iBank different from just handing out the money to each Congressional district and letting the local representative decide where the money should go?

In Kerry’s vision, federal dollars would be matched with private dollars from pension funds and endowments. Kerry told the Time’s Joe Klein recently that “a $10 billion federal contribution will leverage about $640 billion in private investments.” Kerry claims he has support from business, labor and Republican Senators.

Instead of doling out pork-barrel funding for bridges to nowhere, an independent board would decide which projects are needed most. It’s the inverse of a military base closing commission. Instead of shutting down facilities, this entity would greenlight and finance the most-worthy projects.

One thing an iBank wouldn’t be is another big-check stimulus plan, which Congress passed in 2009. That nearly $800 billion package was a huge fiscal band-aid to help states, school districts and wage earners through the recession. Yes, there were some public works projects that created short-term jobs, but the bulk of the money went to tax relief and the states.

The U.S. needs a new approach to economic triage. The June jobs report was nothing short of dismal as employment growth hit a wall with only 18,000 new jobs coming on the market.

Crumbling infrastructure will cost the U.S. economy nearly 1 million jobs and shave $3.1 trillion from gross domestic product by 2020, the Society of Civil Engineers estimates.

What about the budget? Isn’t there a disconnect between the current passion for cutting the federal deficit and spending money to fix America?

There’s little question that putting people to work will help the economy. Working people pay income, sales and property taxes, which flow back into communities. The steadily employed buy homes, vehicles and appliances. Increased tax revenue in turn reduces the deficit.

The iBank may be able to accomplish what a decade of personal income and estate-tax cuts didn’t: Provide the necessary public-private capital to revive the economy. Not even Harry Potter can make magic work on the U.S. economy without some significant infrastructure investment.