An unlikely—perhaps unprecedented—alliance of Republicans, Democrats, labor and business leaders have joined forces to propose the nation’s first infrastructure bank.
Rare bipartisan support
provides a “sweet spot”
that can move the
said Sen. John Kerry
Sens. John Kerry (D-MA), Kay Bailey Hutchison (R-TX), and Mark R. Warner (D-VA) joined leaders from the U.S. Chamber of Commerce and AFL-CIO last week to introduce the Building and Upgrading Infrastructure for Long-Term Development (BUILD) Act.
The act would create an American Infrastructure Financing Authority that would provide loans and loan guarantees to fund construction of roads, bridges, water systems, power grids and other infrastructure.
The Authority would complement existing infrastructure funding.
Obama Plan Trimmed
Backers said the plan would help close America’s widening infrastructure funding gap, create millions of American jobs in the next decade, and make the United States more competitive in the 21st century.
The plan is a scaled-down version of one proposed previously by President Obama. The Senate plan would appropriate $10 billion for one year’s seed funding that would be loaned out for economically viable projects and recouped with interest. Projects could receive up to half of their financing from the federal money; the rest would have to come through private investment.
Obama’s plan would have funded $5 billion in the first year and $30 billion over six years. It also would have put the bank under the control of the U.S. Department of Transportation, while the Senate bill makes the authority independent and self-sustaining.
Backers say the authority can expect to leverage hundreds of billions in private infrastructure funding. Sponsors say the government’s $10 billion seed money could grow to $640 billion within a decade.
AIFA would be government owned, but independently operated by a Board of Directors with seven voting members and a chief executive officer. No more than four voting board members could be from one political party, and board members would have to be U.S. citizens with significant financial or infrastructure expertise.
The President would appoint the board and CEO, with one board member designated as chairperson. The appointments would require Senate confirmation. An Inspector General would oversee AIFA’s operations, and an independent auditor would review its books. AIFA would submit an assessment of the risks of its portfolio, prepared by an independent source.
In general, eligible projects would have to have national or regional significance. They must be at least $100 million in size, although rural projects as small as $25 million will also be eligible. Five percent of the initial funding would be reserved for rural projects.
Projects would “have to have a clear public benefit; meet rigorous economic, technical and environmental standards; and be backed by a dedicated revenue stream,” according to a summary from Kerry’s office.
Loans would have about the same interest rate as similar-length U.S. Treasury securities, with a maximum maturity of 35 years.
“This is a bipartisan moment to make a once-bipartisan issue bipartisan once again,” said Kerry. “Democrats and Republicans, business and labor, are now united to create an American infrastructure bank to leverage private investment, make America the world’s builders once again, and close the deficit in our infrastructure investments.”
Kerry said the plan would “create good jobs, strengthen our competitiveness, and do more with less.”
Just as important, he added, the bill “breaks a partisan stalemate to get America back in the game. When you’ve got a Massachusetts Democrat, a Texas Republican, the Chamber of Commerce and the AFL-CIO preaching from the same hymnal, you’ll find a sweet spot that can translate into a major legislative step forward.”
Kerry noted estimates that the United States would “need to invest $250 billion for each of the next 50 years just to meet our nation's surface transportation needs, and it will cost more than $2 trillion to bring our country's existing infrastructure to an acceptable level.”
He said Europe now spends about 5% of its GDP on infrastructure, and China 9%, compared to 2% by the U.S.
‘Leaving Money on the Table’
Chamber of Commerce President and CEO Thomas J. Donohue called the bill a “major step forward,” although one that would require some minor tweaks.
The U.S. needs a “consistent
source of long-term lending
for infrastructure,” said
Chamber of Commerce president
Thomas J. Donohue.
“Hundreds of billions of dollars from global pension funds, private equity funds, mutual funds, and sovereign wealth funds are available for investment in high-quality, low-risk infrastructure projects,” Donohue said.
“Yet today, most of that money is going to fund projects in other countries, taking jobs along with it. Wouldn’t it be better to keep the capital, jobs and competitive advantages in our country?”
Unlike other countries, Donohue said, the United States has “no consistent source of long-term lending for infrastructure to support private-sector involvement. In fact, the private sector only provides approximately 6% of the nation’s infrastructure funding.”
“That’s a huge missed opportunity. That’s leaving money on the table.”