Senate Bill Creates Infrastructure Bank to Back Transportation Projects

This story appears in the March 28 print edition of Transport Topics.

A bipartisan group of U.S. senators recently introduced a bill that would create a national infrastructure bank to issue loans and loan guarantees for transportation and other infrastructure projects of regional and national significance.

The Building and Upgrading Infrastructure for Long-Term Development Act, or BUILD Act, is designed to help construct transportation, water and energy projects that may otherwise be delayed or rejected because of federal budget cutbacks and revenue shortfalls, Sen. John Kerry (D-Mass.), one of the sponsors of the legislation, said at a March 17 news conference.

Kerry said that experts have estimated the United States needs to invest more than $2 trillion to bring the nation’s infrastructure to an “acceptable level” and $250 billion annually for the next 50 years to meet future federal, state and local transportation infrastructure needs.

The United States is in danger of losing its competitive edge in the global marketplace, Kerry said.

“Today, in the race for global economic leadership, second in infrastructure is second in everything,” Kerry added.

The government-owned infrastructure bank would be authorized to receive $10 billion in advance federal funding for loans and loan guarantees for infrastructure projects costing more than $100 million that have a clear public benefit, and at the same time meet tough economic, environmental, and technical standards.

Kerry said the bank would be independent of the political and bureaucratic process, overseen by a seven-member board and chief executive officer appointed by the president after recommendations are made by congressional leaders. No more than four of the board members could be from the same political party.

The infrastructure bank would eventually become self-sufficient and be able to back from $320 billion to $640 billion in infrastructure projects over its first 10 years of operation. The bank would encourage private-sector participation, but would not be permitted to fund more than 50% of any project, Kerry said.

The BUILD Act is not the first attempt to create a national infrastructure bank. The idea dates back to 1993, when a congressional commission recommended a similar idea. It also was proposed in Congress in 2007, and has been included in a slate of possible financial fixes to the ailing Highway Trust Fund offered by two bipartisan congressional commissions since 2008.

Two of the bill’s high-profile supporters included Thomas Donohue, president and chief executive officer of the U.S. Chamber of Commerce, and AFL-CIO President Richard Trumka.

Speaking at the March 17 news conference, Donohue said that the critical need for infrastructure maintenance and expansion was underscored by the American Society of Civil Engineers in the organization’s 2009 report card that gave the United States an overall “D” grade on the state of its infrastructure.

Donohue said the infrastructure bank is a “great place to start securing the funding we need to increase our mobility, create jobs, and enhance our global competitiveness.”

“While private capital is badly needed, we must also recognize our public financing mechanism is broken,” Donohue said. “Receipts to the Highway Trust Fund have fallen dramatically, funds are being diverted to non-infrastructure projects, and the gas tax has not been increased in 17 years.” 

Sen. Kay Bailey Hutchison (R-Texas), one of the bill’s sponsors, added, “We all know that appropriations are going to be diminished.”

Sen. Mark Warner (D-Va.), another of the bill’s sponsors, said the nation’s infrastructure used to be a competitive advantage, but has become a competitive disadvantage.

The bank would be a “critical tool, but not a silver bullet,” Warner said.

Also on March 17, Sen. David Vitter (R-La.), introduced legislation that he said would save money by incorporating “common sense” infrastructure budgeting practices.

Vitter’s Fiscal Accountability and Transparency in Infrastructure Spending Act would require a 50-year life cycle cost analysis that would include not only direct costs for initial construction, but also would take into account the cost of maintenance and repair.

The analysis would be required only when a project’s federal cost share exceeded $5 million.

The Vitter legislation also would create competition during the design and bidding process and ensure that the most cost-effective project designs were considered for final selection.

“Congress needs to get serious about reducing federal spending on all fronts so we can get on a different, more sustainable fiscal path,” Vitter stated.