Page 82 • September 3, 2011 • www.constructionequipmentguide.com • CONSTRUCTION EQUIPMENT GUIDE
Distribution of Infrastructure Funds Remains Uncertain INFRASTRUCTURE from page 1
does not authorize borrowing of money, and would consider many different kinds of infrastructure projects. • The National Infrastructure Development Bank Act introduced by Rep. Rose DeLauro (D–CT). It would be capitalized by annual appropriations of $5 billion for five years, and would issue debt instruments that would not be guaranteed by the federal government. It would provide loans and loan guarantees on many different kinds of infrastructure projects. • National Infrastructure Bank proposed by President Obama in his FY 2012 budget would be funded by authorization of $5 billion per year in each of the next six years. It would function under the U.S. Department of Transportation. It would provide loans, loan guarantees, and grants for transportation projects. The proposals are more alike than they are different, but some differences are noted by critics. The administration’s NIB idea, for example, proposes to authorize distribution of funds in “loans, loan guarantees, and grants.” Grants, of course, are not paid back, which Sen. James Inhofe (R-OK) observed is not how a bank operates. “Institutions that give away money without requiring repayment are properly called ‘foundations,’ not ‘banks,’” publicly commented the senator, who is the ranking member of the Senate Environmental and Public Works Committee. “Banks don’t give out grants; they give out loans. There is also currently a mechanism for giving out federal transportation grants: It is called the highway bill. I don’t believe an infrastructure bank will increase total transportation investment; it will only take money away from what would otherwise go through the existing highway and transit programs.” The two congressional infrastructure bank bills are faulted by opponents for different reasons. The Kerry proposal relies on congressional appropriations for its funding. Unlike banks, which borrow money at one interest rate and lend it at a higher rate, Kerry’s “bank” takes the money from the federal till and spends it, which is no different from any other stimulus appropriation. The DeLauro proposal would function more like a bank, acting as an intermediary in project funding, but it would not guarantee any third-party loans secured by contractors. That would seem to be a less risky use of tax dollars as seed money. However, opponents of the bill note that the “develop-
that.” “As part of SAFETEA-LU, Congress actually created a program called Projects of National and Regional Significance,” Poole wrote when the infrastructure bank first was proposed by the Obama administration. “It appropriated $1.7 billion for the PNRS program, intended to fund a handful of projects of great benefit but with such high costs or benefits beyond the jurisdiction of a single state or region that those entities could or would not fund them. What happened? Members of Congress proceeded to earmark the entire $1.7 billion, parceling it out to 25 highway, railroad, intermodal, and transit projects.” Everyone involved in the discussion seems to value the idea of funding a project according to merit, rather than doing so because it is in the congressional district of an influential congressman or in a state a president needs to pull into his electoral vote column. Tom Donahue Jim Kessler, vice president for polU.S. Chamber of Commerce President icy in the Third Way organization, says, “A national infrastructure bank would make a critical contribution by supporting projects on merit and harnessing public and private capital to bridge the infraHow to Distribute the Money Aside from questions about the structure structure gap.” Says James Corless, direcof an NIB and sourcing of its funds, skeptics tor of Transportation for also question assurances that the funds America: “Because projects would be distributed according to true would compete based on national priorities and genuine local need. Randal O’Toole, a senior fellow at the merit, it would help to select Cato Institute, alludes to the Fannie Mae the investments that do the controversy in referring to the bank propos- most to advance our national al as “Trannie Mae” and expresses confi- goals, whatever the mode: dence that it would “become one more rail, highway, ports or public transportation.” source of pork and social engineering.” So merit is the gold stanHowever, proponents say that will not be dard in evaluating projects. the case. Though an actual instrument to priWhat gives skeptics pause is oritize distribution has not been revealed, assurances are given that this time it will be that, presumably merit always has been the standard different. “An infrastructure bank helps keep poli- in distributing public funds. tics out of the equation,” U.S. Chamber of Yet in recent years that stanCommerce President Tom Donohue said in a dard clearly has been statement of support. “Careful procedures ignored, with bridges and have been established to ensure that projects roads to nowhere being that receive funds or loan guarantees are funded and built. Kessler and Corless are part of a national based on merit and are of national or regioncoalition of organizations and political leadal significance.” Yet there appears to be no inorganic ers endorsing and promoting the NIB. mechanism that will force the bank to actu- Among the members are such heavyweights ally operate clear of political influence. as: Gov. Ed Rendell of Pennsylvania; Mayor Robert Poole, director of transportation pol- Michael Bloomberg of New York City; icy at the Reason Foundation (which has Andrew Herrman, chairman of an American generally endorsed the bank idea), questions Society of Civil Engineers report card on whether “an entity beholden to the president U.S. infrastructure; Stephen E. Sandherr, and Congress would really be able to do CEO of Associated General Contractors of ment bank” would operate very much like Fannie Mae and Freddie Mac did in the housing market, with disastrous results for the economy when the bubble burst. The debts of those agencies weren’t guaranteed either, but a $150 billion infusion of tax dollars subsequently was ordered up by Congress to bail them out.
“Careful procedures have been established to ensure that projects that receive funds or loan guarantees are based on merit and are of national or regional significance.”
America; Pete Ruane, president and CEO of American Road & Transportation Builders Association, and Mark H. Ayers, president of the Building and Construction Trades Department of the AFL-CIO. A Bipartisan Issue Coalition member Robert Puentes, senior fellow in the Brookings Institution’s Metropolitan Policy Program, believes the NIB is “no silver bullet, but if appropriately designed and with sufficient political autonomy, it could improve the efficiency and effectiveness of future federal infrastructure projects of national significance.” Puentes says such a result is possible because the issue of efficient funding is a bipartisan issue. “I don’t want to be naive,” he says, “but the key elements of a national infrastructure bank span political ideologies.” He cites such overriding principles as the need for a better project selection process and more accountability for funds expended, as well as the need to maintain existing infrastructure and deliver projects more efficiently. “These are not Republican or Democratic issues. So substantively, there is nothing that should prevent action,” Puentes says. Some observers believe infrastructure banks are a federal-state issue. That’s the position of U.S. Rep. John Mica (R-FL),
“I don’t want to be naive, but the key elements of a national infrastructure bank span political ideologies.” Robert Puentes Coalition Member
chairman of the House Transportation and Infrastructure Committee, who prefers that states establish infrastructure banks. “That way they won’t have to come to Washington to get approval.” In fact, 33 states already operate such banks, using revolving loans and loan guarantees to fund priority projects. Some of the state infrastructure banks, or SIBs, use federsee INFRASTRUCTURE page 88