Banking on infrastructure

By Jeff Berman · July 19, 2011

The concept of an infrastructure bank has been lobbied around myriad times by members of Congress, industry associations, and infrastructure experts alike.

On paper and conceptually, leveraging an infrastructure bank to fund future investment seems like a pretty good idea. But as we know, money is tight—perhaps now more than ever, given the tenuous status of a pending federal debt limit deal by August 2—and without money to invest, there is no infrastructure bank in the first place. Even an editor like me can follow that line of math.

The idea of an infrastructure bank is even supported by President Obama. Last September on Labor Day while making a speech touting the economic benefits of transportation infrastructure, the “bank” was part of his proposed six-year, $50 billion plan to expand and upgrade U.S. roads, railways, and runways, which, he said, can enable the country to have the “best infrastructure in the world.”

Again a great idea….without true financial support—at least for now.

This does not mean that an infrastructure bank is never going to happen, I don’t think. But it may very well be in the short-term.

Interestingly enough, following the recently rolled out six-year, $230 billion transportation bill by Representative John Mica (R-Fla.), chairman of the House Transportation and Infrastructure Committee, there was nary a word about an infrastructure bank of any kind. Nor was there any mention of real “freight-specific” efforts that have been recently proposed, including “establishing an Office of Freight Policy and a National Freight Transportation Policy, which would direct the office of the Under Secretary for Policy to issue a biennial National Freight Transportation Plan (which would include a report on the conditions and performance of the National Freight Transportation System), direct the Secretary to develop transportation investment data and planning tools.”

I know that is a mouthful, but it is a prime example of some of the forward-thinking that is actually occurring when freight-specific policy and legislation are discussed.

Mica’s bill has some very good things in it, which would be beneficial to shippers, carriers, and all supply chain stakeholders really. There are references to Marine Highways, Positive Train Control, among others.

Here is a brief list of those things (I apologize in advance for being repetitive!):
-providing additional funding for TIFIA, the Transportation Infrastructure Finance and Innovation Act (TIFIA) program which provides Federal credit assistance in the form of direct loans, loan guarantees, and standby lines of credit to finance surface transportation projects of national and regional significance;
-keeping existing lanes on the Interstate Highway System toll-free but allow states to toll any new lanes they build on the Interstate and give states the flexibility to toll non-Interstate highways;
-encouraging states to create and capitalize State Infrastructure Banks to provide loans for transportation projects at the state level;
-creating a faster and more predictable application process for Rail Rehabilitation and Improvement Financing loans;
-changing the implementation and deadline for Positive Train Control and provide clear direction for rail carriers and allow for technology-neutral solutions;
-trying Harbor Maintenance Trust Fund expenditures to revenues, ensuring fees paid by shippers go to channel maintenance
-encourage short-sea shipping by prohibiting double-taxing of vessels shipping goods between domestic ports

Another interesting thing I noticed news of the Mica bill came out was a mini-flurry of news reports, heeding the call for, yes-you guessed it, an infrastructure bank.

A New York Times editorial by Michael B. Likosky, a senior fellow at the Institute for Public Knowledge, New York University, presents a cogent case for increased infrastructure investment in the U.S.

Look no further than the lede sentence by Likosky:
“For decades, we have neglected the foundation of our economy while other countries have invested in state-of-the-art water, energy and transportation infrastructure. Our manufacturing base has migrated abroad; our innovation edge may soon follow. If we don’t find a way to build a sound foundation for growth, the American dream will survive only in our heads and history books.”

All valid points, indeed.

He moves on to bring up The BUILD Act, by Senators John Kerry and Kay Bailey Hutchison, which would establish a type of infrastructure bank referred to as an American Infrastructure Financing Authority (AFIA), which would complement existing infrastructure funding and provide loans and loan guarantees for infrastructure projects.

Again, not a new idea by any stretch but one that could work.

A Politico editorial by Felix G. Rohatyn, special adviser to the chairman and CEO of Lazard and former chairman of New York’s Municipal Assistance Corp., stresses the point that “infrastructure financing should be viewed as an investment rather than an expense and should establish a national, capital budget for infrastructure.”

Rohatyn also notes that China, India, and European nations are spending the equivalent of hundreds of billions of dollars on efficient public transportation, energy, and water systems, while in the U.S. a five-year investment of $2.2 trillion is required to make U.S. infrastructure dependable and safe, according to the American Society of Civil Engineers, who not all that long ago gave the U.S. a “D” on an infrastructure report card in 2009—hardly a positive.

On top of all this, the U.S. has not raised its federal gasoline tax, which serves as the primary funding source for the Highway Trust Fund, whose revenues are derived from the federal gasoline tax, are used for annual highway and transit programs, since 1993.

As you can see, U.S. infrastructure has more than its fair share of issues and challenges. Here is to hoping forward progress is made in the not too distant future before it truly is too late.


About the Author

Jeff Berman
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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