Has the time come for a U.S. Infrastructure Bank?

A former Transportation Secretary and several top transportation policy leaders are backing the idea of a U.S. infrastructure bank to help increase funding of badly needed highway and bridge projects.

Transportation in the News

Improved freight forwarding market has little impact on rates, says new report
Port of Oakland remains in strong expansion mode
Global ports sector faces structurally slower growth, says Fitch Ratings
California leads the way in addressing transport infrastructure
Buoyed by e-commerce, secondary industrial markets have strong future growth prospects, says CBRE
More Transportation News

Transportation Resource

Making the Case: A Modern-Day Transportation Management System
The modern day supply chain has become a competitive tool for companies of all sizes and across all industries. At the same time, the transportation industry looks drastically different than it did 20 years ago, when most transportation management systems (TMS) were originally designed.
All Resources
By ·

WASHINGTON—A former Transportation Secretary and several top transportation policy leaders are backing the idea of a U.S. infrastructure bank to help increase funding of badly needed highway and bridge projects.
“The needs are great, and getting greater, and more funding is not coming,” said Norman Mineta, who served as Transportation Secretary in the first Bush administration and is currently vice chairman of global communications consultancy for Hill & Knowlton, a public relations firm.
Can the United States create an infrastructure bank? There are hurdles, Mineta said, but they are not insurmountable. Chief among them is how to financially “score” such projects so they are fiscally responsible and paid for without increasing the national debt.

According to Mineta, Congress must maintain the primary role in funding. Transferring large amounts of discretionary funding from Congress to another entity has “very little chance of approval,” he said, adding that while he was transportation secretary he “would have loved to have access to a large amount of discretionary funding, but Congress would never go for it.”
Instead, Congress must work with private funding sources, which are increasingly being seen as an answer to U.S. infrastructure funding needs. “I believe we can create a national infrastructure bank if its primary purpose is to leverage private investment into projects that are critical to our national infrastructure,” Mineta added.
He favors creating a separate entity, with a board that sets lending policy, but lets the decisions on which projects gets funding to experts. It should not be a profit-making venture, he said. “The bank should not be seen as a ‘Trannie Mae,’” Mineta said, referring to the scandal-ridden Fannie Mae and Freddie Mac, which required billions in bailout money to help rescue the federally backed home loan sector.

Still, a U.S. transportation infrastructure bank “has the potential to play a powerful role to meet the unmet transportation needs while providing new jobs and economic stimulus,” he said.
Infrastructure banks are commonplace in other countries, especially in Europe where they are supported by dedicated funding sources. They make low-interest loans directly to localities for infrastructure projects. Supporters say they eliminate time and red tape from the funding process.

Their appeal may be catching on in this country. Already, some in Congress are calling for their creation. Infrastructure banks could also be used to expand telecommunications, broadband capacity, wastewater distribution facilities, and improving other U.S. projects’ needs. In fact, President Barack Obama’s proposed 2011 budget includes $4 billion to create a national infrastructure bank to provide a source of funding for infrastructure needs. This comes at a time when many experts are saying that the U.S. must start thinking outside the box of traditional funding.
“This is something holding up a major surface transportation bill,” Mineta said. “We can’t have these two-month, three-month, or five-month extensions. The critical factor in moving that surface transportation bill forward is how is it going to be funded.”

Robert Poole, director of transportation policy at the Los Angeles-based Reason Foundation, a libertarian-leaning think tank, said the nation suffers from both insufficient and poorly targeted infrastructure investments. “Multi-state projects are particularly hard to fund under the current system,” Poole said. “Large, billion-dollar, multi-state, multi-modal projects would be particularly attractive to funding through infrastructure bank funding.”

But Poole is opposed to using general U.S. funds for transport projects. Rather, he said, they should be funded by user funds, not federal grants. All projects should be merit-based, which could be difficult in a town where all 538 members of Congress are used to bringing home some bacon to their districts and states. “There may be a niche market role for a narrow transportation-only infrastructure bank,” Poole said. “But a broader infrastructure bank may be too ambitious to try and achieve a multi-modal, grant-and-loan-based bank, which I think might fail,” he added.
Bryan Grote, co-founder of Mercator Advisors, a financial advisory firm that works with sponsors of infrastructure projects, said the bank’s appeal would be to more effectively utilize revenue into commercially viable projects.

“Designing the bank would be difficult, but implementing it would be a major challenge,” Grote said. “It probably can be a useful step. But it’s important that it be given the expertise and backing to ensure this entity is doing a better job in providing assistance in a better way. The primary problem is a lack of revenue, not a lack of access to capital markets.”
Michael Lind, policy director of economic growth programs for the New America Foundation, said the idea of an infrastructure bank is not new. The U.S. Chamber of Commerce recently unearthed a document from 1983 calling for such an idea for alleviating congestion at West Coast ports and Midwestern railroad hubs. Those bottlenecks remain today.

“If there are a relatively small number of mega-projects that everybody agrees need to be built, why not just do it?” Lind asked. “Wouldn’t it make sense to do that as a grant, and the American people are taxed to pay for it?”


About the Author

John D. Schulz
John D. Schulz has been a transportation journalist for more than 20 years, specializing in the trucking industry. John is on a first-name basis with scores of top-level trucking executives who are able to give shippers their latest insights on the industry on a regular basis.

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Latest Whitepaper
Digital Issue: The Current State of Third-Party Logistics Services
It has become quite clear that logistics professionals are now facing an unprecedented set of challenges. From tightening capacity, to ongoing regulation hurdles, to the complexity brought on by e-commerce, today’s shippers are transforming the way they manage their logistics operations.
Download Today!
From the June 2017 Issue
Here are five trends that every shipper­—and potential shipper—must watch as the demand for experienced logistics and supply chain professionals soars.
2017 Rail/Intermodal Roundtable: Volume stable, business steady
Cross-Border Logistics: NAFTA tune-up time
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Women in Logistics: Breaking Gender Roles to Win the War for Talent
In this session you'll hear from a panel of women who are now leading top-level logistics and supply chain operations. The panel will share their success stories as well as advice for women who are now making their way up the ladder.
Register Today!
EDITORS' PICKS
2017 Top 50 3PLs: Investment and Consolidation Maintain Traction
The trend set over the past few years for mergers and acquisitions has hardly subsided, and a fresh...
The Evolution of the Digital Supply Chain
Everyone is talking about terms like digitization, Industry 4.0 and digital supply chain management,...

2017 Salary Survey: Fresh Voices Express Optimism
Our “33rd Annual Salary Survey” reflects more diversity entering the logistics management...
LM Exclusive: Major Modes Join E-commerce Mix
While last mile carriers receive much of the attention, the traditional modal heavyweights are in...