As communities continue to face challenges in financing capital projects, an idea that has been kicked around for the past several years has resurfaced. President Obama would like to establish a permanent Infrastructure Bank to fund infrastructure projects starting with high-speed rail and surface transportation. The Infrastructure Bank would be initially capitalized with $50 billion in federal funds and is expected to leverage as much as $500 billion in private capital.
President Obama’s proposal would provide funds to guarantee private capital on projects the private sector is interested in funding – those with their own revenue stream like toll bridges and highways, internet cables, or high speed rail. Loan guarantees would allow private firms to access capital at low interest rates. This would force projects to compete to determine which will produce the greatest return for American tax payers. This is a departure from earmarks and formula-based grants that are allocated more by geography and politics than demonstrated value. President Obama has focused on the idea of an Infrastructure Bank on several occasions since 2007.
There are also Congressional actions supporting the creation of such a financing tool. Representative Rosa DeLauro (CT) and 58 co-sponsors introduced legislation entitled “National Infrastructure Development Bank Act of 2009″ in May 2009. This legislation calls for the creation of an Infrastructure Bank to be capitalized at $5 billion for five consecutive years, ceasing to exist 15 years after its enactment. Eligible projects for this financing would include: energy, environmental, telecommunications, and transportation infrastructure projects.
Sources: www.whitehouse.gov; http://thomas.loc.gov; and http://money.cnn.com