Kerry Pushes Infrastructure Bank With Up to $20B Over Two Years

Sen. John Kerry, D-Mass., on Tuesday unveiled legislation for a national infrastructure bank that could finance up to $10 billion of projects in each of its first two years.

But House Transportation Committee chairman Rep. John Mica, R-Fla., said he is “very reticent” to support Kerry’s proposal because he would prefer to see more private investment rather than “Washington bureaucracy.”

Kerry’s legislation also would exempt private-activity bonds from the alternative minimum tax in 2011 and 2012.

His bill would reinstate a provision of the American Recovery and Reinvestment Act that exempted tax-exempt bonds from the AMT during 2009 and 2010. The provision expired on Dec. 31. State and local governments can issue up to $32.441 billion of PABs in 2011 under state volume caps, according to data from the Census Bureau and the Internal Revenue Service.

Speaking to reporters, along with Sens. Kay Bailey Hutchinson, R-Texas, and Mark Warner, D-Va., Kerry said the proposed infrastructure bank would be structured to survive in Congress’ current budget austerity climate. To assuage federal deficit concerns, the bank would only provide loans and loan guarantees — not grants. Ultimately, the bank would be self-sustaining, the senators said.

The idea for a federal infrastructure bank is not new. In 2007, Sens. Chris Dodd and Chuck Hagel introduced a bill for a $75 billion infrastructure bank that failed to move through the Senate. In August 2008, President Obama announced a $50 billion infrastructure bank proposal as part of an economic stimulus package and the president’s proposed fiscal 2012 budget includes $30 billion over six years for such a bank. Rep. Rosa DeLauro, D-Conn., also has a pending bill for an infrastructure bank, with no set dollar amount.

Most of these proposals are too expensive, according Kerry. A more modest approach can win bipartisan support, he said. “America is falling behind” in infrastructure development, Kerry said, citing Chinese high-speed rail as examples of projects the bank could finance in the U.S. China is spending 9% of its gross domestic product on infrastructure needs, while the U.S. spends 2%, he said.

The bank’s lending would be limited to $10 billion in each of its first two fiscal years, then would increase to $20 billion per year for the next six and rise to $50 billion in the 10th year. The bank could provide up to $160 billion in financial assistance over 10 years. Loans and guarantees would be secured by toll revenues, user fees, or other dedicated revenue sources. Eligible projects would include transportation, water, and energy facilities, and would need to cost at least $100 million, or $25 million in rural areas.

The base interest rate on any direct loan could not be less than Treasury obligations of a similar maturity at the start of the loan. The final maturity for any loan or guarantee would be capped at 35 years.

The bank has support from two key labor and business groups. Thomas ­Donohue, chief executive of the U.S. Chamber of Commerce, and Richard Trumpka, president of the AFL-CIO, attended Kerry’s press conference to back his bill.

Kerry rebutted Mica’s concerns about the infrastructure bank, saying it will be “transparent” and “accountable.” He added he does not want “bureaucracy to get in the way of a very transparent, professional process” for selecting projects. He said he has “talked a little bit” with members of the House about the bank.

Hutchinson said the “modest” $10 billion needed to start the bank can be found within the budget process. Kerry said Senate Budget Committee chairman Kent Conrad, R-N.D., is “very interested” in the bank. If funding can be allocated in the fiscal 2012 budget, then the bank could be started next year, Kerry said.

Warner said the bank-financed projects will need to have a revenue stream, such as tolling “or state and local contributions.” He said he expects “broad, bipartisan support” from governors for the bank.

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Transportation industry Washington
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