WASHINGTON — Despite a renewed push this month for a national infrastructure bank, market participants are at odds over such basic issues as how it would be funded and structured and what projects should receive its help.
The lack of consensus suggests such a bank may not be created anytime soon, members of the infrastructure community said in a series of recent interviews.
A hearing on the prospects for a national infrastructure bank is to be held on Tuesday by the Senate Banking Committee, which is chaired by Sen. Christopher Dodd, D-Conn., a long-time proponent of such a bank. The hearing follows an announcement by President Obama on Labor Day of a skeletal proposal for the bank.
But market participants contend that it is unlikely that details of the bank’s structure and mission could be worked out before the November election or early next year, when congressional aides and transportation industry members say Congress could approve a multi-year bill that authorizes the bank.
A bill sponsored by House Transportation Committee chairman James Oberstar, D-Minn., that was passed by one of the committee’s panels last year does not even contain provisions for an infrastructure bank.
The request by Obama that Congress create the bank is a sign that lawmakers are taking the idea seriously, one expert said.
“Even to announce it post-campaign trail, and have it get some attention … is a big achievement on its own,” said Michael Likosky, a senior fellow at New York University’s Institute for Public Knowledge and a law and public finance program director at the Social Science Research Council.
But the still-undefined nature of the bank that Congress would create continues to plague discussions. Market participants are debating which financing instruments it would employ: direct-pay tax-credit bonds, private-activity bonds, grants, or loans.
They also want to know whether the bank would supplement, absorb, or even compete with other federal financing programs, and whether it would be limited to transportation or include other projects such as nuclear power plants, water and sewer facilities, public housing, public buildings, and pipelines.
“The devil’s going to be in the details. And until there are details, I’m not in a position to go into depth on the proposal,” said David Parkhurst, economic development and commerce committee director for the National Governors Association.
Dodd called for Tuesday’s hearing to “explore the benefits” of creating a bank to fund national and regional projects in transportation and water infrastructure, according to a statement from the committee. Administration officials for transportation policy and economic policy, as well as Pennsylvania Gov. Edward Rendell, are scheduled to testify.
A national infrastructure bank “could leverage state, local, and private funds to ensure our infrastructure systems are equipped to meet the demands of the 21st Century,” Dodd said.
The senator is one of several lawmakers who have put together legislative proposals for a bank.
His bill, introduced in 2007 and cosponsored with former Sen. Chuck Hagel, R-Neb., would have allowed states and other public authorities to apply for funding for mass transit, housing, bridges, roads, and water and sewer systems, including public-private partnerships.
It would be limited to $60 billion of outstanding bonds.
A committee aide said last week that Dodd will not unveil new legislation at the hearing.
Other lawmakers who have called, or drafted legislation, for a national infrastructure bank include Dodd’s fellow Connecticut Democrat Rep. Rosa DeLauro and Oberstar.
Dodd and a coalition of transportation advocates, including Rendell, urged the president in January to provide at least $10 billion to capitalize a bank. Obama included $4 billion in his budget request, but Congress gently demurred because no bank had yet been established through the regular committee process.
The bank could get hung up on political snags, according to Parkhurst. If it is created as a quasi-independent body, with experts selecting projects based on merit — but the bank is funded by congressional appropriations — that “raises political questions, whether Congress will be receptive to that type of decision-making scheme,” he said.
The “situation is so confusing,” agreed Emil Frankel, director of transportation policy for the Bipartisan Policy Center. “Who’s going to be writing the House bill in the new Congress? Does this have legs in the new Congress, in which the opposition party, the Republican party, is likely to control one or both chambers?”
At least one market participant believes the bank is altogether a bad idea, arguing that it would function like a government-sponsored enterprise subject to politics instead of being based on merit or financial effectiveness.
“There’s no other reason to do [the bank] unless it’s a political entity, so it becomes one,” said Kevin Villani, former senior vice president and chief economist of Freddie Mac. “It’s closer to the World Bank.”
The president already has made several different pitches for an infrastructure bank, in campaign speeches, in his fiscal 2011 budget proposal, and in his Labor Day announcement.
Obama’s most recent proposal defined the bank broadly as a way to leverage state and federal funding for transportation projects, indicating that the administration wants to create a less comprehensive bank. Some believe that would be misguided.
“Part of the infrastructure and economic crisis in the U.S. comes from the fact that we don’t have cohesive infrastructure policy across sectors,” Likosky said. The bank should include multiple sectors, diversifying the investments and even the regions in which they would be built, he said, noting that “if you have a densely populated place, and you have a heavily trafficked road, you’re going to have a higher leveraging ratio.”
About $60 billion over a 10-year period “should be our baseline,” Likosky said, but “I don’t think the dollar figures are essential.”