How to Make an Infrastructure Bank Work

September 30, 2010
Lee Drutman

When President Obama proposed a national infrastructure bank on Labor Day, he was short on details. How would such a bank work to give coherence to meeting our infrastructure building needs?

Today, in conjunction with our national conference on infrastructure, PPI is proud to release a new Policy Memo from infrastructure expert Everett Ehlrich about how a national infrastructure bank would work.

In his memo, entitled “A National Infrastructure Bank: A Road Guide to the Destination,” Ehrlich sees five key aspects of a Bank:

First, a Bank will evaluate infrastructure needs from an economic, as opposed to an engineering perspective. That is, infrastructure projects must actually be economically sound investments, not bridges to nowhere.
Second, a Bank will be able to provide consistent, apples-to-apples comparisons of different infrastructure projects so that policymakers can make more rational decisions about where to allocate infrastructure funds.
Third, a Bank will be able to select projects where it can leverage private capital effectively.
Fourth, a Bank will provide an alternative to what Ehrlich calls the “Appropriations Merry-Go-Round” – that is, the process by which states and localities put off much-needed repairs in hopes that congressional appropriators will lavish funds on them if only they wait long enough.
Fifth, a Bank will encourage localities to think creatively about ways to improve on existing infrastructure use, such as designing traffic optimization algorithms. The bank will be able to support non-structural solutions that can often do just as much for our infrastructure needs as building.

Here’s Ehrlich’s overview for how the bank would work:

Any entity – whether state, local, or federal – would have standing to come to the Bank with a proposal requiring federal assistance. The Bank would be able to negotiate the level and form of such assistance based on the particulars of each project proposal. It could offer cash participation or loan guarantees, underwriting or credit subsidies, or financing for a subordinated fund to assure creditors. Any project requiring federal resources above some dollar threshold (on a credit scoring basis) would have to be approved by the Bank.

Ehrlich will be discussing his memo on Friday at a panel on “Panel: Financing Future Growth: How Do We Pay For New Projects?,” as part of the 2nd Annual North America Strategic Infrastructure Leadership Forum, co-sponsored by the Progressive Policy Institute.