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OP-ED: It’s time for a $1 trillion national infrastructure bank

As the new year begins, Congress should place a high priority on the enactment of a 10-year, $1 trillion national infrastructure act.

The act should set aside money to rebuild the country’s transportation, water, wastewater, energy and other critical infrastructure. The $1 trillion should be offered every year in installments of $100 billion.

The need for this is clear and present, as was shown in the American Society of Civil Engineers’ most recent national infrastructure report card. It gave U.S. infrastructure a grade of D – one grade removed from failure. Among other things, it found there is a need for:

  • $2 trillion for surface transportation, including highways, roads and bridges (according to estimates, only $942 billion is now hand, leaving a shortfall of more than $1 trillion)
  • $105 billion for water and wastewater infrastructure
  • $177 billion for electric transmission and distribution infrastructure
  • $200 billion for airports and marine ports, rail networks, inland waterways and dams
  • $102 billion for public parks and recreation infrastructure

All told, ASCE has found an additional $2 trillion is needed for infrastructure through 2025. This is more than 40 percent of the $4.5 trillion that needs to be spent in the mid-next decade.

There’s no shortage of ideas. Industry groups, labor interests, politicians, universities and think tanks have all weighed in. To be most effective, anyone devising a forward-looking infrastructure plan should heed the following advice:

First, and most importantly, know that wise infrastructure policy requires that a priority be placed on the highest-value projects. Projects should be judged individually. A national infrastructure bank should be organized in a way similar to the Federal Reserve, and regional banks should weigh proposals and make spending decisions following the advice of a central board composed of congressionally confirmed officials.

Money raised through regional banks’ sales of private activity bonds should be used to issue loans during each appropriations cycle for projects within a bank’s geographic region. Regional or district banks would then collect repayments of principal and interest, which could then be used, in the manner of a revolving-loan fund, to make new loans. Over time, the banks would be able to sustain themselves. The treasury, using the infrastructure bank, would insure such bonds against default.

Infrastructure banks should require matching money for anything they spend. At a minimum, the requirement should be for a 20 percent match, which is usually the requirement on federal transportation projects.

When devising spending criteria, planners should take into account the different levels of government that have a hand in building, financing and operating our infrastructure, while also acknowledging that much of our infrastructure is provided by private businesses. Steadily growing in popularity, public-private partnerships should be encouraged by according private activity bonds the same tax advantages that are given to publicly financed infrastructure bonds when projects are undertaken using a regional infrastructure bank.

As for deciding which projects are a priority, this should be done using an objective scoring method, one that looks favorably on work that promises to reduce greenhouse-gas emissions and provide protections against disasters like droughts, hurricanes and flooding. Priority should likewise be given to projects that can connect to so-called smart grids and help protect the country’s infrastructure from cyberattacks.

To do any of this, lawmakers will have to show some courage. They will most likely have to reallocate money now set aside for other purposes, as well as consider issuing debt and raising taxes. Some of this is long overdue. The federal gas tax, for instance, hasn’t been raised in 25 years.

ASCE estimates that failing to make needed infrastructure improvements will reduce U.S. Gross Domestic Product by $3.9 trillion and cost the country 2.5 million jobs over the next 10 years. McKinsey separately estimates raising U.S. infrastructure spending by 1 percent of GDP would add 1.5 million jobs.

Setting up a national infrastructure bank wouldn’t totally eliminate the infrastructure deficit. But it would go a long way toward repositioning the country to compete in the modern world while meeting the public’s need for safe and reliable public infrastructure. An infrastructure bank is exactly the type of national endeavor that all of us should be able to agree on.

Matt Slavin founded M.I. Slavin to provide consulting in project management, strategic planning, research and communications. Contact him at 503-619-5601 or matt@mislavin.com.

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