For those of us who are interested in our nation’s infrastructure, what means are available for attracting private investment, as mentioned by President Obama in his State of the Union address? One idea, recently proposed in the House of Representatives, is to create a National Infrastructure Development Bank.
H.R. 402 was introduced on January 24, 2011. It would create a National Infrastructure Development Bank as a government-owned institution to attract private investment from the global capital markets and steer it to projects with a “public benefit.” The Bank would create these investment opportunities through tax-exempt “high quality bond issues.” The powers of the Bank would be vested in a five-member Board of Directors appointed by the President and representing different geographic regions of the U.S. The Board would have the power to (1) monitor and oversee eligible energy, environmental, telecommunications or transportation infrastructure projects; (2) issue public benefit bonds; and (3) lend to regional, State and local entities and commercial banks for infrastructure projects. The bill would also create a risk management committee to develop guidelines for diversified lending activities by both region and type of infrastructure project. The Bank would cease to exist after 15 years.
The Board would develop criteria for determining eligibility for financial assistance. These criteria would be required to consider:
- the means by which the project is being financed;
- the likelihood that any assistance from the Bank would cause the project to proceed more promptly and with lower costs than without the assistance; and
- the extent to which any assistance would maximize the level of private investment in the project while providing a public benefit.
Overall, each project would be subject to a benefit-cost analysis, with priority going towards projects that contribute to economic growth, lead to job creation, and are of regional or national significance.
This bill has been referred to committee, and given the current political climate favoring less government it is unlikely we’ll see much movement during the 112th Congress. But never say never, as the severe budget constraints that state and local governments are facing may cause an institution like the one proposed by H.R. 402 to become a viable solution. One challenge presented by this bill will require us to consider what constitutes a “public benefit” since different States and local entities and commercial banks will likely have different opinions. Further, because States have vastly different infrastructure needs, will equality in distribution of capital be more important than equity in improving our nation’s infrastructure?
We’ll update you as needed on the progress of H.R. 402 through Congress.