Establishing a National Freight Infrastructure Bank:
Policy Issues & Program Design
September 16, 2009
Outgrowth of I-95 Corridor Coalition study (December, 2008)
Evaluate the potential benefits of creating a new special purpose entity (SPE) to help advance major freight projects.
Recent proposals to create a national-level SPE to help finance infrastructure, including:
National Infrastructure Bank Act of 2007 (S. 1926, “Dodd-Hagel”)
National Infrastructure Development Act of 2009 (H.R. 2521 “DeLauro”)
Build America Bonds Act of 2009 (S. 2021, “Wyden-Thune”)
President Obama’s FY2010 Budget (National Infrastructure Bank)
How to categorize freight projects?
HUBS : Terminals where goods are transferred-- Intermodal or Intramodal.
CORRIDORS: Longer Surface routes linking Hubs.
CONNECTORS : “Last Mile” surface links between Corridors and Hubs, generally in metropolitan areas.
Why has public funding for Freight been limited?
Much of Freight Infrastructure is privately-owned.
Intermodal Uses straddle existing Federal programs.
Projects often span political jurisdictions, complicating institutional structure.
Public “spillover” nature of benefits hard to measure— or monetize.
As a result, the Constituency for Freight Projects is Narrower than for Public Works.
What problems are we trying to fix?
Unavailable or expensive financing for projects?
Overcome “Market failure” b y providing loans and other financing subsidies .
Insufficient funding for projects?
Provide a deeper subsidy to reduce revenue requirements for major projects with public benefits.
What is the appropriate timeframe for federal assistance?
Longer-term shift in federal funding role.
Why create a new Federal program for freight--
Assist projects whose scale and complexity exceed state/local capacity.
Overcome gaps in federal-aid eligibility.
Provide “One-stop Shopping” for project sponsors.
Target projects with major economic benefits regionally & nationwide.
Enhance project selection at the federal level (focus on outcomes, not modes).
-- and why create a new Special Purpose Entity (SPE)?
Autonomy & Expertise may lead to improved Project Selection.
Align the singular mission of SPE with a dedicated revenue stream to accelerate investment.
Offer “One-Stop Shopping” with multiple tools to project sponsors.
Take pressure off of states’ formula-funded programs by only handling largest projects.
Why not instead authorize states to create regional entities?
Projects of truly national significance should have national funding responsibility.
National scope brings economies of scale and avoids dilution of effort at regional level (SIBs).
Allows access to direct federal credit support:
Lower-cost source of financing.
Greater budgetary efficiency through fractional “scoring.”
-- Federal Tax Subsidies
How big a program and how should it be funded?
AASHTO Freight Authorization Policy Statement :
$42 billion additional funding for Goods Movement Infrastructure over 6 years (in addition to existing freight-related funding):
$21 billion in Formula Funding to States
$21 billion in Discretionary Allocations (new $3.5 billion/yr. Program)
Increases in existing freight-related sources such as:
Diesel Fuel Tax
Heavy Vehicle Use Tax
New sources of dedicated freight-related fees such as:
Surface Freight Waybill
What organizational form should the SPE take? Special Purpose Entity’s Relationship to the Federal Government Less Federal More Federal Governmental Owned and controlled by the public sector Private Owned and controlled by the private sector Government Dept./Agency Government Corporation Government Sponsored Enterprise Private Non-Profit Corporation Dept. of Transportation Rural Telephone Bank, FDIC . Fannie Mae Freddie Mac Transportation Finance Corp. (proposed) Funded by U.S. govt. On-budget Governing Board Fully or partially funded by U.S. govt. May be on- or off-budget. Shareholder-owned For-profit Implied federal backing Membership organization Not for profit
Why does the SPE’s organizational status matter to Federal policymakers?
Budgetary Scoring Treatment of NFIB’s Borrowing and Spending
Treasury Concerns about:
Cost-Effectiveness of Capital Raising Process
Implied Federal Liability if SPE Issues Public Debt
Competition with U.S. Treasury borrowing/Administrative burden
What types of assistance should be offered?
Potential Portfolio of Assistance
The National Freight Infrastructure Bank (NFIB)
Receives $3.5 billion/year [$21 billion total] of revenues:
~$3.0 billion for Grants
~$0.5 billion for Credit ~$5 billion of loans .
NFIB selects projects > $ million for:
New Discretionary Grant program for projects with public benefits.
Expanded Federal Credit Program
Allocates Volume Cap under new $ billion Tax Credit Bond program and expanded $ billion Private Activity Bond program .