The budget resolution adopted by Congress includes $2 billion this year and $5 billion next year for a national Infrastructure Bank. President Obama has outlined broad design principles on the focus, governance structure, and financing mechanisms of the Infrastructure Bank. The Obama Administration will work with Congress to establish specific policies and practices for the Bank.
• Sectors for investment: Transportation & transportation-affiliated projects.
The Infrastructure Bank should target transportation and transportation-affiliated projects that emphasize smart land use, economic development, intermodalism, energy conservation, and other priorities of our modern infrastructure system. Focusing on cross-modal transportation projects with special attention to broader economic and environmental impacts would allow for effective targeting of Infrastructure Bank dollars. It would also direct funds to high-value projects that are difficult to finance in the existing system. As the Infrastructure Bank grows over time, its scope could expand to more sectors.
• Project size: Low minimum threshold.
The Administration proposes a $25 million minimum threshold on project size. This relatively low project threshold is consistent with the fundamental principle of merit-based selection and would allow the Bank to choose the most valuable of a broad array of projects. The low threshold would also help make Bank funding accessible to all potential applicants, whether large or small, urban or rural.
• Governance and structure:
Independent entity within DOT. Political independence is critical to the success of an Infrastructure Bank. For this reason, the Administration proposes that the Bank be housed as an independent entity within DOT, consistent with the proposed Bank focus on transportation and transportation-affiliated projects. The Bank would be governed by a board of non-governmental advisors with proven expertise in infrastructure, appointed by the President and confirmed by the Senate. Similar to the role of the IRS Oversight Board, the Bank board would lend expertise and insight to project selection, approve final selection decisions, and protect the Bank from internal and external political pressures.
• Financing mechanisms:
Combination of grants and credit products. A flexible set of financing tools would allow the Bank to provide the most appropriate form of financing to a given project. The Administration would allow the Bank to offer a combination of grants and credit products like direct loans and loan guarantees. The Administration does not support Bank authority to borrow independently from private capital markets, since Treasury is the sole entity that borrows on behalf of the federal government and can do so more cheaply and efficiently than any other entity.
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