This is part two of a two-part series on infrastructure funding and financing. Part one highlighted examples of our “infrastructure deficit” as discussed at a recent forum on regional and national infrastructure needs and part two focuses on infrastructure banks as potential ways to help better address those needs.
Okay, so infrastructure’s important. But how do we pay for it?
Speakers at the forum clearly understood the central role that infrastructure plays in maintaining the economic growth and competitiveness that metro DC has become accustomed to. Given this, and the fact that current funding mechanisms are not longer sufficient, how do we move from understanding to action?
One possible answer is an infrastructure bank. GMU’s Gifford provided attendees a quick 101 on how they work. In the simplest explanation, an infrastructure bank is an entity capitalized by government and private sector funds that issues bonds to help leverage the initial capital into much larger amounts.
That funding is then used to pay for the construction of infrastructure – from toll roads, to streetcars, to water treatment plants. The initial donors are then paid back from revenue generated by the projects. Thirty-five states and territories, including Virginia, have forms of infrastructure banks in operation.
Rep. Rosa DeLauro (D-CT), the keynote speaker at the forum, has put forth legislation to create a National Infrastructure Bank. Noting that there’s a very large appetite for stable, long-term investment opportunities, DeLauro said there’s $625 billion in leveraged potential for funding infrastructure.
Under her model, approved projects would be required to have identifiable and reasonable sources of revenue generation so that the bank would be self-sustaining. The bank would fund a wide range of projects including those related to water, transportation, and energy and project selection would be merit-based. DeLauro argued that a National Infrastructure Bank could be a “game-changer” by creating millions of jobs in the US and alleviating the country’s massive infrastructure deficit.
In addition to the potential for bank at the national level, forum participants discussed the potential of creating a regional infrastructure bank for metro DC. Gifford noted that the region has a history of conflict and cooperation on major cross-state initiatives like Metro, the Airports Authority, and the Wilson Bridge. Acknowledging the fierce competition for economic development among the region’s jurisdictions, Gifford argued that as the metro area with the highest per capita income in the country, working together to create a regional Infrastructure Bank to make sure our bridges, trains, and water pipes work smoothly shouldn’t be impossible.
Nationally and regionally we’ve got a lot of work to do just to bring our infrastructure up to current standards. Damon Silvers, Associate General Counsel at the AFL-CIO told forum participants that the U.S. has a $2.2 trillion infrastructure maintenance backlog that doesn’t even include new projects. In other words, we’ve got a lot of catching up to do even before we can begin to think about next generation infrastructure.
That’s a tough sell, said Janet Kavinoky, Director of Transportation and Infrastructure for the U.S. Chamber of Commerce. Infrastructure is incredibly important. It drives job growth and investment and increases competitiveness; however the situation we’re in now is going to require very skilled political leadership as well as real public education and engagement. “Maintenance isn’t sexy,” Kavinoky said. “Cutting ribbons is sexy.”
As Mort Downey, Vice Chair of the WMATA Board of Directors pointed out, the Metrorail map is iconic and one of the key drivers of regional identity. Metro maps shape how people think about places, and the fact ours extends beyond the central city (both the map and the system) and into its surrounding jurisdictions is invaluable. However, as Downey acknowledged, the iconic map is just a piece of paper. Without a more reliable source of funding and financing, we risk the degradation of priceless investments in infrastructure like Metro.