Why we need a national infrastructure bank
In 2011, I journeyed to Taiwan to attend the green unveiling of the Taipei 101 skyscraper, the world’s tallest LEED Platinum retrofit. At 101 floors with the fastest ascending elevator on the face of the planet — 37.7 miles per hour — Taipei 101 was mighty impressive.
But even more impressive was the body of infrastructure and building construction being carried out by the project’s manager, Siemens, throughout East Asia. As I recounted then for GreenBiz, Taiwan, Hong Kong, Korea and mainland China have been rebuilding themselves — and increasing their competitive positioning on the world stage — at a time when the U.S. has been standing still.
The disturbing realization that the U.S., despite its technological prowess, might be falling behind other nations has stayed with me. My concern about American economic competitiveness is why I’ve become increasingly engaged on infrastructure over the last two years, including highways, roads, bridges, water, wastewater and solid waste facilities, the energy grid, schools and other public buildings. Infrastructure represents the critical underpinning of America's local and regional economies. "First class jobs gravitate to first class infrastructure," President Barack Obama noted in his 2014 State of the Union address.
First class infrastructure increasingly is defined as sustainable infrastructure. Upgrading of the electricity grid and greater use of energy efficiency strategies by utilities, businesses and households both will control long-run costs and reduce our carbon footprint. Green strategies, including the use of environmentally sound stormwater management techniques and advanced recycled materials, are also being incorporated into the improvement of roads, waterways and flood barriers to enhance project performance and reliability at reduced cost relative to conventional approaches. Life cycle planning, to ensure cost-effective construction and maintenance over a project’s useful life, is now entrenched in infrastructure best practices. Envision, a sustainable rating system, also has been introduced by the Institute for Sustainable Infrastructure.
Despite the growing interest in sustainable infrastructure, the heightened concern is well founded. The nation’s infrastructure earned a grade of D+, barely passing, in the American Society of Civil Engineers’ last report card, issued every four years. An estimated $3.6 trillion in new investment is needed by 2020 to improve U.S. infrastructure to a grade of B. The U.S. faced a $210 billion yearly gap between actual and required funding from 2013 to 2020, according to the report.
Building on the ASCE findings, Autodesk, in association with CGLA Infrastructure, led 45 corporations, think tanks, academic institutions and others in developing a newly released study, “Making the Grade" (PDF), on solving our national infrastructure crisis. The report, on which I served as an expert advisor, lays out a six-point plan for regaining America’s infrastructure leadership:
1. Make infrastructure a cabinet-level priority.
2. Form U.S. infrastructure regions.
3. Establish a national infrastructure bank.
4. Sell "opportunity" bonds to corporations and/or the public to finance the bank.
5. Create a national infrastructure index.
6. Engage the American people to build support for the importance of infrastructure policy.
Infrastructure investment is good business that would boost America’s economy. An estimated $150 billion annual infrastructure program would create 1.8 million jobs and add $300 billion to $400 billion to our GDP, according to economist Laura Tyson. McKinsey also notes that $1 in infrastructure spending typically yields an estimated $1.59 in additional economic activity, while infrastructure upgrades ultimately could unlock $1 trillion in productivity savings worldwide.
I believe the key issue in returning America to infrastructure leadership is mustering the political will to establish and finance a national infrastructure bank. While additional infrastructure spending long has been supported by a wide coalition that extends from the U.S. Chamber of Commerce to the AFL-CIO, fear of engaging in the necessary spending has sapped political interest. In order to raise the required financing, the “Making the Grade” report supports the sale of bonds to the public and corporations, much like the war bonds that helped to produce an American victory in World War II.
As conceived by many leading policymakers, a U.S. infrastructure bank would use innovative financing tools to leverage additional private investment for significant infrastructure projects identified at the state and local levels. The bank could use a wide array of tools, including grants, low-interest construction and permanent loans, and credit enhancements, including the provision of capital reserve funds for bond issuances, bond insurance support, lines and letters of credit and loan guarantees. These vehicles would be used to improve the financial security and reduce the cost of financing for state and local infrastructure. Transparency would be maintained by the use of rigorous underwriting criteria to ensure sound project selection. An infrastructure bank also could be used to encourage the use of public-private partnership contracts, which can help to attract private equity and pension fund capital and promote best practices
Interest in an infrastructure bank has been growing. Several infrastructure bank bills (S. 1957, HR 2084, HR 2553) have been introduced in the current Congress. On July 17, the White House announced a new Build America Initiative, which would establish a Transportation Investment Center inside the U.S. Department of Transportation. The new center could serve as a pilot for more comprehensive infrastructure bank legislation.
Highway image by donvictorio via Shutterstock.