Why It Matters

Congress is weighing competing proposals to create a national infrastructure bank that could expand federal financing for major projects as lawmakers prepare to reconsider the federal government's role in infrastructure investment during surface transportation reauthorization.

A national infrastructure bank is typically seen as a way for the federal government to provide loans, loan guarantees, and lines of credit to support infrastructure projects carried out by nonfederal entities. The federal government currently covers only 31 percent of capital spending on transportation and water infrastructure, with states and localities responsible for most government infrastructure investment.

Three national infrastructure bank bills have been introduced in the current Congress. Two have bipartisan sponsorship, while a third is sponsored by Democrats. The proposals differ significantly in their governance, financing structures, eligible projects, and approaches to attracting private capital.

The Big Picture

The concept is not new. Legislative proposals for a national infrastructure bank trace back at least to 1983, yet none has ever become law. The three current bills take divergent approaches to the same core challenge of leveraging federal involvement to attract state, local, and private investment without unnecessarily duplicating existing programs like the Transportation Infrastructure Finance and Innovation Act and Water Infrastructure Finance and Innovation Act programs, which already offer targeted credit assistance for infrastructure projects.

H.R. 4315, introduced by Rep. Salud Carbajal (D-CA) with Rep. Daniel Webster (R-FL), would establish a wholly owned government corporation with a seven-member board. The corporation would be funded through loans from pension funds rather than direct congressional appropriations and could provide loans and loan guarantees for transportation, energy, environmental, and telecommunications projects.

H.R. 1235, introduced by Webster with Carbajal, would establish the Federal Infrastructure Bank as a government-sponsored enterprise. It would finance economically viable infrastructure projects that provide a public benefit through equity investments, direct and indirect loans, and loan guarantees. The bank would operate as a revolving fund and raise capital through the sale of stock and its own bonds.

H.R. 5356, sponsored by Rep. Danny Davis (D-IL) and Democratic co-sponsors, would establish a mixed-ownership government corporation with a 25-member board appointed by the president with Senate confirmation. It would finance projects involving transportation, energy, environmental infrastructure, telecommunications, affordable housing, schools, public recreation, libraries, and worker training facilities. The bank would be capitalized through the sale of stock and callable capital and could issue bonds, accept deposits, collect fees, and receive a $100 million appropriation for startup costs.

The Congressional Budget Office has flagged a core tension. A special entity issuing its own debt cannot match the low interest rates and issuance costs available to the U.S. Treasury itself. Meanwhile, the Federal Credit Reform Act requires the estimated long-term cost to the government of federal direct loans and loan guarantees to be accounted for in the federal budget when applicable.

Proponents argue an infrastructure bank could leverage state, local, and private investment, bring specialized expertise and data-driven project selection to federal infrastructure financing, and tap nontraditional capital pools, including pension funds and foreign investors. Critics point to the possibility of political pressure to allocate loans by geography rather than merit, taxpayer exposure to default risk, and duplication of work already done by existing federal credit programs.

Those existing programs include the Transportation Infrastructure Finance and Innovation Act program, Railroad Rehabilitation and Improvement Financing program, Water Infrastructure Finance and Innovation Act program, Army Corps of Engineers Water Infrastructure Financing Program, and Department of Energy's Energy Dominance Financing Program.

The Bottom Line

Congress is already considering the infrastructure-bank concept as part of the next surface transportation authorization. Section 2004 of H.R. 8870, the BUILD America 250 Act, would require the transportation secretary to enter into an agreement with the National Academies of Sciences, Engineering, and Medicine to submit a report to Congress within two years of enactment on establishing a federal infrastructure bank.

The study would examine equity investment by the bank, its potential effect on overall infrastructure investment, how it could complement existing federal credit programs, opportunities to finance nonrevenue projects and projects in rural and economically disadvantaged areas, effects on existing state infrastructure banks, and best practices from infrastructure banks in other countries and state infrastructure banks.

The debate over a national infrastructure bank therefore extends beyond the three standalone bills. Surface transportation reauthorization could provide Congress with its most immediate opportunity to determine whether the concept warrants a larger role in federal infrastructure policy.

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