Senators Collins, left, and McCaskill at their press conference. Image: STLtoday

Last week, McCaskill and Collins introduced the ambitiously-named Bipartisan Jobs Creation Act. The bill begins with the payroll tax cut and wraps it in additional tax cuts, deregulation measures, and a $35.8 billion infrastructure investment program. The whole thing would be paid for by eliminating some subsidies for oil companies and by instituting a surtax on millionaires’ income—though exceptions will be made for small business owner-operator “job creators.”

The two senators are generally touting this bill as a tax relief bill first, and a pay-your-fair-share bill second—infrastructure gets third-stringed at best, but the provisions are still worth looking into.

The McCaskill-Collins infrastructure plan [PDF] includes $10 billion to capitalize state infrastructure banks and $25 billion for highways and bridges—just highways and bridges. Out of $25 billion—about half an average year’s transportation spending by the federal government—not a dime goes to transit.

By promoting state infrastructure banks, McCaskill and Collins are throwing their weight behind the Republican vision for infrastructure spending and against President Obama’s. The President and a number of other prominent figures have advocated to no avail for the creation of a National Infrastructure Bank, and Politico reports that they’ll try again next year—to the familiar tune of $10 billion. Meanwhile, House Transportation Committee Chair John Mica has included support for state infrastructure banks—not a national one—in his reauthorization bill. The senators opted for state I-banks in this case because they are an existing program that could be expanded, while “there is no consensus yet on how to address a National Infrastructure Bank,” according to Senator McCaskill’s press secretary, John LaBombard.

Furthermore, the bill summary states that the $25 billion for highways and bridges is for “rebuild and repair” projects, but LaBombard clarified that they can also be used for expansion of existing roads and new construction. They can’t, however, be used for transit.

McCaskill-Collins is the latest in a growing list of bills that attach infrastructure spending to various other issues, all in the name of job creation. First there was the “drilling-for-infrastructure” proposal, touted as the House Republicans’ major jobs bill. Then there was Rep. Nick Rahall’s Buy America bill (“regulation-for-protectionism”), and now the vote on Boehner’s Keystone XL bill.

With Congress staying in session until a deal is struck on the payroll tax cut, and the pressure high to get it done by Friday, McCaskill and Collins could be poised to present a true bipartisan alternative and break the deadlock. If their bill passes, and the infrastructure portion remained intact, we can only speculate as to the effect it would have on the Senate reauthorization bill come February.

Bills to put unemployed construction workers back on the job keep going down in Congress.

Given Republican opposition to what they consider a repeat of a failed stimulus — and to an infrastructure bank they say is unnecessary at best and politicized at worst — the failure of the bill is no surprise. The bill garnered a slim majority — 51-49 — but not enough to overcome the threat of a GOP filibuster.

Meanwhile, the Republican proposal would have pushed back many health, safety, and environmental regulations that corporations consider onerous. Defeated in a 47-53 vote, the bill also would have extended SAFETEA-LU for two more years — nearly matching the length and spending levels in the bipartisan EPW proposal — without funding the shortfall such spending would cause to the Highway Trust Fund. The bill wouldn’t have been a “clean” extension of current law, though, since it eliminated the “set-aside” for bike and pedestrian infrastructure, making it the fourth attempt in less than two months by Senate Republicans to eliminate or weaken TE — and the fourth failure.

Sen. Schumer's plan to salvage the jobs bill wouldn't resuscitate plans for $50 billion in transportation spending. Photo: AP

New York Sen. Chuck Schumer has proposed narrowing the bill down to two parts – one favored by Democrats, the other by Republicans. Under the plan, an infrastructure bank would be created in the model endorsed by the president and the Kerry-Hutchison BUILD Act. In exchange, there would be a tax holiday for corporations to bring back to the U.S. profits they made overseas.

Obama’s bill had also called for a $50 billion investment in transportation infrastructure, and that appears to be dead as the Senate pursues Schumer’s plan. The House had dismissed the transportation component long ago, with Republican leadership saying they might hold a vote on the pieces of the bill that appeal to them (surprise — stimulus spending isn’t one of them). Meanwhile, some insiders say that Republicans in the House are getting serious about passing a transportation reauthorization before March 31 so that they can show that they, too, are serious about job creation.

Of course, the path they seem to be setting out on involves paying for a higher level of transportation spending with oil drilling, a proposal that’s sure to run up against massive Democratic opposition and possibly even a presidential veto.

And many think that not much is going to happen on any of this until the super committee comes back with its proposals for deficit reduction before Thanksgiving.

Back to the Schumer jobs plan: We’ve written a lot, and will be writing more, about the pros and cons of an infrastructure bank. But what about this idea of repatriating overseas profits?

The plan would allow corporations to stash their profits made outside the country in U.S. banks without paying the 35 percent corporate tax rate they’d normally have to pay. There’s no guarantee that just because that money would now be sitting in U.S. banks that it would be used to create U.S. jobs, though – in fact, a similar repatriation plan in 2004 failed miserably on that front.

Dan DiMicco, CEO of the Nucor steel company, said last week that he’d be in favor of a repatriation holiday where the companies invested part of their repatriated profits in an infrastructure bank. However, Schumer’s thinking doesn’t go that far. The tax earnings from the lower tax rate imposed on the repatriated profits would go into the Treasury, plain and simple.

As for the prospects of the Schumer bill, in the GOP , even this scaled-back plan bears Obama’s mark since it is the offspring of his jobs bill, and therefore Republicans are reluctant to vote for it. Even Lindsey Graham, co-sponsor of the BUILD Act for an infrastructure bank, will only commit to “considering” the new proposal.

Meanwhile, Senate Majority Leader Harry Reid would rather pay for the infrastructure bank with a surtax on millionaires – a proposal Republicans persist in calling “class warfare.”

And to make sure the money is properly spent, we’re building on reforms we’ve already put in place. No more earmarks. No more boondoggles. No more Bridges to Nowhere. We’re cutting the red tape that prevents some of these projects from getting started as quickly as possible. And we’ll set up an independent fund to attract private dollars and issue loans based on two criteria: how badly a construction project is needed and how much good it will do for the economy.

And without ever saying the words “infrastructure bank,” he made his push for one:

This idea came from a bill written by a Texas Republican [Kay Bailey Hutchison] and a Massachusetts Democrat [John Kerry]. The idea for a big boost in construction is supported by America’s largest business organization and America’s largest labor organization. It’s the kind of proposal that’s been supported in the past by Democrats and Republicans alike. You should pass it right away.

He would capitalize the bank with an initial $10 billion, just as Sens. Kerry and Hutchison had proposed. Obama’s own earlier proposal called for a $30 billion investment.

Obama’s written plan also pledges investments in TIGER and TIFIA – good news, since the 2012 transportation budget passed by a House subcommittee yesterday zeroed out TIGER entirely. It also builds on his instruction to agency heads to identify projects that deserve federal help – if not funds – for streamlining the process.

Transportation reform advocates praised the bill, with James Corless of Transportation for America calling it “both ambitious and pragmatic.”

House Transportation Committee ranking Democrat Nick Rahall sat next to Chair John Mica during the speech, and afterward, Rahall said, “We may have walked out of the chamber with different views on the President’s proposals, but I remain committed to working together in a bipartisan fashion.”

We’ll see if they can find anything they both agree to work on. The statement Mica issued after the speech was a quick repudiation of everything the president had asked for:

While the President reconfirmed that our highways are clogged and our skies are congested, his well delivered address provided only one specific recommendation for building our nation’s infrastructure.

Unfortunately, a National Infrastructure Bank run by Washington bureaucrats requiring Washington approval and Washington red tape is moving in the wrong direction. A better plan to improve infrastructure is to empower our states, 33 of which already have state infrastructure banks.

Key interests who have supported the general notion of infrastructure investment in the past won’t necessarily fight for Obama’s specific proposal. The U.S. Chamber of Commerce issued a statement saying that infrastructure spending – even paired with all the tax cuts Obama proposed – wasn’t enough if it didn’t include de-regulation or a commitment to free enterprise instead of bigger government.

Democrats lined up in Obama’s defense. EPW Committee Chair Barbara Boxer called the president’s plan “both inspirational and specific” and pledged to work “on a bipartisan basis to pass the American Jobs Act.” House Minority Leader Nancy Pelosi, meanwhile, called on all House Committee ranking members to urge their chairmen to schedule immediate hearings and action on the legislation proposed by the president.

One of the first things Obama said in his speech is that “everything in this bill will be paid for; everything.” But again he’s leaving the details to Congress.

When the President unveiled his ambitious $556 billion transportation agenda last February, he let his Transportation Secretary twist in the wind as Congress demanded to know how the thing was going to be paid for. All LaHood would say, for months, was that he looked forward to working with Congress on it.

This time, Obama’s leaving the funding question to the bipartisan “super committee” formed as part of the debt ceiling/deficit reduction deal this summer, which just started work and is already beginning to fracture. That committee is already tasked with finding $1.5 trillion in cuts, which was a tall order for a group that can’t seem to agree on what to order for lunch. Now Obama’s asking them to find more.

Senator John Kerry.

They’re proposing to start the bank with $10 billion of seed money that would leverage hundreds of billions of dollars, according to their projections. “Private capital is sitting on the sidelines,” Kerry said. These senators, and many more who are expected to co-sponsor the bill, want to see those private funds put to work.

The BUILD Act will not include any grants and will only fund revenue-generating projects that can repay a loan. The White House had proposed a $30 billion infrastructure bank that includes grants, but Kerry says that given the current climate, they preferred to stick only with projects that will generate revenue, and they’ve pared it down to a size they think lawmakers on both sides of the aisle can accept.

Sen. Barbara Boxer (D-CA) has indicated she’d rather see the TIFIA loan program be strengthened, rather than create a new entity that some fear will invoke echoes of Fannie Mae and Freddie Mac (a charge Kerry vigorously denies). Kerry says Boxer is on board with this proposal, as is the White House, the Senate Budget Committee Chair, and members of the House.

Stay tuned for more details.

Here are the highlights, straight from the document:

• Provides $13.4 billion in discretionary resources in 2012, a $1.3 billion decrease from 2010 levels. (This figure excludes $109 billion in obligation limitations for the surface transportation plan. Including surface transportation obligation limitations, Department of Transportation’s total budgetary resources increase by $53 billion over 2010.)
• Includes a six-year, $556 billion surface reauthorization plan to modernize the country’s surface transportation infrastructure, create jobs, and pave the way for long-term economic growth. The President will work with the Congress to ensure that the plan will not increase the deficit.
• Jump-starts productive investment and stimulates job growth with a first-year funding boost of $50 billion in 2012.
• Provides $8 billion in 2012 and $53 billion over six years to reach the President’s goal of providing 80 percent of Americans with convenient access to a passenger rail system, featuring high-speed service, within 25 years.
• Includes $30 billion over six years for a pioneering National Infrastructure Bank to invest in projects of regional or national significance to the economy.
• Continues to invest in the Next Generation Air Transportation System—a revolutionary modernization of our aviation system.
• Initiates Transportation Leadership Awards to create incentives for State and local partners to pursue critical transportation policy reforms.
• Reduces funding for Airport Grants, focusing Federal support on smaller airports, while giving larger airports additional flexibility to raise their own resources.

The budget includes a new FHWA livability grant program totaling $4.1 billion next year and $28 billion over six years. It specifically targets multi-modal transportation hubs and bike/ped/transit access, and formally embraces a “fix-it-first” approach for highways and transit.

The budget also includes $32 billion in competitive grants to encourage states to adopt safety and livability reforms, as well as $119 billion for transit over the next six years — about double the amount set aside for transit each year under the previous transportation bill.

Bike facilities that pay returns in better health and environmental impacts might not be candidates for funding from the NIB, which demands returns in cold hard cash. Photo: One More Cyclist

But what about a National Infrastructure Bank, you ask? Transportation reformers are pushing — along with President Obama — for one to be established. Would such a bank be a more effective way to finance infrastructure projects than the TIFIA program? And would it lead the country to build better, more sustainable transportation systems?

Unburying Infrastructure Financing

In his testimony before Congress in May, Robert Puentes of the Brookings Institution’s Metropolitan Policy Program said a National Infrastructure Bank would lead to:

• A better selection process with fewer federal dollars going to wasteful projects
• More accountability for funding recipients
• A focus on maintenance and fix-it-first for highway projects
• Better delivery of infrastructure projects

But when asked why the choice of financing mechanism has an impact on outcomes, he admitted that, mainly, “it matters because of the ability to move the stupid bill through.”

He also said two factors would help a National Infrastructure Bank achieve better outcomes.

First, Puentes says a NIB should be independent, instead of being “buried” within the DOT. He recommends a semi-autonomous structure like the Tennessee Valley Authority or the Export-Import Bank.

Second, it should be more transparent, combining the development policy goals of the federal government with the focus on good investment returns of a bank.

Return on Investment

A singular focus on a high rate of return, however, could weaken the impact of a National Infrastructure Bank. Rep. Rosa DeLauro (D-CT) has advocated for a NIB with grantmaking authority to cover projects that won’t necessarily make sufficient revenue to be able to pay down a loan.

A proposal, not yet released but expected to be introduced in Congress next year, would establish a bank with no grantmaking authority, removing one of the best aspects of a potential bank.

“Not every project of regional and national significance is going to generate a return that justifies a financially rational loan for the bank to make,” says Scott Thomasson, an expert in infrastructure finance from the Progressive Policy Institute. “There are projects that are worth doing as a nation where the benefits aren’t going to be repaid financially. They’re going to be enjoyed in other forms” like improving public health, easing traffic congestion, or reducing emissions.

Thomasson worries that a narrowly structured bank, following a traditional bank model, won’t address compelling projects that can’t capture user fees or other financing streams.

Another negative of the current NIB proposal is that returns on the investments go back into the general fund and need to be re-appropriated by Congress each year, making it subject to Congressional whims. But the proposal in the works for next year, however, corrects this problem. It proposes a system more like a traditional bank – or the highway trust fund – where returns go back directly to the bank.

One for Good Luck

Which brings us to one last solution out there for infrastructure financing: strengthening the highway trust fund. This is the proposal of Mark Reutter, former editor of Railroad History and author of the book Making Steel. Reutter is a fellow at the Progressive Policy Institute, but even co-worker Thomasson says the idea “doesn’t have a lot of political legs to it.”

After all, the principal way to strengthen the trust fund is to raise the gas tax or impose a fee on vehicle miles traveled – and we’ve seen where those proposals have gone in this political climate.

A $50.5 million TIFIA loan helped finance the largest public works project ever undertaken in Northern Nevada, the Reno Transportation Rail Access Corridor. Image courtesy of the city of Reno

Robert Puentes of the Brookings Institution’s Metropolitan Policy Program says the current system is “both broke and broken,” meaning dramatic changes to the financing system are essential to get the kind of transportation system we want. “Minor tweaks are just not going to be enough,” he said. “You could triple the bike program and that’s great, but it’s not going to solve the major challenges we’re facing as a nation. It’s all got to be run through an economic lens.”

Puentes favors a National Infrastructure Bank, promoted by President Obama in his Labor Day speech, as a way to channel transportation investments strategically.

One person who will have a large role in shaping an infrastructure bank is California Senator Barbara Boxer, chair of the Senate Committee on Environment and Public Works. In a hearing this fall, Boxer challenged the idea of a National Infrastructure Bank, saying she’d prefer to see current financing programs strengthened. The program that Boxer wanted to see strengthened, instead of establishing a NIB, is known as TIFIA (Transportation Infrastructure Finance & Innovation Act).

So, you’re probably wondering whether using TIFIA or a NIB to pay for infrastructure makes a difference. Is one mechanism better suited to building a safer, more efficient, and sustainable transportation system than the other?

TIFIA

TIFIA is a program of the Federal Highway Administration that provides credit assistance – not grants – for infrastructure projects. It doesn’t substitute for public spending or private investment – it’s a way to encourage private investment by providing loan security.

TIFIA has been around since 1998 but it’s come into greater use since the recession started eating away at state budgets. “They didn’t need it [before the recession] the same way they need it today,” says Puentes. “It’s oversubscribed, and so we need to figure out a way to choose TIFIA projects based on their merits.”

It’s not clear how the TIFIA program chooses projects to support, now that applications outnumber availability by a factor of more than eight to one. That’s one critique of the program: that it’s not transparent enough in its decision-making.

The U.S. DOT has a proposal for TIFIA reform [PDF], but it refers to technicalities like repayment schedules and wage laws. Reformers say more dramatic, substantive reform would need to happen to make TIFIA a lever for change.

And many doubt that TIFIA can be as strong as it needs to be as long as it’s housed in the Department of Transportation. “Once something is created in DOT or in Treasury or anywhere else, it becomes part of someone’s jurisdiction, someone’s fiefdom,” says Scott Thomasson, an expert in infrastructure finance at the Progressive Policy Institute. “And there are people who want control of it and are going to fight if you try to change it too much.”

But could TIFIA be made into an independent entity? “That’s an institutional political fight you’re going to lose,” says Thomasson, “if you try to take away somebody’s baby.”

In our next post, we’ll investigate the proposal to establish a National Infrastructure Bank, how it compares to TIFIA, and evaluate its pros and cons.

The Obama administration's report emphasizes how much Americans spend on transportation costs and ties the financial burden to car dependence. Graphic: U.S. Treasury/Council of Economic Advisers

When President Obama announced his push for a long-term transportation bill on Monday, he introduced a report by his Council of Economic Advisors and the Treasury Department analyzing the economic impact of infrastructure investment [PDF]. At face value, the numbers in the president’s plan might not look so impressive. It calls for rebuilding 150,000 miles of roads, laying and maintaining 4,000 miles of railways, and the restoration of 150 miles of airport runways.

If you’re hoping for an all-out push for sustainable transportation and livable streets, you may be wondering whether this signifies much of a change to the highway-centric status quo. Look at the underlying message, and it does.

The headline numbers sit on top of a broad strategy that groups including Transportation for America, the Environmental Defense Fund, the Transportation Equity Network, and U.S. PIRG have all applauded. There are still few specifics in the administration’s plan, but here’s a quick cheat sheet to the elements of the report that transportation reformers find so encouraging.

It emphasizes the need to provide American families with a range of transportation options, not just driving.

The report calls attention to the heavy burden that high transportation costs place on the middle class. “The average American family spends more than $8,600 a year on transportation, one-third more than they spend on food,” it states, pointing out that the wealthiest 10 percent spend only 9 percent of their income on transportation, while everyone else shells out 16 percent of our income to move from point A to point B.

The report links high transportation costs to car dependence and makes the case for increasing access to transit and other transportation options, asserting that “[t]his burden is due in large part to the lack of alternatives to expensive and often congested automobile travel. Multi-modal transportation investments are critical to get American families moving again without wasting their time and their money sitting in traffic.”

It makes the case for a “fix-it first” approach to highways — which should help put the brakes on sprawl.

The administration notes that the decrepit state of the nation’s roadways is exerting a toll on Americans’ household budgets through “car maintenance due to potholes and poor road conditions.” And it refers to the work of economist Edward Gramlich, who argued that “the greatest return on investment can be garnered from spending on maintenance of existing highways.” The nation’s highway spending should be targeted at keeping our existing roads in a state of good repair, not the over-expansion of the interstate system.

It advances the idea that America needs a new system of transportation investment that fund projects based on merit, not politics or formulas.

The report continues to make the administration’s case for a national infrastructure bank that would provide a mechanism for investing strategically in infrastructure. Instead of allocating transportation funds with a haphazard, often politically-driven system that ends up favoring highways-to-nowhere, the report notes that “a well designed infrastructure” bank would leverage private capital to “fill the gaps in our infrastructure funding system, which currently disadvantage investments in multi-modal” projects and projects that cross state lines.

It advocates for investments in “healthy, safe and walkable neighborhoods, whether rural, urban or suburban.”

The report cites the U.S. DOT’s six principles of livability and mentions the success of transit-oriented development as a path toward improving neighborhood economies.

The time is now.

The economic downturn represents an opportunity for smart spending right now, according to the report. With construction costs down, low bids have allowed stimulus funds to stretch 10 to 20 percent more than predicted. So if anyone was wondering: this is the perfect time to start building.

The administration is framing its infrastructure push as way to keep America globally competitive, echoing a theme which reform-minded lawmakers like Oregon Representative Earl Blumenauer have been sounding for years: that the U.S. is lagging behind other nations in infrastructure investment, as the two percent of GDP our country spends annually is dwarfed by Europe’s five percent and China’s nine percent.

The release of the report hasn’t changed the timing of the six-year transportation reauthorization, which is expected to move soon after the next Congress convenes in 2011. But administration officials have made clear that they will push for the infrastructure bank — the “$50 billion down payment” often referenced in the press — when Congress comes back after the elections for its lame duck session. Lawmakers will need to address the December 31 expiration of the current extension of SAFETEA-LU, but they will likely just extend it again.

The question then will simply be, how long of an extension will they authorize? A short extension will signal a willingness to take up a real reauthorization soon.

The European Investment Bank provides financing for projects like Spain's high-speed rail system.

As an inspiration for an American Infrastructure Investment Bank, the EIB makes some sense, but there are also big differences. “It has to be understood in the context of European arrangements,” said Alistair Milne, a banking and finance professor at the Cass Business School at City University in London. European institutions, he explained, are not as comfortable with selling bonds for infrastructure projects. “The EIB fills a bit of that gap which may not exist in America.”

The bank is owned by all the member states of the European Union, so its mission is to encourage investments that advance Europe, rather than the interests of any single European state. It offers loans, technical assistance, and venture capital. Last year it raised about 80 billion euros for projects. It has provided loans for windfarms, solar plants, high speed rail, and other sustainable infrastructure projects.

For example, last year the EIB agreed to provide 5 billion euros for Spain’s high speed rail system, including a line that will eventually link Madrid with Lisbon. And in May it lent 150 million euros to improve a Hungarian portion of the European electricity grid. In addition to these large infrastructure projects, it also provides some “small business finance and some lending outside of the European Union,” said Milne.

Originally, the Obama administration had planned to lend money to specific states. But this infrastructure bank model, it is hoped, will better allow private capital to be applied toward projects that cross state lines.

Because it would have the backing of the feds, there would be lower risk for investors, and it would be easier to raise capital. “The EIB can finance at lower cost than commercial banks because there is an implicit backing from the European Systems, but it is supposed to be subject to commercial disciplines,” said Milne.

But critics say the proposal for an American equivalent of the EIB falls short. For example, the administration is calling for capitalization to the tune of $60 billion: compare that to estimates from the American Society of Civil Engineers, which say it’ll take $2.2 trillion to repair America’s crumbling infrastructure. Still, the strategy is to use that Federal start-up investment to leverage another $500 billion in private investment.

UBS Americas is already throwing its support behind the proposal. And that’s the whole idea: to facilitate investment from private banks. However, according to a Reuters report, UBS advised against modeling it as an infrastructure version of Fannie Mae and Freddie Mac, which required $150 billion in taxpayer funds to remain solvent after the housing market collapsed. Others, such as Senator Barbara Boxer of California, argue that the infrastructure bank duplicates some of what can be accomplished through existing programs, such as the Transportation Infrastructure and Finance And Innovation Act (TIFIA).

But supporters like the idea of a funding institution that can, at least in theory, transcend local budgets, political turf wars, and election cycles. Some compare the Infrastructure Bank concept to the Federal Deposit Insurance Corporation and its role in retail banking. For giant electric, water and rail projects that take decades to construct and cross many state boundaries, this may be just the way to leverage the private capital necessary to keep the country’s infrastructure from falling apart.

EPW Committee Chair Barbara Boxer says "not so fast" on a national infrastructure bank.

California Democrat Barbara Boxer, chair of the Senate Committee on Environment and Public Works, expressed skepticism about one of the centerpieces of President Obama’s infrastructure plan today. As she tries to stave off an election challenge from the right, Boxer seems reluctant to embrace the creation of a national infrastructure bank to finance transportation projects.

In a committee hearing today, Boxer instead threw her weight behind an existing program created by the Transportation Infrastructure Finance and Innovation Act (TIFIA):

The infrastructure bank has some support in Congress, others oppose it. So the reason I focus on TIFIA is because it’s already there. So, I think the Administration, I hope, will recognize that if something is already in law it may be easier to go with that model. I’m not saying give up on the infrastructure bank…. But TIFIA is there.

Boxer also appeared to take solace in a statement from Senator James Inhofe, the ranking Republican on the Environment committee and well-known climate change skeptic. (He was at another hearing and couldn’t attend.) In his statement, Inhofe said TIFIA was one of the forms of “innovative financing I’m most excited about,” adding that “this is a successful program that must be dramatically expanded.”

Unlike TIFIA, the infrastructure bank has generated enthusiasm from transportation reformers, who see it as a potential vehicle to spur investment in walkable development.

The star of the hearing was Los Angeles Mayor Antonio Villaraigosa. After his county voted to pay an extra half-cent sales tax to accelerate transit construction, Villaraigosa has become an outspoken advocate of federal financial assistance for local transportation projects, pushing specifically for his plan to accelerate transit investment in L.A. He acknowledged that whenever a jurisdiction asks for federal money for a project, officials will need to answer the question, “If it’s such a good idea, how much of your money are you putting up?”

Villaraigosa aligned with Boxer on the TIFIA vs. infrastructure bank question. When he identified his two-point financing wish-list, it included an expansion and modification of TIFIA and a new category of subsidized infrastructure bonds. He told Boxer, “As you said, while the infrastructure bank may be a good idea, these programs currently exist; they can be expanded in a way to move projects now.”

Boxer also found a willing partner in Roy Kienitz, the Under Secretary for Policy at DOT. She asked him if DOT would work with the committee to “reform TIFIA in such a way that it rewards those counties, cities, states that are willing” to help bear the funding burden themselves. His answer: “In a word, yes, we’re absolutely willing to do that.”

More on Kienitz’s statements in the next post.

“First and foremost is how does all this dovetail with the reauthorization of the multi-year surface transportation law that now expires at the end of this year?” asked moderator Rob Puentes of Brookings’ Metropolitan Policy Program, laying out the unknowns. “The President called for $50 billion. Is that just for an infrastructure bank? Is that the front-loaded part of this multi-year law? Is it both?”

The panel didn’t have answers to every question, but a few themes emerged. First, enthusiasm for a national infrastructure bank is strong among the transportation reform community, which sees it as a vehicle not only to jumpstart investment, but to select projects based on merit and strategic goals like economic competitiveness and reducing carbon emissions.

Assistant Secretary for Transportation Policy Polly Trottenberg. Image: Brookings

The second is that administration officials are still fine-tuning the policies and programs they want to see in the next transportation bill. Polly Trottenberg, assistant secretary for transportation policy at U.S. DOT, said she wants to adjust the way her agency distributes competitive grants. She called the TIGER program too reactive — letting states and regions propose isolated projects and then choosing the best among them. She’d rather have more latitude to help regions start broad new reforms. DOT, she said, is looking to the administration’s education grants program, Race to the Top, for inspiration. They’re tentatively calling the transpo version “Wheel in the Sky” (yes – like the Journey song) but Trottenberg didn’t seem to think that name would stick.

As for that 800-pound gorilla… the question of financing the transportation program is still, well, a question. Rep. Rosa DeLauro (D-CT) suggested that some form of user fees, whether congestion pricing or mileage taxes, would be necessary — and politically feasible if the public sees that the money will be well-spent. “It is the public understanding of this which will help to bring the politicians along as well,” DeLauro said. “We need real public education on this issue of what infrastructure means to you personally.”

To make her point, she looked to the Los Angeles transit funding ballot measure known as Measure R, which voters passed in 2008. “The Mayor of Los Angeles went to the public,” she said. “The people of Los Angeles said yes, they were willing to spend a half-cent more on a sales tax in order to get the benefit of this very visionary transit system.”

Every panelist agreed that the administration is going to have to sell its infrastructure program as a wise investment, no matter what. Said Michael Greenstone of Brookings’ Hamilton Project, “If there’s greater confidence that the money is being spent on the high-payoff projects, I think that would loosen some of the political support for funding these.”

Villaraigosa (r.) with Gov. Arnold Schwarzenegger, another co-chief of Building America's Future. (Photo: Getty)

Rendell and Villaraigosa came to the Capitol for a visit to the House Ways and Means Committee's revenue panel, which faces the challenging task of finding a workable financing mechanism for long-term federal transportation legislation.

Villaraigosa used his high-profile push for federal assistance with his city's "30/10" transit plan, which would expedite construction of 13 rail and rapid bus projects using proceeds from a voter-approved sales tax, to urge lawmakers' support for an NIB.

"We're not only arguing for infrastructure investment on the federal level," he said. "We're saying ... at a time of spiraling deficits, we've got to encourage local governments to put up their own money. We have done that [in L.A.]."

Rendell, who has used his role as co-chairman of the advocacy group Building America's Future to amass support for an NIB, quoted GOP Sen. Jim Inhofe's (OK) support for federal transport spending in a bid to depict infrastructure as a uniquely bipartisan issue.

"The American people are way ahead of us," Rendell told Ways and Means members. "Infrastructure is something they can touch, they can see, they can experience ... This is easier, in terms of public perception, than anybody thinks."

But even as the duo focused on the NIB -- which Rendell and Rep. Rosa DeLauro (D-CT) agreed should be placed outside the U.S. DOT, counter to the White House's proposal -- the specter of the federal gas tax hung over the room. One day after conservatives began using anti-gas tax arguments in a bid to derail the new Senate climate bill, lawmakers prodded Rendell and Villaraigosa to share their views on the subject.

Rendell, specifying that he was "not speaking for" his advocacy group, endorsed a gas tax increase. Villaraigosa followed, confidently: "I unequivocally support an increase in the gas tax ... if America is going to continue to maintain its highways and infrastructure, it's crucial."

Few Democrats on the Ways and Means panel, however, were prepared to echo their colleagues from the state and local levels.

"I think we'd have a hard time passing a gas tax increase in the Democratic delegation [and] a hard time passing it in the Pennsylvania delegation," Rep. Mike Thompson (D-CA) told Rendell after the governor cited surveys that show the majority of the public incorrectly believes the tax is already indexed for inflation. "I just think these polls may not be as telling as we'd like to think."

A middle-ground approach was offered by Rep. Earl Blumenauer (D-OR), who reminded fellow House members that "there is no reason we have to raise a gas tax, this year or next year," to pay for sustained new federal transport investment. "As long as we establish a revenue path going forward within a 10-year budget score, we can leverage it."

Still, in a political climate dominated by incumbents in both parties running scared ahead of the November midterm elections, the prospects for any significant commitment from Washington appeared bleak.

Geithner (l.) said that there is "a very good economic case" for infrastructure spending. (Photo: WaPo)

But the president’s proposed $4 billion fund aimed at attracting private capital to public works projects met with skepticism from a key House Democrat, raising the specter of an internal dispute over crafting a national infrastructure bank.

Spending on the built environment is "good policy for the long run and it’s very good policy for the
short run, because it’s one of the most employment-intensive forms of
government investments that we can make," Geithner told the House Appropriations Committee yesterday during broader testimony on the state of the economy.

"We’ve got to do it, though, in a way that’s fiscally responsible," Geithner added, describing the White House’s 2011 budget request as a step in that direction.

That budget plan seeks $4 billion from Congress for a National Infrastructure Innovation and Finance Fund (I-Fund) that would be used to promote more public-private partnerships on big-ticket transportation projects. The I-Fund is often likened to a National Infrastructure Bank (NIB) but differs from congressional efforts on that topic in one major respect — the White House would house its fund within U.S. DOT rather than make it an independent entity.

Rep. Rosa DeLauro (D-CT), the lead House sponsor of NIB legislation, has previously resisted the lack of independence for the White House I-Fund and reiterated that skepticism yesterday. DeLauro told presidential budget chief Peter Orszag and Council of Economic Advisers Chairman Christina Romer:

With all due respect, $4 billion in the Department of Transportation is not a national
infrastructure development bank under the Treasury Department that has
the ability to borrow in the capital markets and so that we can
leverage private funds. We are not going to get serious investment for
the long-term future of this country until we do what the Europeans
have done in setting up a European investment bank.

Orszag defended the administration’s approach, describing the full-scale European-style approach as "something that we continue to explore" and the I-Fund concept as "a first step in that direction."

But DeLauro, a longtime ally of White House chief of staff Rahm Emanuel and House Speaker Nancy Pelosi, aired specific qualms with the notion of an I-Fund located at U.S. DOT when pressing needs exist in the areas of "water systems, energy, environment, broadband and telecommunications." She is not alone in stressing the value of an NIB separate from the federal government; pro-transport reform thinkers have raised similar concerns.

Gov. Ed Rendell (D-PA) (Photo: Post-Gazette)

Rendell, who co-chairs the infrastructure advocacy group Building America's Future with New York City Mayor Michael Bloomberg (I) and California Gov. Arnold Schwarzenegger (R), has proposed seeding a new NIB using part of a short-term loan from the federal Treasury to the nation's highway trust fund -- the meat of the "front-loading" concept.

"The original stimulus bill had decent infrastructure spending," Rendell said in an interview. "It probably should have had more."

The Pennsylvanian, who is bidding for his state to become only the third in America to add tolls to an existing interstate highway, described a "front-loaded" transport spending bill as a means to create jobs quickly while giving Congress time to reach an agreement on long-term infrastructure reform after the 2010 midterms.

Approving a loan from the federal government's general fund to the highway trust fund would ensure that "the tough political decisions involved in" debating a new six-year transportation bill don't slow the pace of job creation, Rendell said.

His pitch would involve postponing the "guts of reform" -- for example, progress on national performance targets for transport and more flexibility for states to spend highway money on transit -- for 12 months, at which point lawmakers would be called upon to resolve the nation's transportation funding gap in order to pass a new bill that repays the Treasury's loan.

The design of a new NIB, which the Obama administration strongly supports, is a key issue for Rendell. The bill introduced in June by House transportation committee chairman Jim Oberstar (D-MN) would make an NIB part of the U.S. DOT and set up an Office of Public Benefit within the Federal Highway Administration to monitor the terms of any public-private partnerships.

Rendell expressed concerns that such a setup would limit the NIB's independence and subject it to excessive political scrutiny. His preferred method would be setting up an independent board to manage the NIB, as envisioned in legislation offered by Connecticut Rep. Rosa DeLauro (D) and Sen. Chris Dodd (D).

Rendell said he has talked up his plan in recent days with Treasury Secretary Tim Geithner and President Obama, who stopped in Allentown, Pennsylvania, on Friday for a speech on the struggling economy. The governor described Obama's eyes widening as he heard statistics on the manufacturing growth sparked by transportation stimulus spending in Pennsylvania: 4,300 more tons of steel bought in the first 10 months of this year than in all of 2008, a 43 percent increase; a similar increase in concrete production, with 95 percent of it coming from Pennsylvania factories.

Rendell told Streetsblog Capitol Hill that he would support efforts to increase the transportation accountability language in the new jobs bill, including sending some aid directly to urban metropolitan planning organizations (MPOs) and setting stronger "use it or lose it" guidelines to cut through possible delays at state DOTs.

But the governor's ideal jobs bill would involve using "ready-to-go" project lists generated by state DOTs, which environmental advocates tend to consider to be little more than "vague 'wish lists'," as John Krieger of the U.S. Public Interest Research Groups (PIRG) put it today.

"Is any of this perfect? No," Rendell acknowledged, vowing to keep "banging the drum" for long-term infrastructure investments after the current jobs bill is finished. "If I were the king of the world," he said earlier in the interview, "we would go on a 10-year infrastructure repair push, we'd build out the passenger rail system."

For now, however, Rendell is focused on amassing support for a "front-loaded" transportation bill that emphasizes economic recovery. "My message to fellow reformers is, we are with you," he said. "But understand that there are priorities, and right now No. 1 is to get Americans back to work."

Rep. Rosa DeLauro (D-CT) (Photo: America2050 via Flickr)

[T]here was a development in Congress last week that should have been seen as significant but could not elbow its way into the media precincts obsessed with Rush Limbaugh, Dick Cheney and swine flu.

Representative Rosa DeLauro, a Connecticut Democrat, introduced a bill to establish a national infrastructure development bank that would use public and private capital to fund projects of regional and national significance. These are projects that are badly needed and would be a boon to employment.

DeLauro's plan would give the final say over which transportation, energy and telecom projects receive assistance from the development bank to an independent board of directors. Separate risk management and audit committees would keep an eye on the bank's balance sheet, which would get a $5 billion annual infusion of taxpayer money to help attract more capital from private investors.

The development bank has won backing from a collection of strange political bedfellows, including the U.S. Chamber of Commerce, the AFL-CIO and Felix Rohatyn, the investment-banking magnate who helped New York City avert insolvency in the 1970s.

Still, the risk-management aspect of the plan appears particularly crucial. Why? The development bank would be able to "purchase and sell infrastructure-related loans and securities on the global capital market," according to DeLauro's summary. That phrase sounds innocuous enough, but several communities that issued infrastructure-related bonds to pay for recent improvement projects have found themselves facing bankruptcy after making risky bets to help keep pace with fluctuating interest rates.

With the municipal bond market on shaky ground right now, it's easy to envision the infrastructure bank taking -- to use a euphemism -- creative measures on the market to help convince private investors to participate. It's important, therefore, for the bank to ensure states and localities aren't getting talked into overly complex financing arrangements.

Does the infrastructure bank proposal have a real future in Congress? Its current 27 co-sponsors in the House are all Democrats, but former GOP senator Chuck Hagel signed onto a similar plan in 2007, and its appeal is undeniably bipartisan. Transportation Secretary Ray LaHood also has spoken approvingly of the bank, meaning that it has a strong chance of appearing in the federal transportation bill slated for introduction this summer.

So Herbert could soon get his wish for more media coverage of DeLauro's proposal ... if the House pushes forward to a final vote on its transportation bill.