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Infrastructure Banks and Surface Transportation 1 (July 2012)

handle is hein.congrec/cbo10856 and id is 1 raw text is: JULY 2012 Infrastructure Banks and Surface Transportation From 2008 to 2011, total government spending on surface transportation infrastructure-highways, mass transit, and passenger rail-surpassed $200 billion a year. The federal government spent more than $50 billion a year-mostly in the form of grants to state and local enti- ties, which then determined what projects to fund-and state and local governments spent more than $150 billion a year of their own funds.' The private sector also invested in such infrastructure.2 If future government spending on surface transportation infrastructure matched those recent amounts, the condi- tion of the highway and transit systems would probably deteriorate. According to the Federal Highway Adminis- tration (FHWA), maintaining the current attributes of the highway and transit system would require at least $13 billion per year more than has been spent in recent years. Moreover, if the country undertook all of the high- way projects for which the FHWA's estimate of benefits exceeds its estimate of costs, investment in the highway system would be about $83 billion per year more than has been spent in recent years. However, gaining the greatest net benefit from any increase in infrastructure investment would depend critically on whether that investment went to the most advantageous projects or not. 1. The figure for spending by state and local governments includes spending on capital expenses and operations and maintenance for roads, transit, and rail systems. Historically, about 60 percent of state and local spending on surface transportation infrastructure has been for operations and maintenance. The Congressional Budget Office estimated state and local spending from 2008 through 2011 by combining data for 2007 (the last year for which comprehensive data are available) with growth rates obtained from more recent but less complete data. 2. In 2011, the companies that own U.S. railroads spent about $12 billion on capital expenditures. To increase the funding available for infrastructure projects and to improve the selection process for those projects, some analysts and policymakers have suggested the creation of an infrastructure bank. In this report, the Congressional Budget Office (CBO) analyzes an illustrative federal infrastructure bank-one that is repre- sentative of those in many recent proposals.3 That entity, which would be federally funded and controlled, would select new, locally proposed construction projects for funding on the basis of a number of criteria, including their costs and benefits, and would provide financing for the projects through loans and loan guarantees. To repay the loans, projects financed through the infrastructure bank would have to include tolls, taxes, or other dedi- cated revenue streams. Financial assistance could be made to any consortium of partners with an eligible project. For example, a group of state and local entities could apply, as could a group of private, nongovernmental part- ners. The bank could provide the subsidy amounts needed to compensate private-sector investors for benefits that accrue to the general public and the economy at large.4 The illustrative infrastructure bank in this analysis would focus on surface transportation projects. It would not provide financing for water or energy projects, even though some recent proposals have included them. 3. Proposals include S. 652, the Building and Upgrading Infrastruc- ture for Long-Term Development Act, as well as proposals by the Center for American Progress, Building America's Future, and the U.S. Chamber of Commerce. The President proposed a federal infrastructure bank in his budget for 2013. 4. For additional information on issues surrounding private financ- ing of infrastructure projects, see the statement of Joseph Kile, Assistant Director for Microeconomic Studies, Congressional Budget Office, before the Senate Committee on Finance, Te Hig-hu.ay lit Jhnd nd l-aingofir Highways (May 17, 2011).

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