When the Rebuild America Jobs Act failed a cloture vote in the Senate on November 3, 2011, the creation of an Infrastructure Financing Authority (Infrastructure Bank) went with it. Could this "bank," which has bipartisan support as well as the support of the Chamber of Commerce and AFL-CIO be the tool to spur job creation we’ve been looking for?
The heart of the plan is the creation of the American Infrastructure Financing Authority (AIFA). The AIFA will be a wholly owned government corporation. The members of the governing board will be from the private sector with expertise in public financial management, the financing, development, or operation of infrastructure projects, and/or analyzing the economic benefits of infrastructure investment. The AIFA will have a business plan and investment prospectus with the overall portfolio rated as investment grade after its first five years of operation.
The AIFA will provide direct loans or loan guarantees to infrastructure projects in the areas of transportation, water, and energy. Approved projects must contribute to regional or national economic growth, be beneficial to taxpayers, demonstrate a clear and significant public benefit, lead to job creation, and mitigate environmental concerns. Minimum total project cost for a project to be considered is $100 million, $25 million for a rural project. Priority will be given to projects based on a public-private partnership.
The maximum annual federal funding available would be $10 billion the first two years, $20 billion during years three to nine, and $50 billion 10 years and beyond. These amounts also are the maximum total of direct loans and loan guarantees that may be issued in a given fiscal year. Any individual loan or loan guarantee may not exceed 50% of the total project cost and must be repaid in full no later than 35 years after completion of the project.
Before issuing a loan or loan guarantee, AIFA will review the overall financing of the project, the credit worthiness of the project sponsors and co-financiers, the financial assumptions and projections used, and whether there is sufficient State or municipal political support. If some of these elements are not satisfactorily met, whether or not AIFA assistance would improve the potential for criteria to be met will also be evaluated.
The U.S. is ranked 23in quality of overall infrastructure according to the World Economic Forum’s Global Competitiveness Report and seventh in its ability to move goods from manufacturers to consumers according to the World Bank’s 2010 Logistic Performance Index.
Additionally, in its 2009 infrastructure report card, the American Society of Civil Engineers, gave the condition of U.S. infrastructure an average grade of “D” and estimated it would take $2.2 trillion over the next 5 years to bring American infrastructure up to standard.
It is estimated that private infrastructure investments could create 1.9 million jobs. I believe the program died because the bill included an additional $31 billion federal stimulus and a 0.7% income tax surcharge to modified adjusted gross income of over $1 million. If reintroduced without the extra baggage, the AIFA could be the job creation engine that we need.