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USDOT “Talking Freight” Webinar—Institutional Arrangements
Establishing a National Freight Infrastructure Bank:
Policy Issues & Program Design
David Seltzer
September 16, 2009
1629 Locust Street, Suite 100, Philadelphia, PA 19103 (Tel: 215-546-6801, Fax: 215-546-6803)
Background
• Outgrowth of I-95 Corridor Coalition study (December, 2008)
– Evaluate the potential benefits of creating a new special purpose
entity (SPE) to help advance major freight projects.
• Recent proposals to create a national-level SPE to help finance
infrastructure, including:
– National Infrastructure Bank Act of 2007 (S. 1926, “Dodd-Hagel”)
– National Infrastructure Development Act of 2009 (H.R. 2521
“DeLauro”)
– Build America Bonds Act of 2009 (S. 2021, “Wyden-Thune”)
– President Obama’s FY2010 Budget (National Infrastructure Bank)
2
How to categorize freight projects?
• HUBS: Terminals where goods are transferred--
Intermodal or Intramodal.
• CORRIDORS: Longer Surface routes linking
Hubs.
• CONNECTORS: “Last Mile” surface links
between Corridors and Hubs, generally in
metropolitan areas.
3
Why has public funding for Freight been limited?
• Much of Freight Infrastructure is privately-owned.
• Intermodal Uses straddle existing Federal programs.
• Projects often span political jurisdictions, complicating
institutional structure.
• Public “spillover” nature of benefits hard to measure—or
monetize.
As a result, the Constituency for Freight Projects is
Narrower than for Public Works.
4
What problems are we trying to fix?
• Unavailable or expensive financing for projects?
– Overcome “Market failure” b y providing loans and other
financing subsidies.
• Insufficient funding for projects?
– Provide a deeper subsidy to reduce revenue requirements
for major projects with public benefits.
• What is the appropriate timeframe for federal
assistance?
– Near-term stimulus.
– Longer-term shift in federal funding role.
5
Why create a new Federal program for freight--
– Assist projects whose scale and complexity exceed
state/local capacity.
– Overcome gaps in federal-aid eligibility.
– Provide “One-stop Shopping” for project sponsors.
– Target projects with major economic benefits regionally
& nationwide.
– Enhance project selection at the federal level (focus on
outcomes, not modes).
6
-- and why create a new Special Purpose Entity (SPE)?
• Autonomy & Expertise may lead to improved Project
Selection.
• Align the singular mission of SPE with a dedicated
revenue stream to accelerate investment.
• Offer “One-Stop Shopping” with multiple tools to project
sponsors.
• Take pressure off of states’ formula-funded programs by
only handling largest projects.
7
Why not instead authorize states to create
regional entities?
– Projects of truly national significance should have national
funding responsibility.
– National scope brings economies of scale and avoids dilution of
effort at regional level (SIBs).
– Allows access to direct federal credit support:
• Lower-cost source of financing.
• Greater budgetary efficiency through fractional “scoring.”
-- Federal Tax Subsidies
8
How big a program and how should it be funded?
• AASHTO Freight Authorization Policy Statement :
– $42 billion additional funding for Goods Movement Infrastructure over 6
years (in addition to existing freight-related funding):
• $21 billion in Formula Funding to States
• $21 billion in Discretionary Allocations (new $3.5 billion/yr.
Program)
Funded by:
– Increases in existing freight-related sources such as:
• Diesel Fuel Tax
• Heavy Vehicle Use Tax
– New sources of dedicated freight-related fees such as:
• Customs Duties
• Container Tax
• Surface Freight Waybill
• Other?
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– General Fund?
What organizational form should the SPE take?
Special Purpose Entity’s Relationship
to the Federal Government
Governmental Private
Owned and controlled by Owned and controlled by
the public sector the private sector
Government Private
Government Government
Sponsored Non-Profit
Dept./Agency Corporation
Enterprise Corporation
n Governing Board
n Shareholder-owned n Membership
n Funded by U.S. n Fully or partially
n For-profit organization
govt. funded by U.S. govt.
n Implied federal n Not for profit
n On-budget n May be on- or
backing
off-budget.
Rural
Telephone Transportation
Dept. of Fannie Mae
Bank, Finance Corp.
Transportation Freddie Mac
FDIC
. (proposed)
More Federal Less Federal
10
Why does the SPE’s organizational status
matter to Federal policymakers?
• Budgetary Scoring Treatment of NFIB’s Borrowing and
Spending
• Treasury Concerns about:
– Cost-Effectiveness of Capital Raising Process
– Implied Federal Liability if SPE Issues Public Debt
– Competition with U.S. Treasury borrowing/Administrative
burden
11
What types of assistance should be offered?
Role of National Freight Infrastructure Bank
Increments to Increments to New Dedicated
Existing Fuel Existing Freight Existing Freight Freight-Related
& Vehicle Fees Related Fees Related Fees Fees
Highway Trust Fund (HTF) Freight Infrastructure
Transit Highway Freight Account Trust Fund (FITF)
Account Account State Freight Program Projects of National
and Regional Significance
FTA FHWA NATIONAL FREIGHT INFRASTRUCTURE BANK
Formula Grants DISCRETIONARY TAX CREDIT BONDS
FEDERAL CREDIT
Transit GRANTS (TIFIA & RRIF) & PAB VOLUME
Agencies
States
Transportation
Public or Private Projects
Finance
(including freight rail)
Corporation
Tax Credit Bond
National Issuer
Federally Chartered
State/Local User Private Non-Profit
Fees Charges (Wyden-Thune)
12
Potential Portfolio of Assistance
• The National Freight Infrastructure Bank (NFIB)
– Receives $3.5 billion/year [$21 billion total] of revenues:
• ~$3.0 billion for Grants
• ~$0.5 billion for Credit ~$5 billion of loans .
• NFIB selects projects > $[250] million for:
– New Discretionary Grant program for projects with public
benefits.
– Expanded Federal Credit Program
– Allocates Volume Cap under new $[25] billion Tax Credit Bond
program and expanded $[30] billion Private Activity Bond
program.
---------------------------------------------------
• Authorize States to establish the Transportation Finance Corporation
– Federally-chartered private non-profit corporation created to serve
as nationwide non-federal issuing conduit for Tax Credit Bonds.
13
Other Policy Design Issues TBD
• Multi-purpose Bank to assist Freight, Intercity Passenger Rail
and other major Surface Transportation Projects?
• Consolidate existing Federal credit programs (TIFIA and RRIF)?
• Part of Reauthorization or part of new Stimulus?
• Receive General Fund contributions?
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