If future government spending on surface transportation infrastructure matched recent amounts, the condition of the highway and transit systems would probably deteriorate. 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 a report released today, CBO analyzes an illustrative federal infrastructure bank—one that is representative of those in many recent proposals.
As envisioned, an infrastructure bank would be federally funded and controlled and would select and finance surface transportation projects nationwide that would provide significant national or regional economic benefits. Project sponsors (a combination of states, local governments, and private entities) would apply to the bank for loans or loan guarantees to pay for their proposed project. To repay the loans, projects financed through the infrastructure bank would have to include tolls, taxes, or other dedicated revenue streams.
In principle, such a bank has advantages. It could identify and support large-scale projects that have substantial economic benefits for which users could be charged directly so that only a little federal assistance would be needed to cover the expected costs. In addition, a federal infrastructure bank could centralize—and, in some people’s view, depoliticize—decision making about which projects receive federal funds by creating a competitive application and award process for those funds. It could also overcome certain barriers to the financing of multijurisdictional or multimodal projects.
But the number of projects that would be good candidates to receive a loan from a federal infrastructure bank as envisioned in recent proposals is probably limited, at least in the short term. Most current projects do not involve tolls or other mechanisms to collect funds directly from project users or other beneficiaries. Further, the support that would be offered by most proposed infrastructure banks would not differ substantially from the loans and loan guarantees already offered through an existing program run by the Department of Transportation.
This report was prepared by Sarah Puro of CBO’s Budget Analysis Division.