How Would a National Infrastructure Bank Work? An Interview with PA Gov. Ed Rendell

Pennsylvania Governor Ed Rendell is a good friend to infrastructure. As the co-chair of the Building America’s Future coalition, he’s been a staunch advocate for increased infrastructure spending as well as the creation of a National Infrastructure Bank (NIB), a public-private partnership agency tasked with evaluating and financing the nation’s largest projects. The NIB has been strongly supported by the White House, as well as many political groups and private organizations. Like other federal banks, it would start with a modest amount of federal money to provide secure credit at low rates, and leverage the private funds needed for long-term investment.

The governor kindly agreed to answer our questions about the bank, and his plans for it.

Infrastructurist: First off, any reactions to the president’s call for increased spending on long-term infrastructure?

Rendell: We think its great — we’ve lobbied hard on this issue, and I spoke with the White House on Friday to make sure infrastructure was a key component to the jobs bill, and now we see that it is one of the three key areas the president discussed. We have the capacity to do $100 billion worth of projects, if you count water and sewer and transportation broadband.

Also, we’re very pleased that the president essentially endorsed the NIB. He offered support for merit-based infrastructure investment that leverages federal dollars, allowing projects to be selected on merit. The NIB is the only vehicle that could do all those things and is merit-based. So we’re very excited about that. We think this is a great opportunity to get increased infrastructure spending for major projects.

I: So how would the NIB be structured? Who would be charged with oversight?

R: We think it can’t be part of the Department of Transportation [as was originally suggested by a June bill introduced by the House transportation committee chairman, calling for creation of the NIB as part of the DOT, governed and monitored by an office in the Federal Highway Administration] because it has to include waste water, levies, school construction, and more. So if it is placed in any government agency, it would be better placed  in the treasury, though it could also be a standalone organization with general oversight by Congress and the administration, or by an independent board — and we would approve either of those oversight models. It’s gotta be more than just transportation.

I: What about the argument that a NIB would suffer the same fate as Fannie Mae and Freddie Mac,  with private lenders funding only projects they think will make money? Will there be safeguards to make sure this doesn’t happen?

R: There can be safeguards in the legislation creating the bank, and in the type of people appointed to the bank. I would make sure anyone appointed to the bank had substantial experience in infrastructure development, such as state secretaries, or DOT secretaries, people who have financed infrastructure projects in the past.

I think that by the nature of the people in the bank you can control a lot of this problem, as well as by the regulations you put in place and the legislation you pass. But the simple fact is that when there are private dollars involved, there has to be a return on the investment. The only reason to put your money in is because there is a return on the investment. We understand that. I think Wall Street and hedge funds are very anxious to invest in infrastructure projects, but they want a guaranteed safe return — that has to come from loan guarantees and credit, etc.

I: The NIB appears to have widespread support among the private sector and interest groups, but there’s still some skepticism in Congress. Why? Are lawmakers wary of more government spending?

R: There is skepticism among the smaller states because they don’t believe they’ll get their fair share, since the bank by nature would concentrate on multi-state projects like high speed rail. But I think there’s a misunderstanding causing this. We’re not saying ALL transportation funding should go through NIB — rather, we’re saying the NIB should be independently funded with some government grant funding capacity, with public and private working together. And with projects like water and sewer, these could easily benefit all states, small and large — South Dakota as much as California.

I: What’s your view on long-term funding for high speed rail? Would a NIB ensure that HSR projects are not just begun, but also completed?

R: The Obama administration deserves credit for designating funds in the stimulus bill for high speed rail.  But none of these projects really deserve the title “high-speed rail” — rather, they are all mid-speed, or up to 120 miles an hour. But high speed in the modern world is more like 225 miles per hour. High speed rail is a good example of why we need a NIB. Right now TIGER grants can accept HSR applications, but once the stimulus goes away, there’s no vehicle for many states to apply for funding that’s wide in scope. If you’re building HSR in Ohio, you might do conventional track with high speed trains and electrification — but then you couldn’t run a high speed train through Pennsylvania out of Ohio, since PA isn’t using the same track. So there has to be some place for national management and funding of these projects.

Overall, HSR is a 10-year investment of somewhere between $700 billion and $1.3 trillion. States should share in some of that cost, but its a significant investment, there’s no ifs ands or buts about that. But other countries have done it. Pennsylvanians who go to Europe come back amazed at how advanced their rail system is, while we have nothing like it.

I: How should the $8 billion in stimulus money designated for high speed rail be used?

R: That $8 billion in funds is being used to increase speed on regional rail lines that have multi-state capacity. Take Pennsylvania. Amrak collaborated to put $74 million up and used $150 million to do work on our tracks to increase the speed of Harrisburg line. We cut the travel time down and increased ridership from 898,ooo people to around 1.2 million, just by lowering the speed 30 minutes. But you still couldn’t call what we have “high speed rail.”

I: Is it a better idea to adapt our current rail system to high speeds? Or do we need to start from scratch with HSR?

R: Adapting what we have is very very hard. The Acela is the closest thing we have right now to a high speed train in this country. It can reach speeds of up to 150 an hour, but only on a stretch of about 20 miles between New York and Washington are the tracks straight enough to reach this speed. If we built new straight tracks, we could do New York to D.C. in 1 hour and 35 minutes. Philadelphia to New York would be a 36-minute trip if we had straight tracks. This would let us end the Delta and U.S. Air shuttle. And if  you could get rid of the shuttle, that would get rid of the cause of so many air traffic delays. Just imagine it!

Image via Creative Commons.