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September 21, 2010 - ASCE Statement - Infrastucture Bank

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Statement of
The American Society of Civil Engineers
On Investing in Infrastructure: Creating Jobs and
Growing the Economy
United States Senate
Committee on Banking, Housing, and Urban Affairs

September 21, 2010

The American Society of Civil Engineers (ASCE)1 would like to thank the Senate Banking, Housing, and Urban Affairs Committee for holding a hearing today on proposals to create a National Infrastructure Bank. The Society is pleased to present to the Committee our views on investing in the nation’s infrastructure. ASCE supports the creation and operation of a National Infrastructure Bank.

ASCE’s 2009 Report Card for America’s Infrastructure graded the nation’s infrastructure a “D” based on 15 categories (the same overall grade as ASCE’s 2005 Report Card), and stated that the nation needs to invest approximately $2.2 trillion over the next five years to maintain the national infrastructure in a state of good repair. Even with the current and planned investments from federal, state and local governments in the next five years, the “gap” between the overall need and actual spending will exceed $1 trillion in 2014. If the nation continues to under invest in infrastructure and ignores this backlog until systems fail, we will incur even greater costs.

The total of all federal spending for infrastructure as a share of all federal spending has steadily declined over the past 30 years, according to the Congressional Budget Office. The results of years of under investment can be seen in traffic and airport congestion, unsafe bridges and dams, deteriorating roads, and aging drinking water and wastewater infrastructure. ASCE is concerned with this accelerated deterioration of America’s infrastructure, with the general reduction in investment for the preservation and enhancement of our quality of life, and with the threatened decline of U.S. competitiveness in the global marketplace.

As Congress is in the process of developing a comprehensive multi-year surface transportation authorization, and as President Obama rolls out the administration’s plan to invest $50 billion on the nation’s infrastructure, our roads, bridges, dams, and water systems continue to remain in a state of decline. Aging and overburdened infrastructure threatens the economy and quality of life for all Americans. However, while the problem may appear staggering, innovative financing such as a National Infrastructure Bank, could provide a fiscally prudent means to begin repairing our nation’s deteriorating infrastructure.

Innovative financing techniques can greatly accelerate infrastructure development and can have a powerful economic stimulus effect. Currently, the burden of infrastructure funding is shifting from federal to state and local resources to fund the growing need for improvements. Innovative programs in SAFETEA-LU, such as the establishment of the State Infrastructure Bank program, have been a good start, but more needs to be done to expand their scope, and new programs or approaches must be introduced. The nation must develop and authorize innovative financing programs that not only make resources readily available, but also encourage the most effective and efficient use of those resources. Federal investment must be used to complement, encourage, and leverage investment from the state and local government levels as well as from the private sector. In addition, users of infrastructure must be willing to pay the appropriate price for their use. 

ASCE supports innovative financing programs for transportation projects and believes the federal government should make every effort to develop new programs or flexibility in innovative procurement approaches. President Obama’s newly released infrastructure investment plan proposes the permanent creation of a national infrastructure bank, which could leverage private capital for projects of national and regional significance. This sort of proactive thinking toward infrastructure will allow states to come together for regional projects such as high speed rail and can move the nation’s infrastructure forward. ASCE applauds President Obama’s leadership on the issue and believes that the administration’s investment plan has great potential to be a part of the solution. In particular, the President’s call to establish a national infrastructure bank is a concept ASCE long has supported.

The National Infrastructure Bank Act of 2009 would begin to address a problem that is rapidly approaching crisis levels. Briefly the legislation would establish a National Infrastructure Bank, which would be an independent body designed to evaluate and finance infrastructure projects of substantial regional and national significance. Eligible projects would range from mass transit systems, roads, bridges, drinking-water systems, and sewage treatment systems. The bill would begin the process of meeting the nation’s broad infrastructure needs, while selecting those projects which will be most beneficial.

ASCE supports the creation and operation of a National Infrastructure Bank, which should leverage public funds with private dollars to invest in transportation, environment, energy, and telecommunications projects of significance. Each infrastructure system should have a dedicated source of revenue that is independent of the federal government’s annual appropriations process. This ensures that the owners and managers of publicly owned treatment works and other systems will be able to finance improvements to their physical infrastructure in a systematic, long-term program that avoids the volatile atmosphere surrounding yearly spending authorizations.

However, an infrastructure bank should adhere to certain key requirements.

• The bank should be capitalized initially by general fund appropriations and should be selfsustaining after the initial start-up period.
• The bank should develop financing packages for selected projects which could include direct subsidies, direct loan guarantees, long-term tax-credit general purpose bonds, and long-term taxcredit infrastructure project specific bonds.
• The bank should not replace existing infrastructure funding and financing mechanisms, but act as a supplement to leverage federal, state, local, and private infrastructure financing.

Additionally, ASCE encourages an infrastructure bank where public works projects must meet the continuing needs to provide natural resources, industrial products, energy, food, transportation, shelter, and effective waste management, while at the same time protecting and improving environmental quality. Sustainability and resiliency must be an integral part of improving the nation’s infrastructure. Today’s transportation systems, water treatment systems, and flood control systems must be able to withstand both current and future challenges. Infrastructure systems must be designed to protect the natural environment and withstand both natural and man-made hazards, using sustainable practices, to ensure that future generations can use and enjoy what we build today.

Furthermore, a National Infrastructure Bank should allow states to make the ultimate decision on which projects receive financing from the federal bank based on established priorities. The bank however, should retain sufficient oversight to guarantee an equitable distribution of funds and to ensure that all eligible projects are able to compete for financing on a relatively even footing.

Without long-term financial assurance, the ability of the federal, state, and local governments to do effective infrastructure investment planning is severely constrained. Therefore, in addition to a National Infrastructure Bank ASCE also supports:

• User fees (such as a motor fuel sales tax) indexed to the Consumer Price Index.
• Appropriations from general treasury funds, issuance of revenue bonds, and tax-exempt financing at state and local levels.
• Trust funds or alternative reliable funding sources established at the local, state, and regional levels, including use of sales tax, impact fees, vehicle registration fees, toll revenues, and mileage based user fees to be developed to augment allocations from federal trust funds, general treasuries funds, and bonds.
• Public-private partnerships, state infrastructure banks, bonding and other innovative financing mechanisms as appropriate for the leveraging of available transportation program dollars, but not in excess of, or as a means to supplant user fee increases.
• The use of budgetary firewalls to eliminate the diversion of user revenues for non-infrastructure purposes.

ASCE is concerned with the accelerated deterioration of America’s infrastructure, with the general reduction in investment for the preservation and enhancement of our quality of life, and with the United States’ continued competitiveness in the global marketplace. As stewards of the nation’s infrastructure, civil engineers must be a voice in the national debate on infrastructure. ASCE has and will continue to support innovative financing programs that not only make resources readily available, but also encourage the most effective and efficient use of those resources. However, financing alternatives such as a National Infrastructure Bank, cannot replace a public commitment to funding. Financing by any technique does not supplant the need for adequate user fees or other funding sources to eventually pay for projects.