usdot "talking freight" webinar—institutional arrangements

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)

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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.

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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.

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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.

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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).

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-- 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.

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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

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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?

– General Fund?

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What organizational form should the SPE take?

Special Purpose Entity’s Relationshipto the Federal Government

GovernmentalOwned and controlled by

the public sector

PrivateOwned and controlled by

the private sector

Government Dept./Agency

Government Corporation

GovernmentSponsored Enterprise

Private Non-Profit

Corporation

Dept. of Transportation

Rural Telephone

Bank, FDIC .

Fannie MaeFreddie Mac

Transportation Finance Corp.

(proposed)

Less Federal

Funded by U.S. govt. On-budget

Governing Board Fully or partially funded by U.S. govt. May be on- or off-budget.

Shareholder-owned For-profit Implied federal backing

Membership organization Not for profit

More Federal

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

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What types of assistance should be offered?

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Formula Grants

NATIONAL FREIGHT INFRASTRUCTURE BANK

Role of National Freight Infrastructure Bank

Existing Fuel& Vehicle Fees

Increments toExisting FreightRelated Fees

Highway Trust Fund (HTF)

DISCRETIONARYGRANTS

FEDERAL CREDIT(TIFIA & RRIF)

TAX CREDIT BONDS& PAB VOLUME

State/LocalFees

UserCharges

TransportationFinance

CorporationTax Credit BondNational Issuer

HighwayAccount

TransitAccount

Freight AccountState Freight Program

FHWA

Federally CharteredPrivate Non-Profit

(Wyden-Thune)

StatesTransit

Agencies

FTA

Freight InfrastructureTrust Fund (FITF)

Projects of Nationaland Regional Significance

New DedicatedFreight-Related

Fees

Increments toExisting FreightRelated Fees

Public or Private Projects(including freight rail)

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.

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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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