USDOT “Talking Freight” Webinar—Institutional Arrangements Establishing a National Freight Infrastructure Bank: Policy I

1. USDOT “Talking Freight” Webinar—Institutional Arrangements Establishing a National Freight Infrastructure Bank: Policy Issues & Program Design David Seltzer September 16, 2009

2. 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)

3. 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.

4. 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.

5. 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 appropriatetimeframe for federal assistance? • Near-term stimulus. • Longer-term shift in federal funding role.

6. 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).

7. -- 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.

8. 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

9. 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?

10. What organizational form should the SPE take? 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 Governing Board n Shareholder-owned n Membership n Funded by U.S. n Fully or partially n For-profit n organization govt. funded by U.S. govt. Implied federal n Not for profit n On-budget May be on- or n n backing off-budget. Rural Telephone Transportation Dept. of Fannie Mae Bank, Finance Corp. Transportation Freddie Mac FDIC . (proposed) Special Purpose Entity’s Relationship to the Federal Government More Federal Less Federal

11. 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

12. What types of assistance should be offered?

13. 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.

14. 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?