The Urban land Institute’s got a smart idea about how to get more bang out of federal transportation bucks: ‘Channeling Funding Through “the Three Bs”’ of Base, Bonus, and Bank.
1) Use Base Formula Funds to Maintain the SystemBase formula funds should be the primary funding source for system maintenance and preservation. Accounting for approximately 75 percent of total federal transportation funding, the base formula funds should be distributed to states, metropolitan regions, and localities on a mode-neutral basis (that is, all eligible projects should receive the same federal match)…. The formula used to distribute the funds should be shifted away from the current metrics used in the federal funding formulas, which are based on population and vehicle miles traveled. Instead, they should be modified to reward reduced driving per capita, promote the effective use of transit, and achieve other economic and environmental goals.
2) Provide a Bonus Pool to Create Incentives for Sustainable Investment
A new bonus funds program should be created to turn policy goals into workable projects on the ground. Accounting for a significant portion of total funding for new transportation—25 percent—the program should distribute grant funds on a competitive basis. Major new capacity additions for road and transit should flow through this program. The bonus pool should also support planning, regulatory, and land development innovations that advance federal goals.
3) Create an Independent American Infrastructure Bank to Invest in Infrastructure
A new American Infrastructure Bank (AIB) should be created as an independent public institution to fund infrastructure projects—for transport, water, energy, and more—in pursuit of the nation’s economic, environmental, and social goals. Structured as a public, independent nonprofit financial institution, the AIB’s broad goals and lending criteria should be established by its mandate and board of governors, with lending decisions made by professional bank staff using sound financial underwriting standards. By defining project criteria and creati into report ng loan packages with a variety of length and interest rate terms, the bank will help foster an investmentoriented approach to U.S. infrastructure.
Lending to public or private entities for investments in U.S. infrastructure, the bank will be an important source of long-term capital for projects whose returns are realized over many years, such as airports, ports, high-speed rail, major bridges, and new roads and highways. The AIB could be funded and capitalized with a stream of revenue from fuel taxes, general revenue funds, bonds, or some combination of these and other sources. The AIB should prioritize projects that have substantial commitments from other parties, including the private sector, and are leveraged by user revenues.
The bank will also be a vehicle for leveraging the investment of private capital into our nation’s public infrastructure—a potentially significant source of capital for infrastructure that currently has few good channels.
This is exactly the kind of approach to shaping the economy we ought to be using more often. It’s a nice mix of nudging folks in the right direction, priming the pump, and nudging/reshaping Finance in a more sane direction.
