U.S. infrastructure bank no quick fix

WASHINGTON (Reuters) - President Barack Obama will likely explain his vision for a national infrastructure bank in the detailed budget he plans to release on Thursday, but analysts warn the bank will not be a comprehensive or quick fix for the nation's road and highway problems.

In the proposed budget he released in February, Obama set aside $5 billion in fiscal year 2010 for an entity to "provide direct federal investment" and "foster coordination through state, municipal and private co-investment" in building and repairing the country's physical capital.

"To think that the National Infrastructure Bank is the solution, or anywhere close to the solution, I think is extremely over-optimistic," Robert Atkinson, chair of the National Surface Transportation Infrastructure Financing Commission, told the Reuters Infrastructure Summit on Wednesday.

In the February proposed budget, Obama presented an overview of his spending plans, including calling for the bank to receive $25.2 billion through 2019, but did not provide specifics. Budget Director Peter Orszag has said his office will give the public "full programmatic detail" on Thursday.

Based on what Atkinson's government-backed commission found last year -- that the country needs to invest $210 billion a year in infrastructure, or roughly three times its current rate -- he does not think the bank provides the answer.

"The need is so great," he said.

Many of the country's roads and bridges have fallen into disrepair over the last decade, with one Minnesota bridge collapsing over a year and a half ago, and many say that the bank could not speedily fix their conditions.

Speaking to Reuters on Monday, the House of Representatives Transportation and Infrastructure Committee Chairman James Oberstar said the bank would not be established and operational for some time to come.

The Minnesota Democrat said he will draft the blueprint for the next half decade of federal surface transportation spending without including the bank, which some have likened to a Federal Reserve for capital projects.

Despite calling it a good idea, Oberstar has warned that the bank faces some political risks, such as finding long-term funds and avoiding directly competing with already established programs, such as the Highway Trust Fund.

This winter Connecticut Senator Chris Dodd said he imagined passing a bill to create the bank within the year. It would have an independent board to decide which projects receive backing and would create a new stream of dollars that would not compete with the trust fund.

POSSIBLE DELAYS

Ken Simonson, the Associated General Contractors of America economist who was recently appointed to the panel advising the National Surface Transportation Policy and Revenue Study, said Congress may further delay the project.

While Simonson said there is more support for a bank now than a few years ago, any provision to create it would likely be attached to a broader piece of legislation that could be held up in debate.

The bank would probably be funded through debt akin to the Build America Bonds included in the economic stimulus plan, and lawmakers' appetite for increasing public debt seems to be waning, he said.

For Atkinson, the bank's main hurdle will not be the calendar or competition, but the very nature of financing infrastructure.

"A bank means you have to get money somewhere, you have to repay those loans. The only place to get money is tolls," he said. "There are some Democrats who are big NIB supporters, but who are at best lukewarm on tolling."

Tolls are also unpopular with drivers, he said. His commission suggested raising the tax charged on gasoline and diesel, which supports a trust for highway building repair, as the best and fastest solution to make up for the infrastructure deficit.

In the future, when fuel-efficient cars could dominate the road and push down the demand for gas, the United States should move to taxing drivers based on how many miles they drive.

Oberstar said he also supports such a tax.

(Additional reporting by John Crawley and Jim Christie in New York)