* Infrastructure bank proposed by Sens Kerry, Hutchison
* Initial taxpayer outlay capped at $10 bln
* Projects generating revenue would be sought (Recasts with plan details, comment)
By John Crawley and Rick Cowan
WASHINGTON, March 15 (Reuters) - A U.S. government plan to upgrade roads and rails would kick-start an infrastructure bank that would rely heavily on investors and eventually stand on its own, according to a Senate proposal on Tuesday.
The bipartisan initiative led by Democrat John Kerry and Republican Kay Bailey Hutchison would create a financing arm for loans and loan guarantees, like the Export-Import Bank, for projects that generate revenue and produce returns.
“It is a practical strategy for prosperity,” Kerry said at a news conference, noting that business leaders have told him that “private capital is waiting for this kind of cue.”
Financing needed repairs and new construction of roads, rail lines, water treatment facilities and energy plants is a key question facing the Obama administration and Congress.
The administration and lawmakers influential on infrastructure matters are pushing for legislation this year, and experts recommend a sharp increase in spending.
President Barack Obama has proposed an infrastructure bank as a centerpiece of a six-year, $556 billion plan for upgrading U.S. roads, bridges, transit systems and rail lines.
Most in and out of government believe the traditional ways of paying for infrastructure through gasoline taxes or federal or state appropriations is inadequate to meet demand.
The gap between revenues and capital needs each year for transportation projects is $137 billion, congressional figures show.
There is broad support in Washington for leveraging private investment, but lawmakers and policymakers have yet to find an approach acceptable to all.
Government wants some control of national infrastructure in return for the use of taxpayer dollars and investors want guaranteed returns and a project vetting and funding process free of political interference.
Individual members of Congress currently have enormous influence over what projects get done in their states and which do not.
Previous infrastructure bank proposals have gone nowhere in Congress.
But with federal and state budgets tight, Kerry and Hutchison say they are lining up support for an entity they call the American Infrastructure Financing Authority.
Their plan, they said, addresses key concerns that sunk previous plans.
Initial taxpayer funding would be capped at $10 billion and money would come from existing accounts, so no new spending would be authorized.
Loans would go to projects that generate revenue, like toll roads and water-related utilities. Loan repayments would help replenish the bank.
Public funding would be capped at 50 percent of a project’s costs and in many cases would provide just enough to lure investors like private equity, pension funds, and foreign sovereign wealth funds.
The bank would become self-sustaining over time and be run by people with banking and investment expertise and overseen by Congress. (Editing by Andrea Ricci and Leslie Adler)