News / Alvarez & Marshall's proposition: the 1% of Federal income tax revenue for infrastructure

Alvarez & Marshall's proposition: the 1% of Federal income tax revenue for infrastructure

🕔 June 19, 2012

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Golden Gate BridgeIn a recently published report, Alvarez&Marshall (A&M) proposes a solution for all the infrastructure problems the US face.

The problem can be solved by allocating - or reallocating - Federal funds equivalent to about 1% of Federal income tax revenue $20 billion per year) exclusively for infrastructure. This dedicated Federal revenue would fund a credit reserve to underpin a National Infrastructure Bank (NIB) guarantee program. The program, in turn, would prime the pump for at least $400 billion per year in private sector capital to invest in our failing infrastructure and provide a catalyst for economic recovery for the next decade.
According to A&M public private partnerships are essential to get this goal:
Public-Private Partnerships will have a pivotal role to play in a vibrant infrastructure investment program. The rationale for this statement is that the PPP:
  • Is an excellent structure for encouraging private sector investment in public sector projects (and, thus, further leveraging Federal funding);
  • Brings private sector investment discipline into the process - both in terms of the selection of appropriate projects and optimizing the capital structure; and
  • Results in superior project execution -  experience from other jurisdictions is that well-structured PPP projects are delivered on time and on budget.
Finally, they claim in their report the following about a potential National Infrastructure Bank:
  • Administration of the Federal Guarantee Program (including, importantly, the monitoring of the credit reserve on an ongoing basis);
  • Acting as the coordination center for projects proposed by all State Governments;
  • Providing leadership in project analysis (including the utilization of the latest techniques) - and acting as a liaison with Government Departments for the  accumulation of pertinent data;
  • Becoming the repository for best practice in the procurement of infrastructure project PPPs; and
  • Acting as a thought leadership center in infrastructure investment.
It is vital that NIB does not become an additional layer of bureaucracy; it should be staffed primarily with private sector personnel and should be outside the political process.

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