Banking on 30/10

Among the economic stimulus proposals unveiled this week by President Obama was an idea that he has been kicking around at least since his days as a U.S. senator: creation of a national infrastructure bank, which would pool money from the federal government and private investors and lend it to transportation projects deemed worthy by experts. It’s a scheme that should have particular resonance in Los Angeles because it has the potential to make Mayor Antonio Villaraigosa’s dream of fast-tracking local public transit improvements a reality.

Villaraigosa’s “30/10” initiative is a key goal of his second term, so he has much to gain if Congress approves Obama’s bank plans. The idea behind 30/10 is to borrow money from the federal government to fund a dozen L.A. County transit projects that are already in the works thanks to Measure R, the half-cent sales tax initiative that voters approved in 2008. On the current schedule, it will take 30 years to build the projects, but by borrowing money up front and paying off the loans with proceeds from the sales tax hike, they could be completed in 10. Local transit planners are lobbying Congress to create a new category of bonds and to provide federal grants and loans, but Obama’s infrastructure bank would be a more direct way of getting the needed capital.

The problem for Villaraigosa is that Congress is accustomed to doling out transportation money via earmarks, not loans. Sen. Barbara Boxer (D-Calif.) has endorsed 30/10, and as chair of the Senate Committee on Environment and Public Works is working to insert financing mechanisms for it into the overdue six-year transportation bill. But it’s an uphill climb. The previous transportation bill expired a year ago and was extended until Jan. 1; many observers think Congress is so divided over the question of how to fund repairs and improvements to the country’s highways and rail systems that the bill will simply be extended again. The fundamental difficulty is that the federal gasoline tax, which hasn’t been hiked since 1993, no longer brings in enough money to meet spending demands, and there is no political appetite in Congress to raise it.

Obama’s infrastructure bank proposal, too, would probably be taken up as part of the transportation bill. Republicans are already lining up against it, saying the bank could expose taxpayers to heavy financial risks. That could be true, although everything depends on how the bank is structured. We think the idea is well worth exploring, and not just because it could accelerate L.A.’s transit improvement schedule and create thousands of local jobs by financing the 30/10 initiative. Such a bank would allocate transportation funding based on merit rather than political patronage, a fairer and more efficient way of keeping the country moving.