Why we need a public infrastructure bank

A standard approach for states looking to finance infrastructure projects is to create public-private partnerships in which a quasipublic entity uses private capital from investors to fund socially desirable projects like affordable housing. But these partnerships serve to enrich private investors at taxpayer expense.

In piece entitled “How to Cut Infrastructure Costs in Half,” Ellen Brown argues that these costs are excessive and unnecessary: “Private equity investment now generates an average return of about 11.8 percent annually on a 10-year basis. For infrastructure investment, those profits are made on tolls and fees paid by the public. Even at simple interest, that puts the cost to the public of financing $1 trillion in infrastructure projects at $1.18 trillion, more than doubling the cost. Cities often make these desperate deals because they are heavily in debt and the arrangement can give them cash up front. But as a 2008 Government Accountability Office report warned, ‘there is no free money in public-private partnerships.’ Local residents wind up picking up the tab.”

Now consider that the state-owned Bank of North Dakota can fund state infrastructure projects at 2 percent annually. For example, for a $1 trillion infrastructure plan funded at 2 percent over 10 years, the interest tab would come to $200 billion, nearly $1 trillion less than the $1.18 trillion expected by private equity investors. Not only does the state save $1 trillion over 10 years, in the form of all those tolls and fees which would go to pay interest to the private investors, but even the $200 billion paid in interest is returned to the government, because the government owns the bank. This isn’t just savings. The state in fact can profit from the lending. All it takes is a change in the general statutes. Support public bank legislation in Connecticut. Justin Good East Haddam