FAQs

The Federal Infrastructure Bank (“Bank”) will be a privately owned, managed, and funded National Bank Charter created to complement existing and future federal programs. The Bank will serve as a wholesale lender to infrastructure projects through state and local governments, state infrastructure banks and private entities. Learning from prior infrastructure bank attempts, the Bank will employ a nimble, efficient, and sustainable investment structure that will propel private infrastructure investment.

Bank operations and policies will be determined by a seven-member Board of Directors, who are elected by the bank’s shareholders. The Bank will lend at competitive rates and terms, which are consistently below offerings by commercial banks, investment banks, private equity and other funds. To quickly capitalize and deploy resources, the Bank will offer an infrastructure investment tax credit to investments made during the first three years of bank operation.

The Bank is not reliant on federal appropriations for startup costs nor future operational expenses. Upon enactment, the Federal Infrastructure Bank Holding Company will seek to raise $100 million to capitalize the Bank and secure the National Bank Charter. Shareholders receive a return on investment through price appreciation of the equity shares and dividend payments. Initial funding will be secured through individual and institutional investors, who will own equity shares of the Bank.  The Bank will have a 10-year goal of raising $1 billion and, in total maintain a 10:1 debt-to-equity ratio for issuing up to $1 trillion in project financing.

Additional equity will be raised in both private placements and an Initial Public Offering (IPO). Operating Expenses for the Bank will be covered by the spread between the Bank’s borrowing costs and the rate on its loans to borrowers. The 10:1 debt-to-equity ratio is required by the Federal Reserve and will be maintained, plus an additional 2% Loan Loss Reserve.

The Bank serves as a complement, not a replacement, for existing programs and encourages states and municipalities to pursue all available funding sources. By creating new funding streams, the Bank will create opportunities for states and municipalities to redirect Federal Formula Funds for projects that do not have a pledged revenue source. Many of the BIL’s discretionary grant programs require a 20% local match to secure funding. Through a loan or equity investment, the Bank could provide all or part of the 20% match requirement to assist in securing federal funds.  Should state/federal match requirements change, the bank can evolve to support a match exceeding 20 percent.

Further, existing Federal programs are viewed by many as onerous, require complex and lengthy application submissions, and are rarely accessed to maximum potential. Similar to a local banker, Federal Infrastructure Bank staff will work with states to navigate these complexities and leverage available funding resources to best address local infrastructure priorities.

The Federal Infrastructure Bank is a market tool designed to advance U.S. infrastructure regardless of project cost. With increased material costs, higher wages, and supply chain challenges, BIL funding cannot address the level of infrastructure advancements originally envisioned. Through a nimble and sustainable investment approach, the Bank can supplement BIL funding to address current funding constraints and ensure maximum infrastructure investment. In doing so, the Bank can help limit project delays and promote continued job growth.

The Bank would be structured similarly to the Federal Home Loan Bank System and Federal Farm Credit System, which are also privately owned, managed and funded. The Federal Infrastructure Bank would utilize best practices from successful State Infrastructure Banks such as the California Infrastructure and Economic Development Bank, which is privately funded and no longer relies on Federal or State funds. Since its inception in the mid-1990s, none of its customers have defaulted on loan payments and its bonds are rated AAA by all three rating agencies. The California success provides a sound model for both the Bank and the other State Infrastructure Banks.

The Bank will work with public and private entities, including state and local governments, investment banks, consultants and advisors, to source viable and much needed projects and determine how best to prioritize and fund. When prioritizing projects, the bank will consider sound lending policies, such as need, worthiness, financial and economic viability, security and impact on the communities.

The Bank will support industries and projects critical to the structure, growth and resurgence of the US economy. Bank investments are not restricted to specific projects. Rather, the Bank will have the ability to invest and finance all infrastructure projects. To address specific infrastructure funding challenges in rural areas, the Bank would set aside a minimum investment for rural infrastructure projects. The Bank is restricted from engaging in commercial or investment banking activities.

As a wholesale lender, the Bank will have an initial loan minimum of $20 million, which will increase as the Bank grows. The maximum investment or loan in a single project shall be limited to 5% of the risk-based capital, as defined by the Federal Reserve. The loans and investments will be secured primarily by a revenue pledge and by collateral and guarantees. The steps to secure a loan will include:

• Project Eligibility
• Feasibility
• Permits & Regulatory Approvals
• Source of Financing Repayment
• Financing Application
• Agreement on Terms & Conditions
• Loan Approval

The Guidelines for Selection of Investments and Projects will detail these criteria and will be made available to potential borrowers.

Each loan recipient must have the capability to repay the loan with a designated revenue source. However, non-revenue producing assets can be bundled with assets with a revenue stream and collateral to assure loan repayment. For example, the Bank can support the revitalization of Main Street so long as Small Town America commits revenue-producing collateral (e.g. parking garage, public building, municipal golf course, etc.). This is a successful practice of the California State Infrastructure and Economic Development Bank and others.

In addition to bundling projects, with money being fungible, if an entity can use funding from the Bank for an eligible project, it would allow that same entity to use federal and/or state funding for other projects. In this way, the recipient’s funds can go further by leveraging all available funding to support various infrastructure projects.

The federal infrastructure bank is available to finance all types of infrastructure, including operations and maintenance, which are critical to ensuring that the United States has adequate infrastructure.

The Bank will take a portfolio approach to lending. In doing so, the Bank will partner with state and local leaders to best determine priority projects in a specific state or region. The Bank will manage its portfolio to ensure both revenue producing and non-revenue producing projects are supported. The Bank will look at infrastructure investment opportunities broadly, but is not mandated to support one infrastructure class more so than others. Operating under sound investment principals, such as extending no more than 5% of risk-based capital to a single project, the Bank will ensure a diversified project investment portfolio.

The Federal Infrastructure Bank is not exclusive and will seek to work with commercial banks to ensure state and local partners have the easiest access to capital and the lowest available rates. Regarding competition, a number of large commercial banks have shared that they would be supportive of these efforts, including some of the largest commercial banks in the country. Commercial banks view the creation of an infrastructure bank as an opportunity to increase the available portfolio for commercial infrastructure investment.

Broadly speaking, there is minimal opposition to the infrastructure bank concept. In fact, for years, a wide array of industry associations have supported the creation of a national infrastructure bank, though a majority of these associations have not endorsed specific legislation. Business groups view an infrastructure bank as another tool to provide much-needed capital for infrastructure projects, while shifting the investment risk to private industry.

Previous attempts to enact national infrastructure bank legislation stalled due to disagreements regarding the structure and function of an infrastructure bank. These disagreements center issues such as: how an infrastructure bank should be funded (government appropriation v. private investment); whether an infrastructure bank should be mandated to support specific infrastructure projects; and the federal government’s role (i.e. Board members appointed by the President and confirmed by the Senate, oversight authority, and project selection).

All states are eligible for Bank investment so long as the project satisfies the Bank’s loan criteria. Sixteen states do not have an infrastructure bank, while other state infrastructure banks are no longer active. The Bank serves as a wholesale lender and will partner with state infrastructure banks, state departments of transportation and/or additional state and regional authorities with bonding authority and other funding capabilities (e.g. regional transportation organizations, water departments, utilities, etc.). Once the Bank is established, states will likely look to create new State Infrastructure Banks or, depending on the state, resurrect inactive state infrastructure banks.

In time, the Bank will establish Regional Infrastructure Banks to help meet the needs of each region. At the outset, state infrastructure banks, departments of transportation, and other eligible recipients, will serve as the medium for state loans and investments. The Bank must follow the loan criteria and cannot assure equal distribution among the States. The Bank allows borrowers to determine nationwide loan distribution by proposing sound loan proposals that comply with the Bank’s loan criteria.

The Bank will serve as the platform for large-scale private investment in American infrastructure by institutional investors, individuals pension funds, and sovereign wealth funds. Aggregate foreign investment is capped at 25% and foreign entity shareholders do not receive voting rights. The Treasury Secretary may purchase no more than 5 percent of outstanding bonds. The Federal Reserve may invest in the bonds of the Bank without limit. Individuals can also invest in equity holdings once the Bank goes public with an IPO with no minimum.

Non-U.S. individuals and entities may not collectively hold more than 25 percent of the Bank’s equity securities and bonds. Further, a non-US equity holder does not have shareholder voting rights. By mandating foreign shareholder restrictions, the Bank can limit foreign influence and equity holdings thereby ensuring Bank operations advance U.S. infrastructure.

The Federal Reserve has oversight and supervisory authority over the Bank. The Securities and Exchange Commission will supervise equity and bond offerings.

The Federal Government does not guarantee Bank assets, such as its loans and investments.