Legislature(2021 - 2022)BELTZ 105 (TSBldg)
05/04/2021 01:30 PM Senate TRANSPORTATION
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| Audio | Topic |
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| Start | |
| SJR14 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| = | SJR 14 | ||
SJR 14-SUPPORTING NATIONAL INFRASTRUCTURE BANK
1:41:05 PM
CHAIR MYERS announced the consideration of SENATE JOINT
RESOLUTION NO. 14 Urging the United States Congress to
reintroduce and pass legislation to establish a national
infrastructure bank as was provided by H.R. 6422 from the 116th
United States Congress to help finance urgently needed
infrastructure projects across the nation.
1:41:20 PM
SENATOR TOM BEGICH, Alaska State Legislature, Juneau, Alaska,
sponsor of SJR 14, stated that SJR 14 requests Congress and
President Biden to look favorably on establishing a National
Infrastructure Bank (NIB). Since the state has been receiving
more funds from the federal government, Alaska has been
evaluating its infrastructure. He offered his view that
establishing an infrastructure bank may be a more sustainable
approach. He paraphrased the sponsor statement, which read
[Original punctuation included]:
It has been many decades since the U.S. last undertook
a nationwide infrastructure overhaul. This becomes
even more apparent when we look at the current state
of our nation's built environment. We are struggling
to put people in homes, develop public transportation,
and provide low-cost, clean energy, and far too often,
we are ill-equipped to deal with disasters, both
natural and human-generated. This reality will only
get worse with inaction. Each year we fail to act, the
cost of replacing our outdated infrastructure
increases.
Because of the unique nature of our state, Alaska is
especially in need of federal help with our
infrastructure needs. Thirty-one communities across
our state lack centralized water or wastewater
systems. 85% of our consumer goods come through the
port of Anchorage, yet it lacks funding for essential
upgrades. 570 miles of highway and 141 of the bridges
that connect people, goods, and services across the
state are in poor, deteriorating condition, and
desperately need repair. It is clear that the time to
take action is now.
This urgent issue calls for a national effort to
revitalize our infrastructure. President Biden has
recently introduced the American Jobs Plan, which will
provide at least $2 trillion in nationwide
infrastructure funding. This is a solid step in the
right direction, but we can do more to ensure long-
term viability and growth of both the United States'
and Alaska's infrastructure. A national infrastructure
bank will insure just this.
SENATOR BEGICH added that the National Infrastructure Bank
(NIB) would leverage resources, so it won't be necessary to
draw on the treasury to set up the bank. Former Presidents
George Washington, James Madison, Abraham Lincoln, Franklin
D. Roosevelt all set up National Infrastructure Banks to
expand economic opportunity and growth in the country.
1:44:38 PM
SENATOR BEGICH continued [Original punctuation provided]:
Establishing a national infrastructure bank will
provide a secure fund for infrastructure projects and
upgrades for decades to come. It will distribute loans
to fund infrastructure projects and require no new
federal debt. The concept is not a new one. We have
implemented national infrastructure banks four
different times in our nation's history. Each time,
the bank was a success, boosting the economy and
improving our infrastructure. Based on the
performances of these past banks, we anticipate that
its reintroduction will help grow the nation's economy
4-5% per year.
Infrastructure is one of the largest bills our nation
currently faces. It is not going to go away and we are
going to have to pay it eventually, and there is no
time it will be as inexpensive as now. We ask for your
support on this resolution to urge Congress to
reestablish a national infrastructure bank.
1:45:04 PM
SENATOR BEGICH stated that his Ted Stevens intern, Connor Owens,
did most of the work on the bill but he was unable to present
SJR 14 today since he had college exams.
He said that a sectional analysis was not required for a
resolution.
1:46:38 PM
At ease
1:52:29 PM
CHAIR MYERS reconvened the meeting.
SENATOR MICCICHE joined the meeting.
1:52:54 PM
ALPHECCA MUTTARDY, Member Advisory Board, Coalition for a
National Infrastructure Bank, Leesburg, Virginia, speaking as an
invited testifier on SJR 14, said she works as a macroeconomist
on behalf of the coalition. She provided her background, such
that she retired after serving 25 years as a macroeconomist for
the International Monetary Fund. She spoke in support of SJR 14,
which would ask Congress to pass H.R. 6422 to create a $4 to $5
trillion National Infrastructure Bank to provide infrastructure
projects throughout the country. The NIB has not been able to
finance infrastructure projects through federal, state and local
budgets. This means a considerable backlog of projects have not
been built or repaired, she said. As Senator Begich mentioned,
this concept has been used many times in U.S history. It began
with the first bank of the U.S. under Alexander Hamilton and
then-President George Washington and ended with the
Reconstruction Finance Corporation under President Franklin D.
Roosevelt (FDR). She surmised that the corporation helped the
U.S. get out of the Great Depression and win World War II.
MS. MUTTARDY said this newest iteration contemplated how much
was needed to fix all the infrastructure nationwide. The
American Society of Civil Engineers (ASCE) indicated in its
latest report card that the U.S. would need $6.1 trillion over
the next ten years to repair infrastructure or increase capacity
to meet today's needs. Of that, $3.5 trillion was slated to be
financed through federal, state and local budgets. However, that
would still leave at least $2.6 trillion in unfunded
infrastructure projects. This bank would cover all this unfunded
amount, including $1.2 trillion for surface transportation and
$1.1 trillion for road and water infrastructure.
1:55:09 PM
MS. MUTTARDY said the proposed NIB would work as a commercial
bank. It would be capitalized by funds from the private sector
to issue loans for infrastructure. She offered the NIB's view
that spending $5 trillion for repairs would supercharge economic
growth and provide jobs for workers. In Alaska, NIB could
finance affordable housing, water and sanitation facilities and
support all the Port of Alaska's needs. It could also provide
funding for inland connections from the port to air, road or the
[Alaska Marine Highway System (AMHS)] as well as fund AMHS
projects and railroad facilities. Further, this could reemploy
workers who lost their jobs due to the oil industry's downturns
or the COVID-19 pandemic. She pointed out that NIB advisory
members gave similar testimony to the Nevada Legislature's
Transportation Committees. Nevada just passed a resolution in
support of NIB, she said.
1:56:51 PM
JULIE OLSEN, Member, Advisory Board, Coalition for the National
Infrastructure Bank (NIB), Owner, Office Tech, Inc., Anchorage,
Alaska, stated that she supports SJR 14, in part because her
business relies on a fully functioning Port of Alaska. She
explained that her company receives regular weekly shipments of
equipment transported by Carlile, a trucking and logistics
company that picks up cargo from the port and delivers it to
Railbelt customers. Or else it hauls freight to Northern Air
Cargo for shipment to rural Alaska hubs, including Bethel, Nome
and Kotzebue. This equipment may be further shipped to villages
via small air carriers. Further, Carlile delivers cargo to AMHS
for transport to Kodiak. As previously mentioned, 85 percent of
consumer goods coming to Alaska travels through the Port of
Alaska, serving stores such as Costco, Target and Safeway. Every
business north of Haines depends on an operational Port of
Alaska, which desperately needs repairs and modernization. She
related that the next big earthquake could destroy the port,
which would have disastrous consequences to many Alaska
businesses.
1:58:57 PM
MS. OLSEN reported that the Port of Alaska estimates costs from
billion to $1.9 billion to modernize and repair the port.
Although the Municipality of Anchorage owns the port, the costs
would be passed on to property owners and to businesses and
consumers through increased tariffs. The NIB would offer better
financing with flexible and longer terms. For example, if the
Port of Alaska were to finance $1 billion, it would result in
debt service of $70 million per year. However, with NIB's more
flexible rates and terms, that debt service would be reduced by
half, making the project more affordable. She explained that NIB
would thoroughly vet loans to ensure funds would not be used for
boondoggles or unsound ventures. Its process would force
government entities applying for loans to fully assess projects
to figure out whether the infrastructure made financial sense.
It would make goods coming into Alaska far more affordable.
2:00:46 PM
JAMES MOORE, Board Member, Alaska Trollers Association, Sitka,
Alaska, speaking as an invited testifier on SJR 14, stated that
he has commercially fished for over 50 years. He also serves on
the Northern Southeast Regional Aquaculture Association (NSRAA)
and as a board member of Armstrong-Keta, Inc. He stated that NIB
reminded him of Alaska's Department of Commerce, Community and
Economic Development's (DCCED) loan program that offers lower-
interest loans to commercial fishermen. He said these loans
allow them to purchase vessels, which is the infrastructure
necessary for commercial fishing.
MR. MOORE stated that historically he found the four NIB
iterations valuable to consider. He quoted remarks made by
Abraham Lincoln in 1843 when policies pertaining to banking were
being developed: "Upon the question of the expediency, we only
ask you to examine the history of the times, during the
existence of the two Banks, and compare those times with the
miserable present."
2:03:39 PM
MR. MOORE highlighted other instances of government financing,
including that then President Lincoln could finance the Civil
War efforts and the transcontinental railroad by issuing the
Lincoln Greenback Treasury notes. These projects energized the
nation and caused scientific discoveries to blossom. In 1932,
FDR was able to pull the country back from the brink of disaster
by creating the Reconstruction Finance Corporation, a government
corporation that financed state and local government projects
and made loans to banks, railroads, mortgage associations and
other businesses. Through his policies, FDR restored hope to a
discouraged population and put U.S. citizens back to work. He
touched on the Tennessee Valley Authority rural electrification,
another corporation transforming America. He surmised that a
fifth NIB iteration happened before the American Revolution when
the Massachusetts Bay Colony created its currency: the oak and
pine tree shillings. Entrepreneurs could obtain bank funding for
projects, such as the highly successful Sargents Ironworks. The
federal credit extended through national banking empowered the
economic engine, which was not the money itself, but the loans
tapped into the creative potential of the people.
MR. MOORE stated that he supported reinstituting the American
physical economy. He asked members to move SJR 14 forward.
2:09:31 PM
SENATOR KIEHL asked Ms. Muttardy to describe how the funding
process for the $4 trillion bank will not adversely impact the
national debt.
2:10:04 PM
MS. MUTTARDY explained that a lending bank would work similarly
as a commercial bank by taking in deposits and lending out for
infrastructure projects. Instead of using government funding to
capitalize the NIB, the bank would receive treasuries by
offering the private sector preferred bank stock plus an
enticement of a two percent premium above the earnings. She
stated that the two percent would initially be considered as
mandatory spending for budget purposes. Still, NIB would
reimburse it as an annual dividend derived from the interest
earnings on the loan. Since NIB was budget neutral, it would not
require any new taxes or create any new debt with respect to the
budget.
2:11:10 PM
MS. MUTTARDY explained that the bank would give out loans in the
same manner as a commercial bank. The bank would consider the
loan an asset and create an offsetting deposit as a liability,
which creates money. She acknowledged that there was a secondary
process related to clearing checks, but the bank would receive
repayments for its loans. NIB would keep interest rates low by
using the Treasury bond rate. She stated that spending $5
trillion and creating 25 million jobs would also supercharge
growth rates. For example, after the stock market crash of 1929,
the creation of the [Reconstruction Finance Corporation (RFC)]
resulted in increased growth rates of 5.5 percent. She said
computer models could replicate this effect. Higher growth rates
would result in more tax receipts to federal, state and local
coffers, allowing them to repay the loans even if user fees were
not associated with the loans.
2:13:00 PM
SENATOR SHOWER cautioned that if an earthquake destroyed the
Port of Alaska, it would have dire results.
He asked who decides whether to fund project loans, such as
financing a natural gas line. He pointed out that China's
expansion was rapid, but it was now experiencing the downside
because China's economy was overextended.
2:14:32 PM
MS. MUTTARDY stated the intention was to cover financing gaps
for classic infrastructure that ACPE already identified. She
said H.R. 6422 defines infrastructure to include items such as
roads, bridges, community development projects, energy, and
energy structures. Within the mix, states could request help
with their needs. Within the mix, states could request help with
their needs. For example, Alaska would have the discretion to
request loans for its ferry system, fund upgrades to 280
airports with gravel runways, and supply broadband to its
communities.
2:15:47 PM
MS. MUTTARDY acknowledged that one might solely view China's
rapid escalation of building infrastructure facilities from an
economic perspective, but these investments were strategic ones.
For example, within the last ten years China built 27,000 miles
of highspeed rail with its Belt and Road Initiative (BRI) to
create economic connections for trade with other countries. NIB
would like to build infrastructure to accelerate economic
development. Further, states could work together to plan
infrastructure to suit their population or economic development
needs. For example, high-speed rail could be built from
Birmingham, Alabama to Raleigh, North Carolina to improve
connectivity for their automotive manufacturing industry. The
best infrastructure projects are ones that will spur economic
growth, she said.
2:17:20 PM
SENATOR SHOWER stated he has traveled to China and observed that
some cities in China were ghost towns because they were not
really needed. He cautioned members to consider potential NIB
infrastructure projects carefully.
MS. MUTTARDY agreed that the vetting process was essential.
2:18:00 PM
SENATOR MICCICHE turned to the financial aspect of funding. He
recalled she suggested paying a two-percent premium above the
earnings to entice investment, which relates to a total of four
percent. He asked how the margin would be covered.
MS. MUTTARDY responded that to capitalize the bank, NIB would
bring in funds from the private sector so it would combine the
two-percent stream for the treasury with two percent derived
from the budget. This would result in NIB only needing to
capitalize at a rate of $1 of capital to $10 in loans. Thus,
$500 billion would capitalize $5 trillion in loans. NIB would
pay the total interest earnings to cover its overhead and pay
dividends. She stated that NIB was creating a more detailed
plan.
2:19:39 PM
SENATOR MICCICHE recalled she mentioned a discount rate for
infrastructure projects. While he understood the basic
mechanics, he was unsure of the bank's margin of profit to
remain functioning.
MS. MUTTARDY responded that as a public bank NIB is a non-profit
bank. If any funds remain from gross interest earnings, after
paying its bills, NIB intends to place the funds into a trust
fund to award grants to low-income communities.
2:20:40 PM
CHAIR MYERS asked for a rough definition of infrastructure since
the federal definition was very broad and included housing.
MS. MUTTARDY answered that H.R. 6422 defined infrastructure
projects using ASCE's 17 categories, including roads, bridges,
rail, electric grid, schools, parks, and water infrastructure.
In addition, a few categories were added, including
approximately seven million affordable housing units across the
country, high-speed rail, and broadband to increase connectivity
and productivity. The Biden plan would provide traditional
infrastructure financing that ASCE initially estimated based on
last year's data. The bank would cover the full suite of
traditional and expanded infrastructure to complement the Biden
plan.
2:23:00 PM
SENATOR SHOWER asked how the approval process would work
regionally. He asked whether this proposal would guarantee that
all the funds would not be spent in California or New York.
MS. MUTTARDY responded that the proposal used ASCE's estimates
for needed infrastructure to ensure sufficient funding was
available for all states. She pointed out that states would have
substantial flexibility, but the $5 trillion should provide
adequate funding for all the needed infrastructure.
2:24:55 PM
CHAIR MYERS opened public testimony on SJR 14.
2:25:15 PM
STANLEY FORCZEK, Member, Advisory Board, Coalition for National
Infrastructure Bank, Williamstown, New Jersey, spoke as an
invited testifier. He provided his background, stating he served
as an executive for Amtrak for 30 years. He said he currently
serves as an infrastructure expert on the advisory board for the
coalition. He pointed out that the last infrastructure bank
ended its term in 1957. Since then, the country has not had any
major nationwide infrastructure proposal, so most of the
infrastructure is 65 years or older.
2:26:16 PM
MR. FORCZEK referred to the U.S. space program's manned flight
to the moon. In 1962, then President John F. Kennedy told the
country that the space mission to the moon was for the
betterment of the country and mankind; however, he did not
mention the cost. NIB proposes that fixing the nation's
infrastructure, putting people back to work, and supercharging
the economy is for every citizen's betterment. As Ms. Muttardy
mentioned, NIB would like to complement the administration's
proposal and provide an opportunity for those who want to invest
in infrastructure. He said the main point is that this all needs
to be done. He stated the intention was for NIB to go on
forever. Thus, H.R. 6422 does not have a sunset clause. He urged
members to pass SJR 14.
2:27:59 PM
CHARLES MCKEE, representing self, Anchorage, Alaska, testified
on an issue not related to SJR 14.
2:29:22 PM
CHAIR MYERS, after first determining no one wished to testify,
closed public testimony on SJR 14.
[SJR 14 was held in committee.]
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