Commentary / Infrastructure Bank

A National Infrastructure Bank to Fund Infrastructure in Virginia

By Alphecca Muttardy, Macroeconomist

Last updated 10/25/2018


At present, the State of Virginia spends about 10% of its total public spending (or 1.7% of the state’s GDP) on public infrastructure projects.[1]  Of that total, the Virginia state budget pays for highway construction and improvements at four-year universities; local governments pay for their capital needs (including elementary & secondary school construction and repairs); and other state funds (gasoline taxes and college tuition fees) pay for the remainder.[2] There is little left in Virginia’s state and local budgets to fund priority projects in: rail, roads, urban transit, coastal flood protection, nor new technologies like broadband or rail/traffic-signal/air-traffic coordination control systems.

A National Infrastructure Bank (NIB) could provide all of the funding needed for Virginia’s mega-transportation projects, as well as for important social projects to revitalize industry, improve agricultural productivity, and alleviate poverty in rural areas. Those projects would dramatically boost: economic growth, job creation, higher wages, and state and local tax receipts in Virginia, as well as in and neighboring jurisdictions. Similarly, NIB-funded projects in neighboring areas would boost economic growth and wages here at home. Meanwhile, no new Federal or State Debt would be created by such a Bank.

An infrastructure bank can fund the high-speed rail we need. Above, a Chinese high-speed train.

In recognition of the critical need to revitalize America’s economy through infrastructure development, the following organizations have endorsed the creation of a National Infrastructure Bank: The Democratic Municipal Officials (DMO, 40,000 elected Democratic council persons and mayors); the Democratic National Committee (a modified version of the DMO resolution); Our Revolution Northern Virginia; Loudoun County Progressive Democrats; National Federation of Federal Employees (110,000 members); and the National Latino Farmers and Ranchers Trade Association.  Also: fifteen State Legislatures introduced resolutions in support of the proposed NIB (including Rasoul-Guzman Virginia HR 1); while dozens of regional labor unions, mayors, state legislators, and city councils across America have written to their Congressmen in support of the proposed legislation. Currently, we are looking for a Virginia Representative to introduce a Bill into Congress to establish a National Infrastructure Bank.

Overview of the Virginia State Budget:

Virginia operates under a two-year (biennial) state budget cycle. Following its passage by the Virginia House and the Senate, on June 7, 2018, Governor Ralph Northam (D) approved a $116 billion, two-year spending plan for FY2019-FY2020 (see Table 1 below).[3] As with previous budgets, the FY2019-FY2020 budget provides funding principally for education ($19.5 billion per year, mostly for Elementary & Secondary standards of learning, and college operations and building support) and healthcare ($17 billion per year, mostly for Medicaid services).

There is no explicit breakout in the state budget for capital spending but, based on other sources, it is estimated to comprise about 10% of total state spending, or about $6.0 billion per year. The largest portion of capital spending goes into highway construction and maintenance ($4.3 billion per year), bolstered by a state gasoline tax and matching Federal funds. Only about $1.0 billion is budgeted yearly for local ground transportation (capital plus operations, of which, $154 million is for annual capital contributions to DC Metro[4]).  Other than new construction at four-year universities and prisons, there is almost no other infrastructure spending provided for within the Virginia state budget (see footnote 1 for a listing of what is excluded from the State Budget).

Infrastructure Needs across the Nation and in Virginia

Meanwhile, important infrastructure needs across the nation and in Virginia go mostly unfunded. In a recent report card on the condition of America’s infrastructure, the American Society of Civil Engineers (ASCE) estimated that $4.6 trillion over ten years is needed to fully repair our nation’s infrastructure, of which $2.1 trillion remains unfunded (See Table 2 below).  The principal reason for the lack of funding is that Federal, State, and Local governments do not have the fiscal means.[5]

That applies in Virginia as well.  In 2015, ASCE gave Virginia an overall Report Card rating of C-, with sub-ratings that reflect Virginia’s critical unmet needs:[6]

Bridges: C – 56% of Virginia’s 21,000 bridges and culverts are approaching the end of their design life…

Dams: C – Virginia has 4 dams within every 100 square miles that continue to grow older and more susceptible to damage…

Drinking Water: C – a large number of Virginia’s 2,830 public water systems, serving   7 M residents, have now passed 70 years of age…

Parks and Recreation: C+ – Virginia’s public parks and recreation facilities provide more than $18 B in economic benefits, and therefore ought to be maintained…

Rail and Transit: C- – Virginia is ranked as one of the top states where freight carloads terminate, while passenger rail ridership has exploded in recent years. Virginia will need to decide how to handle an expected doubling of rail traffic by 2035, especially since current funding from Rail Operating and Capital Trust Funds is deemed to be insufficient…

Roads: D – The Washington DC-VA-MD metro area is ranked second worst in the nation for traffic congestion (after Los Angeles). Virginians have spent 28,000 years sitting in traffic, at a fuel cost of $5B, and experienced 74 hours of travel delays per person per year. The entire road network has grown by 14% over the past 35 years, to become the third largest in the nation.  Although state funding was increased starting in 2013, it has not kept up with growing needs…

Schools: C- – More than 60% of Virginia’s 1,800 K-12 public schools are at least 30 years old, and roughly $18B is needed to renovate them…

Solid Waste: B- – Virginia’s 208 solid waste facilities process 20M tons of solid waste per year, originating from within, and from out-of-state. Residents recycle more than in other states; even so, a further reduction in waste generation could save residents $40M per year…

Storm water: C- – Increased infrastructure improvements, and regulatory compliance, are needed to sustain the Chesapeake Bay and Virginia ecosystems…

Wastewater: D+ – Virginia has $6.8B in wastewater needs over the next 20 years, a 45% increase since the previous Report Card in 2009…

A National Infrastructure Bank Could Fund All of Virginia’s Infrastructure Needs

Because of its size – a revolving fund of $4 trillion – a National Infrastructure Bank would have the scale needed to fund mega-projects and small ones across America, including in Virginia. It would work just the like four Infrastructure Banks that preceded it, [7] by monetizing existing Federal Debt, and lending it only for public infrastructure projects (see Slide 1 below showing how that would work). Numerous economic studies have shown that well-targeted public investment improves private productivity, super-charges economic growth, raises wages, and thus improves the quality of life.[8] [9] Economic growth, in turn, provides new tax receipts that improve the ability of state and local governments to repay their infrastructure loans. As proof of this, all previous Infrastructure Banks since the First Bank of the United States established by Alexander Hamilton have largely been repaid , and either broken even or turned a profit

A recent engineering study commissioned by the U.S. Treasury Department confirms just how beneficial well-targeted infrastructure projects can be.[10] The study identifies 40 transportation and water “megaprojects” costing a total of $334 billion that, the study estimates, could bring as much as $1.3 trillion in national economic benefits. Stated differently, as a group, the 40 projects would return between $3.50 and $7.00 to the economy for every dollar of capital expenditure invested. Many of those projects span multiple states, and their economic impact would almost certainly spill over into neighboring regions. The study concludes that a lack of public funding is by far the most common factor hindering the completion of these projects.

A listing of 11 of the 40 projects surveyed in the study, where planning and implementation is underway, is provided in Table 3 below.

Table 3. 11 of 40 Proposed U.S.Transportation and Water Infrastructure Projects of Major Economic Significance


Six of these projects would have direct benefits for Virginia:

  • The Hampton Roads Crossing Project would cost a nominal $8.2 billion, and would provide an average return to Virginia of $28.5 billion (a net benefit-to-cost ratio of 4.0-7.0). It would improve access, mobility, and goods movement to relieve congestion at the I-64 Hampton Roads Bridge Tunnel; and connect ports, the military, and freight corridors to surrounding distribution highways.
  • The Southeast High Speed Rail Project from Atlanta to Washington DC would pass through Virginia along I-95, and thus $2-4 would accrue to the state for every $1 spent here, not least because it would raise productivity by reducing North-South commute times for Virginia residents.
  • Systems for National Traffic Signal Coordination, Next Generation Air Traffic Control, and Positive Train Control, are all national systems that can be adopted in the state to reduce commute times by road, air, and rail. They would plough back from $4 – $10 for every $1 Virginia invests. And finally,
  • Northeast Corridor Improvements to AMTRAK/VRE passenger rail service from Virginia through Washington DC to Boston would improve service and safety, and shorten commute times. Its nominal price tag of $100.8 billion is the largest of the 40 projects studied, and its benefit-to-cost ratio is on the low end, at 2.0-4.0. However, 20% of America’s GDP is generated in the Northeast Corridor, so any improvements to productivity there will benefit the nation as a whole, and Virginia as well.

Even so, most of these projects cite a lack of funding as a major impediment to their complete implementation.[11] That’s where a National Infrastructure Bank is needed


Finally, broadband is an important new technology that can produce business and educational benefits.  Nationally, 39% of rural Americans, or 23 million people, do not have access to high-speed internet service, while 21% of schools in rural areas still lack a fiber optic connection.[12] Those statistics describe Virginia’s rural areas in the: Appalachian, Central, Southern, and Eastern sides of the state.  There, business is being lost, personal interconnectivity is difficult, and key institutions like schools, libraries, and social services are compromised.

Cost estimates to provide broadband service nationwide vary widely:

  • One study estimates the price at $15,000 per mile to lay fiber optic cable in rural areas, while the U.S. Department of Transportation estimates that costs may run as high as $27,000 per mile in those regions.  Because it is prohibitively expensive for private cable companies to install cable in low population-density areas, there is a public need and role for state and local governments to step in.
  • Another report from the Schools, Health and Libraries Broadband Coalition (SHLB) proposes that high speed internet can be fed to key anchor institutions in rural areas, such as libraries, community colleges, or health care providers.  These recipients could in turn distribute it to the remainder of users in the area through a combination of wired and wireless technologies. The cost of this approach is about $20 billion.
  • The Federal Communications Commission (FCC) estimates that it would cost $40 billion to deploy high-speed broadband to 98% of American homes, and double that to reach 100% of the homes.

The advantage of a National Infrastructure Bank to complete broadband in America is that its Board of Directors – all engineers, with local and municipal representation – could:

  • Consider alternative cost benefit analyses to determine which broadband technology is best,
  • Enter into public/private partnerships to fully recoup investments made, and
  • Provide any needed funding to wire up all of our vast nation, to further boost America’s infrastructure and GDP!

 Slide 1. NIB Money for Infrastructure Loans Creates No New Federal or State Debt


The green star is the National Investment Bank; the yellow bar is state and local governments; the blue circle is investments, and the pink star is economic growth. Inputs into the NIB are the federal budget (the gray bar), existing Treasuries, and state and local bonds.

[1] It’s Time for States to Invest in Infrastructure, by Elizabeth McNichol, August 10, 2017. Figures are based on Census Bureau data for: new construction; infrastructure; purchase of buildings, equipment, and land; and other major improvements. They exclude capital spending by public corporations (e.g., utilities) and fee-charging entities like airports, seaports, and hospitals. For reference, Virginia’s GDP in 2017 amounted to $509 billion.

[2] State Expenditure Report for FY 2017, by the National Association of State Budget Officers, 2017.

[3] .

[4] Here’s how Metro says it would spend $15.5 billion over a decade, by Faiz Siddiqui, March 17, 2018.

[5] It’s Never Infrastructure Week – U.S. government investment spending is the lowest it’s been in 70 years. That’s probably too low. By Justin Fox, September 6, 2018.

[6] The American Society of Civil Engineers 2015 Report Card for Virginia’s Infrastructure.

[7] A Brief History of the Principle of National Banking in the United States, by americansystemnow , August 27, 2018.

[8] The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War, by Robert J. Gordon, Aug 29, 2017.

[9] See also: David Aschauer, “Is Public Expenditure Productive?” Journal of Monetary Economics, Vol. 23, 177-200, 1989. And, James Heintz, “The impact of public capital on the U.S. private economy: new evidence and analysis,” International Review of Applied Economics, Vol. 24 (5), 2010, 619-632.

[10] Treasury Study Rates 40 Transpo/Water Megaprojects, By Jeff Davis, January 5, 2017. The full report is available at: .

[11] For a complete description of possible infrastructure projects for Virginia, including those beyond transportation and water, see the report: A Proposed Infrastructure Program for Virginia, By Stuart Rosenblatt, July 31, 2018.

[12] 2016 Broadband Progress Report, by the Federal Communications Commission, January 29, 2016.




  1. Nancy – U sure cover a lot of territory! How, U can be in so many critical places, amazes me.

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