Infrastructure Banks Also Don’t Generate Revenue

posted Jan 23, 2012, 8:43 AM by Mark Stout

In a recent post I made the point that public-private partnerships don’t normally generate revenue.  They normally result in debt instruments that require revenue to pay them off.

Something similar needs to be said about infrastructure banks.  An infrastructure bank is……..a bank!  It is a type of bank that lends money to build projects and expects to get paid back in revenues generated by those projects – meaning tolls.

Now, infrastructure bank debt can be a useful way to finance projects, as can general obligation bonds, TIFIA loans, GARVEE loans, and all the other debt instruments available for projects.  But they shouldn’t be confused with the need to raise revenue.  Unfortunately, discussions of infrastructure banks often have the effect, intentionally or unintentionally, of obscuring that need.  This is something we should keep in mind in future discussions (possibly SOTU?) of I banks.