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Sunday, September 4, 2016

Sustainable Economic Policy VI

Financial/Engineering Checks and Balances

In the previous section we discussed general principles of checks and Balances. Now we address some specifics.

For our economic system to be sustainable there has to be built in checks on the largess of those who hold funds, coupled with built in checks on those who would spend them. The way we do this is with forms that vet projects and other forms that review them on completion. This is the real reason we need an Infrastructure Bank. The Treasury Department, or the Department of Transportation, can perform these functions, but they need to be done universally and systematically. But to do that fairly and justly an inclusive process must be in place. An Infrastructure Bank, could in theory, just print money, but that would be a disaster shortly after the decision to do so. Bureaucracy, as much as we hate it, is a necessary evil in checking people's ambition and hubris -- when done right. One has to grant certain powers to local persons to develop and execute projects. But those projects must be reviewed for financial, engineering and marketing sanity. The principle problem with a "bridge to nowhere" is that nobody will use it. When executed right projects make sense from the get go. And that requires us to constitute an Infrastructure bank that is well constituted -- so we can't complain later that it built bridges to nowhere, or worse, bridges that fell down.

Working Through Local Government

Much of the functions described here are already done by local, State and Federal Government. The Bank will be constituted to leverage these assets in reviewing and approving these projects. The Infrastructure bank and its enabling legislation will standardize the process, ensure that review, appellate and approval processes exist and operate equitably. And it will compensate local government for performing these functions. For projects that meet the criteria of a necessary project that benefits the entire country it will fund them in the form of grants. For public projects that have a means to ensure payback of those funds it will fund them as zero interest loans. And for public projects that anticipate a profit, it will ensure that the funds are loaned with an appropriate level of interest.

Loan Forgiveness

The bank will also have the power to buy and retire bonds or forgive loans where 3 criteria are met:

  • The project is one of a Government entity
  • and is funded by taxpayers or tolls
  • Such forgiveness will enable repairs, upgrade or necessary extensions of the impacted infrastructure

This is necessary where local government is near or under water or there has been a disaster.

Engineering Appraisal

Each project funded by the Infrastructure Bank, shall require engineering appraisals for soundness of design, quality of materials and fitness of project.

Cost Benefit Analysis

Furthermore each project shall have a cost/benefit analysis, and projects where the costs to consumers are higher than the benefits should be nixed.

Environmental Analysis

Environmental effects shall be considered in the Cost Benefit Analysis and in a separate report on the potential impact of projects to the environment. Where there are such impacts the project should not be approved unless appropriate steps are taken to minimize that impact.

Milestone Reviews

Infrastructure projects shall have milestone reviews and not be funded further if they fail them without taking steps to remedy the issues raised. At the milestones Engineers, Cost Analyst and Environmental Engineers shall review the project to determine if it is being built within design parameters.

Sustainment

When a project is completed, the related assets shall be maintained by the appropriate program office. Which program office is assigned to govern that asset shall be part of the initial design, and on project completion the cost for sustaining that asset shall be included in estimates and considered along with the construction costs at each milestone. The Infrastructure Bank shall ensure that infrastructure assets are properly maintained and that projects are initiated at the appropriate time in the assets life-cycle.

Best Practices

Projects, programs and their offices, considered by the Infrastructure Bank shall comply with best practices for program, project and budget management.

Third Party Review

These reviews shall include outside reviews by Engineering, Cost Analysis and Budget Professionals not benefiting in any way from the projects they are reviewing, but retained and paid by the Infrastructure Bank to provide third party review.

Design Standards, interoperability and interconnectedness

The Bank shall work with City Planners and State Authorities to ensure that projects fit in with a broad vision of ultimate capability for infrastructure across the country, are interoperable, inter-connected and networked. They shall work with NIST to ensure that standards are developed and adhered to for all parts of all networked infrastructure. A Joint office of planning shall guide development efforts so they are coordinated. These plans and their requirements shall be developed with bottom up representation of all communities involved and of Engineers representing those communities. They shall be implemented with input, review and revision from those same bodies.

Community Economic Health Appraisals

The Infrastructure Bank will fund some infrastructure projects with an eye on community economic health. Such projects and their sustainment may be paid in a manner to ensure that payrolls are met and people are employed. The Infrastructure Bank shall apprise Community Economic Health and determine what infrastructure investments are necessary to make a community Self Sustaining.

Working with Local Business

It shall work with local business and government to insure that communities around the country have productive industry and employment to sustain local infrastructure. It will also ensure that funds go to those who need them and pass through those who have the business acumen and resources to employ others, without excessively enriching such people at Government expense. Such people should be able to profit from production, capital investment and output, not subsidies beyond what it takes to startup a business.

Funding

When a project is approved, the Infrastructure Bank shall make sufficient funds available for use of the project office at each milestone, for the amounts asked for during the performance period under review. Further funds shall be available as each milestone is passed. An account of how much is spent shall be made during each period of performance. When a project is delivered, if it is self funding, then the infrastructure bank will collect payments for the first year of operations and thereafter only collect repayments of any loan or notes. If it is a zero interest loan project. It may continue to fund operations and collect repayments through tax receipts. If it is a grant based project it will be up to the administrators whether to fund sustainment, and that will depend on Community Economic Health Appraisals.

Further reading.
This page is in first draft status and I'll update it more later.
Sustainable Economic Policy To Date:
Sustainable Economic Policy I
Sustainable Economic Policy II
Sustainable Economic Policy III
Sustainable Economic Policy IV
Sustainable Economic Policy V
Sustainable Economic Policy VI

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