AASHTO Journal, 16 January 2015
President Obama will ask Congress to approve a new type of tax-incentivized bonds that his administration hopes can attract billions of dollars in additional private funds to projects for highways, airports, seaports and other infrastructure.
The White House said the proposal is for Congress to create a financing tool called Qualified Public Infrastructure Bonds, and will send details to Capitol Hill when it releases President Obama’s 2016 budget plan.
A fact sheet describing the QPIB bonding idea and other infrastructure initiatives said its range and incentives would be broader than under a similar program of Private Activity Bonds, which have been used to support more than $10 billion in public-private partnership financing of roads, tunnels, and bridges.
The White House also said this would be just one piece of federal financing for transportation and other needs. “Private capital is not a substitute for public investment,” the statement said. “That’s why the president has repeatedly called on Congress to increase public funding for our highways, bridges, and transit system.”
But while waiting for Congress to craft a long-term transportation bill, it said “there is a real opportunity to put private capital to work in revitalizing U.S. infrastructure.”
Now, P3s that combine public ownership with private sector management and operations cannot take advantage of the tax benefits of municipal bonds, the White House said. Under its proposal, QPIBs will extend those benefits to P3s such as partnerships with long-term lease and management contracts, which would lower their cost of borrowing.
The new bond program would expand the scope of private activity bonds, the White House added, “to include financing for airports, ports, mass transit, solid waste disposal, sewer, and water, as well as for more surface transportation projects.” The QPIB program would have no expiration date or issuance caps, and interest earned on them would not be subject to the alternative minimum tax.
Those bonds would not be available for privately owned facilities or privatizations of public facilities, but the White said the program would “increase private participation in building our nation’s public infrastructure.”
The statement listed some executive actions the administration is already taking to boost infrastructure project spending, including an investment center launched last summer at the Department of Transportation that it said is speeding up some projects and helping would-be investors tap DOT loans.
The administration also plans a March “summit” it said will “bring together over 2,500 leading investors and executives from around the world and connect them with U.S. business opportunities.”