Legislation that would establish a national infrastructure bank that could issue up to $60 billion of taxable tax-credit bonds to help finance publicly owned infrastructure projects could be taken up for a vote by the Senate Banking Committee as soon as next month, panel chairman Sen. Christopher Dodd, D-Conn., said yesterday.
The committee could vote on the bill "sometime in the next month or so," Dodd said after a committee hearing on the condition of the nation's infrastructure and financing options to improve it.
Under the measure, which was cosponsored by Sen. Chuck Hagel, R-Neb., state departments of transportation or other public authorities seeking to build or upgrade mass transit networks, housing properties, roads, bridges, or drinking and wastewater systems would apply to the bank for funding.
A project would have to cost at least $75 million to be eligible for bank aid. If a project is approved for funding, the bank would develop a financing package that could include tax-credit bond financing. The bank would not be permitted to have more than $60 billion of bonds outstanding at any given time and could issue bonds specifically for a single large project or for several smaller projects.
The bill also would allow for the tax credit to be stripped from the underlying principal of a bond and the components to be traded separately. De-coupling, or stripping, the principal from the tax credit is important because it would make the bonds easier to sell, according to committee aides. For example, depending on market conditions, the tax credit could be sold to a corporation that has a large tax liability it wants to shrink, while the principal could be sold as a zero-coupon bond to an investor such as a pension fund.
The bank also would be able to provide assistance to a public authority seeking private capital for a public-private partnership, or P3.
The idea of increased private investment appealed to the panel's ranking member, Sen. Richard Shelby, R-Ala., who said that increasing the 18.4-cent tax on gallon of gasoline, the primary way federal transportation funding is generated, is not likely to happen any time soon.
"I have no illusion about us passing more taxes ... for our infrastructure needs," Shelby said. "I don't think Congress is going to be in the mood to do this because you add that to the cost of energy today, as oil has passed $100 a barrel and probably is going up."
Shelby said Alabama is considering private investment to supplement state and federal transportation funding. For example, the Legislature is considering a bill introduced by state Rep. Terry Spicer, D-Elba, which would allow the state Department of Transportation and the Alabama Toll Road and Bridge Authority to enter into P3 projects.
"Well, I hope my state of Alabama moves that way fast," Shelby said.
Dodd said that his legislation is designed to put a structure in place that, in addition to providing direct funding to needed projects, would also attract private investment by setting up a reliable public partner.
Tracy Wolstencroft, managing director and head of public sector and infrastructure banking with Goldman Sachs & Co., who appeared before the panel, said that the public funding from the bill would work with private funding so long as the project being financed had a revenue stream, such as a toll.
"At the end of the day, that [private] capital needs to be paid back." said Wolstencroft, who added that improving infrastructure will require tapping all available sources of capital, including tax-exempt debt, federal government funding tools, and private-sector funds.
Dodd said he is building support for the measure and earlier this week spoke with Pennsylvania Gov. Edward G. Rendell, who leads Building America's Future, a bipartisan coalition of public officials calling for increased federal funding of the nation's infrastructure.
"This is one of those ideas that may have some legs, even in an election year," Dodd said.
Other supporters of the bill include the U.S. Chamber of Commerce, the AFL-CIO, and the American Society of Civil Engineers.
