Bill May Add New Wrinkle to Project Finance

Infrastructure projects would acquire a new source of funds under a bill that would allow investors to make tax-deductible contributions to approved projects.

The legislation, introduced Wednesday by Rep. Geoff Davis, R-Ky., would amend the federal tax code to allow local governments and planning authorities to create “regional infrastructure improvement zones” encompassing surface transportation, drinking water, waste water, and storm water infrastructure projects.

Once an RIIZ was established, corporations or individuals could make tax-deductible donations to the project, and then write the money off as a business expense.

“Improving our failing and out-of-date infrastructure is imperative to our long-term economic growth,” Davis said. “With federal, state and local budgets already stretched thin, creative solutions are needed to maintain and improve our infrastructure.

“RIIZs are a local and regional tool to incentivize private-sector investment, move infrastructure projects forward and enable additional job creation.”

Establishing an RIIZ would require interested party to petition their local authority to set up a zone. The authority would then examine the proposal to determine if it fits with pre-approved long-range regional plans.

Once approved, the RIIZ would file certificates with the secretary of state and  attorney general. Only then could taxpayers begin making approved tax-deductible payments toward projects within the zone.

The proposed law has the backing of the National Association of Regional Councils, an advocacy group that favors regional approaches to financial and governmental challenges.

“We commend Congressman Davis for his leadership in the introduction of the RIIZ legislation,” said Ohio-Kentucky-Indiana Regional Council of Governments Board president Edwin Humphrey. “RIIZs represent a remarkably innovative financing measure that will assist local and regional entities in meeting their growing infrastructure needs.”

David Seltzer, co-founder of Mercator Advisors LLC, said the bill is narrowly tailored so that it’s unlikely to supplant municipal bonds and other more familiar methods of infrastructure finance.

“I don’t see it dramatically affecting the way in which infrastructure projects are financed generally,” Seltzer said. “I think the muni bond market is safe from being rendered obsolete by this legislation.” 

The bill has been referred to the House Ways and Means Committee, of which Davis is a member.

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