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Infrastructure

Retiring AASHTO Leader Pushes Tax-Credit Bonds

WASHINGTON — The executive director of a transportation group is going out with a bang, spending the final weeks before his planned retirement pushing Congress to make authorize $50 billion of tax-credit bonds and to change fuel tax policy.

Speaking at the Transportation Research Board’s annual meeting Wednesday, American Association of State Highway and Transportation Officials Executive Director John Horsley said Congress should pass the Transportation Regional Infrastructure Project or TRIP bond legislation introduced last session by Sens. Ron Wyden, D-Ore. and John Hoeven, R-N.D.

That bill, which failed to make headway last year and has not yet been introduced in the 113th Congress, would provide every state with up to $1 billion over six years for these taxable, tax-credit bonds to be invested in transportation.

Wyden has said the TRIP bonds, subsidized by customs fees and issued by state infrastructure banks, would cost the government only $12 billion over a decade and would therefore be cheaper than a reauthorization of direct-pay Build America Bonds, for which issuers receive subsidy payments from the Treasury. Investors have traditionally had a lukewarm reaction to tax-credit bonds. The Bond Dealers of America told lawmakers last year that while the BAB program was in effect, issuers, who were given a choice of issuing tax-credit or direct-pay bonds, only issued direct-pay bonds.

AASHTO strongly supported the initial push for TRIPS, and Horsley is making another run at them just before his scheduled retirement next month. Horsley said a TRIPS bill would serve as an economic stimulus and be a boon to state departments of transportation.

“This program would create thousands of jobs, stimulate economic recovery, and improve mobility in every state,” said Horsley.

A separate but similar approach to transportation finance emerged last month, when Los Angeles County Metropolitan Transportation Authority announced it would spearhead a push for a $45 billion, ten-year tax-credit bond program.

Horsley also warned the TRB audience of a looming “fiscal cliff” for transportation finance, and said Congress should head it off by passing legislation to convert the 18.4 cents per gallon federal excise tax on fuels to sales taxes on gasoline and diesel. Congressional Budget Office forecasts show that the federal Highway Trust Fund, which states rely upon to back grant anticipation revenue vehicle or Garvee bonds, could become insolvent by October 2014. If that happens, federal surface transportation investment could fall to a fraction of its current levels, AASHTO projects.

Horsley told the TRB that a sales tax of 8.4% on gasoline and 10.6% on diesel fuel could bring in about $60 billion annually by 2018, and would amount to more than a $100 billion increase in Highway Trust Fund receipts between 2013-2018 versus the current 18.4 cents per gallon tax. The approach taken by the most recent transportation funding law, which used U.S. general fund transfers to keep the trust fund solvent, is not sustainable, Horsley said. The fund currently spends $15 billion more each year than it takes in, and rating agencies have downgraded or placed on negative outlook billions of dollars of Garvee bonds due to a lack of clarity about how they will be backed in the future.

“Fully supporting the program through highway user fees, rather than through transfers from the U.S. Treasury, would reduce the federal deficit by $150 billion over 10 years,” Horsley said. “The cost of the reform to taxpayers would be less than $1 per week, per vehicle.”

“AASHTO is working with the Americans for Transportation Mobility Coalition led by the U.S. Chamber of Commerce to develop bipartisan support for the concept in the Senate,” AASHTO said in a release.

Horsley, who has led AASHTO since 1999, officially retires Feb. 1. Frederick G. “Bud” Wright was named AASHTO’s new executive director in November 2012.

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