AUSTIN – Congress is likely to pass a major infrastructure bill this year that would include incentives for private investments in public roads, bridges, and water systems, according to Robert Poole, director of transportation policy at the Reason Foundation.
"By and large I'm optimistic," said Poole at a keynote address Thursday at The Bond Buyer's Texas Public Finance Conference. "I think we'll see a large infrastructure bill by the end of the year with some significant dollars for public-private mega-projects."
Poole cited a nationwide public opinion poll published in December that found 80% approval for a large infrastructure program, with 74% support for highway projects, 57% in favor of more funding for transit and rail, and 56% backing upgrades to airports.
One of the biggest incentives for private investments that Congress could provide in the next year would be loosening the restrictions on the use of tax-exempt financing for public-private partnerships, Poole said.
"Tax-exempt revenue bonds should be allowed for all P3 public purpose projects," he said. "That could be in the form of the qualified public infrastructure bonds as proposed by President Obama or for allowing the use of private activity bonds for the upgrades of existing infrastructure," he said. "Right now PABs are not available for upgrades of projects built with municipal bonds unless the outstanding debt is retired."
If a state or municipal facility has received direct federal grant funds, a change of use or ownership, such as a long-term lease or concession agreement triggers a grant repayment requirement, Poole said.
Expansion of the credit assistance programs like the Transportation Infrastructure Financing and Innovation Act would be beneficial to Trump's program, as would a shortening of the environmental review requirements that can delay projects for up to 10 years, Poole said.
In addition, Poole said, President Trump has stocked his cabinet with P3 advocates such as Transportation Secretary Elaine Chao and Commerce Secretary-designate Wilbur Ross, who co-authored Trump's 10-year, $1 trillion infrastructure proposal.
But the most important pick may be the selection of former Transportation Department general counsel DJ Gribbin as the president's special assistant for infrastructure, Poole said.
"DJ Gribbin is a strong advocate for P3s and for tolling," he said.
Poole cautioned that the Trump proposal released in late October does not propose $1 trillion of new federal spending and provides no dedicated source of funding.
"It is based on long-term P3 concessions, with federal tax credits for 82% of the equity involved," he said. "The plan focuses on infrastructure with the potential for charging user fees."
The $137 billion of federal tax credits in the Trump proposal are not needed to attract private investments in U.S. infrastructure, Poole said.
"There are hundreds of billions of dollars in infrastructure investment funds around the world that are eager to invest in U.S. projects," he said. "The problem is a paucity of projects."
Extending tax-free financing to more of the national infrastructure would significantly expand the number of potential P3 projects, Poole said.
"We have in this country 130 commercial airports, 47,000 miles of interstate highways, 56,000 municipal water systems, and 99 large ports," he said. "All of them are in need of reconstruction, and all of them can or could charge user fees."
Congress could also give P3s a boost by expanding the Federal Aviation Administration's airport privatization program and allowing states to levy tolls on existing interstates to fund upgrades and expansions of the current network, Poole said.
"It would cost almost $1 trillion to reconstruct the interstate highway system, and tolling the existing system could generate $1 trillion in new revenue," he said. "The original plan in 1956 was to build the system with money from the gasoline tax, and that is what happened. But this is a different country from what it was in 1956."
