WASHINGTON — As Congress prepares to craft long-term infrastructure funding legislation, cities are turning to other funding sources to finance much needed projects.
At a U.S. Chamber of Commerce meeting Tuesday, city leaders said they're finding innovative ways to fund local necessities such as parking structures, roads and affordable housing through public-private partnerships. Muni market participants are looking to the transportation funding debate in Congress as an avenue to expand the use of municipal bonds by reviving advance refundings and creating new federally-subsidized bond programs, among other things.
Talk about a possible federal infrastructure plan is on the table for the third consecutive year, as the country looks to fill a $2 trillion shortfall from existing revenue sources for infrastructure at large, said Rep. Peter DeFazio, D-Ore., and chair of the House Transportation and Infrastructure Committee.
DeFazio stressed the importance of investing in infrastructure and was hopeful that President Donald Trump would mention infrastructure in his State of the Union Tuesday night.
Though DeFazio sees public-private partnerships as a viable option, he said it won’t work everywhere.
“P3’s are a tool, but they’re not going to get us there,” DeFazio said. “We need a federal government making substantial investments in a national transportation system, not state by state.”
However, cities are turning to P3’s to fund streets, parking and affordable housing, such as Ferndale, Mich. where Councilwoman Melanie Piana is leaning on P3’s to fund a parking structure with office space, retail and affordable housing. Ferndale, with a population of about 20,000 is on the outskirts of Detroit.
Monday night, Ferndale’s city council approved a $20 million bond for the project.
“We have been pushing to do a mix use development on the spot and it has taken us seven years to get here,” Piana said.
The municipal market needs to look at large scale projects, but remember smaller and medium-sized communities, said Alan Polsky, senior vice president of Dougherty & Company LLC and member of Bond Dealers of America.
Polsky said private activity bonds have a place in the market, but also said there is a place for direct pay bonds and bank-qualified bonds. Polsky said also wants to bring back advance refunding, which went away with the Tax and Jobs Act in 2018.
“Direct pay bonds really allow municipal borrowers to access the taxable market using a subsidy that comes directly from the government,” Polsky said. “They can broaden their audience and the market should have as many useful investors as they can.”
For 2019, Polsky says the market still benefits from low-interest rates and sees cities looking to do more with affordable housing. He added as cost of living increases, cities will have to find innovative ways to develop affordable housing.
Polsky said it’s important to protect current financing tools.
For now, Piana wants a stronger partnership when it comes to funding her cities’ projects.
“All cities are looking to the federal government to be a stronger partner,” Piana said.
