DALLAS - Larger federal loan programs and a higher cap on tax-exempt private activity bonds would increase investor interest in transportation-related public-private partnerships, state and local officials said Wednesday at a House hearing.
The P3 Panel of the House Transportation and Infrastructure Committee held the hearing, its first, as part of the process of renewing the federal surface transportation funding bill that will expire on Sept. 30, the end of fiscal 2014.
PABs and Transportation Infrastructure Financing and Innovation Act (TIFIA) loans help keep investors' borrowing costs low on large projects, said James Bass, chief financial officer and interim executive director of Texas Department of Transportation.
"Federal tools like TIFIA and PABs add to our tool box to leverage the ever-shrinking fuel tax receipts," Bass said. "The private sector is flush with funds to invest in infrastructure projects and it is Congress' duty to continue to create an environment for those funds to be utilized to build and maintain our vast transportation network."
If TIFIA funding is not increased in the next highway bill, Bass said, the program should least be maintained at the fiscal 2014 level of $1 billion per year, he said "We view TIFIA as a critical component in the delivery of our larger scale projects," Bass said.
Phillip Washington, executive director of Denver's Regional Transportation District, said PABS are "a very valuable tool that we recommend be not only preserved, but expanded, in the future."
P3 projects would benefit if Congress significantly increased the capacity of the TIFIA program, Washington said. "If it could be increased, that would be great," he said. "I'm not sure what the right size is, but doubling it would be nice."
President Obama's fiscal 2015 proposed transportation budget released earlier this week would increase the special cap on transportation-related PABs to $20 billion a year from the current $15 billion. The four-year spending plan would keep TIFIA funding at $1 billion per year.
Texas projects have received a total of $4.2 billion of TIFIA loans since the program began in 1998, Bass said, including three of the largest loans to date. The loans have leveraged a total of $13 billion in state, local, and private investments, he said.
"These projects have been critical to relieving congestion and contributing to efficient movement of goods in heavily populated areas of the state," Bass said.
PABs have been crucial to the success of the Denver district's transit projects, Washington said. A $2 billion rail system saved $400 million in interest over the life of the project with a $380 million tax-exempt PAB issue, he said.
"In addition to the lowered cost of capital provided through PABs financing, they reduced market capacity concerns about raising the amount of private capital required," Washington said. "We strongly urge Congress to continue providing a robust TIFIA program and to preserve and expand PABs, the financing tools that make innovative P3s possible."
P3 projects can be completed quicker and cheaper than conventional bond financing allows, Bass and Washington said, but Joseph Kile of the Congressional Budget Office said the benefit is slight at best.
"On the basis of evidence from a small number of studies, it appears that such partnerships have built highways slightly less expensively and slightly more quickly, compared with the traditional public-sector approach," said Kile, assistant director of microeconomics studies at CBO.
The private funding of a P3 project costs about the same public funding, he said, when the associated risks and the financial transfers from the federal government to states are considered.
