DALLAS – Legislation introduced by a bipartisan pair of senators could offer more financial options for public-private partnerships through a combination of a new class of private activity bonds and expanded tax credits.
Sens. John Hoeven, R-N.D., and Ron Wyden, D-Ore., said their Move America Act (S. 1229) would enable states, localities and their private sector partners in infrastructure projects to leverage $8 billion of federal investment into $226 billion of bond authority over the next 10 years or up to $56 billion in tax credits over the same period.
The legislation introduced on May 25 could provide an avenue to accomplish the reliance on private investments in President Trump’s infrastructure renewal program, Hoeven said.
The tax-exempt bonds and tax credits authorized by the Move America Act “brings a sustainable and flexible approach to help states build vital projects, like permanent flood protection, roads, bridges, airports and information networks,” he said.
Greater use of private capital through public-private partnerships would be a helpful complement to increased federal infrastructure spending, Hoeven said.
“Congress continues working with the administration on an infrastructure package to revitalize America’s infrastructure and Move America should be a part of this effort, providing a cost-effective complement to public funding,” Hoeven said. “The administration’s budget proposal supports tax-exempt financing for infrastructure.”
The infrastructure crisis requires an “all hands on deck” approach with increased financial options, Wyden said.
“Move America gives local leaders the flexibility to quickly and efficiently jump start infrastructure projects in their own back yard,” he said. “Leveraging this community investment will revitalize the ports, airports, and other gateways of commerce needed to move our economy forward.”
Qualified facilities for Move America Bonds include highways and freight transfer facilities, airports, passenger and freight rail, coastal and inland waterways, and water systems.
Under the proposal, each state would receive an allocation of the new Move America Bonds equal to half of their current annual PAB cap. The annual allocations would expire after five years, with any unused capacity then made available to states that have used theirs up.
The bonds would be exempt from the alternative minimum tax.
“This eliminates the interest rate penalty placed on states for public projects with private partners,” stated a fact sheet on the proposal.
The Move America Bonds would be treated as exempt facility bonds, but the government ownership requirements would not apply.
Smaller states could trade in some or all of their bond allocations for tax credits, at a rate of $1 for each $25 of bond allocation that it gives up. The credits could be used in combination with Move America Bonds or other federal grant or credit assistance programs to finance projects.
The tax credits could be provided to investors in qualified projects. The credits would be paid over 10 years, beginning when the facility is placed in service. The credits made available for equity investments in an infrastructure project would be limited to no more than 20% of the total costs.
States could also use the credits to capitalize infrastructure banks or other infrastructure revolving funds that would finance projects without a revenue stream. The revolving funds would have one year following the swap of bonds to tax credits to use the tax credits for a qualified project or they would revert to the bond volume cap as if the transfer never occurred.
The measure is similar to legislation proposed by Wyden and Hoeven in May 2015 that failed to gain traction in Congress.
A fact sheet detailing President Trump’s infrastructure renewal program that was released on May 16 along with the proposed fiscal 2018 budget called for lifting the current $15 billion cap on transportation-only PABs.