Pennsylvania Gov. Edward G. Rendell warned yesterday that the national infrastructure reinvestment bank is in danger of being tabled as an option for states and localities to finance projects.
Meanwhile, the Securities Industry and Financial Markets Association sent letters urging congressional leaders to consider including in economic stimulus legislation a repeal of the alternative minimum tax for private-activity bonds. The group said the AMT is costly to issuers.
Speaking at a forum sponsored by the Brookings Institution, Rendell said he has heard that the infrastructure bank proposal has lost traction "in the scuttlebutt" surrounding the forthcoming economic recovery or stimulus bill that congressional leaders and President-elect Barack Obama are drafting. If an infrastructure bank is not written into stimulus legislation, then "we need to do it right afterward," he said.
Obama cosponsored legislation that was introduced last year by Sen. Christopher Dodd, D-Conn., to establish a national infrastructure bank that would issue up to $60 billion of taxable tax-credit bonds to help finance improvements or additions to public amenities such as mass transit networks, roads, bridges, and drinking or wastewater systems.
Aides to Dodd, chairman of the Senate Banking Committee, and other lawmakers and lobbyists, either could not confirm Rendell's comment or could not be reached for comment.
"This is not time to do business as usual," Rendell said. He added that lawmakers should "give the infrastructure bank $6 billion to raise capital" and consider enlarging programs like the Transportation Infrastructure Finance and Innovation Act - which gives low-interest credit to public and private entities for projects - and private activity bonds. Lawmakers should limit or eliminate earmarks, which are targeted funding for pet projects, and should include "use it or lose it" deadlines on stimulus funding, he said.
Rendell said he worries that an economic recovery bill containing even $100 billion of infrastructure funding could actually wind up being detrimental to the long-term advancement of the nation's infrastructure.
The massive short-term appropriation would "cause a box to get checked off" in the minds of lawmakers or the administration, who might then drop any further interest in infrastructure, which currently has $1.6 trillion of funding needs, he said.
The governor spoke before a panel on long-term and immediate investment in infrastructure including water and wastewater, broadband, energy transmission, roads and bridges, and transit.
Bruce Katz, vice president and director of the Metropolitan Policy Program at Brookings, who introduced the panel, said stimulus funding for infrastructure will generate new jobs and recover lost ones. Infrastructure provided about 8.6% of all U.S. employment in November 2008, down 4% from the same time the previous year, he said.
Panelists who represented state, regional, and federal decision makers stressed that infrastructure funding will need to be more regional and collaborative in the future.
Deb Miller, secretary of the Kansas Department of Transportation said, states sometimes fail to consider that what would be to their benefit is not always what is within their borders. Miller also called the Bush administration's push for more state control of transportation financing an "absolute disaster for our country."
Rendell offered an example of regional, federal, and interstate collaboration - the National Gateway Initiative, a six-state public-private freight rail partnership with CSX Corp. for which Pennsylvania last month committed $35 million in funding over three years.
In the letters to lawmakers on the AMT, Scott DeFife, SIFMA's senior managing director of government affairs, said: "In a time of severe fiscal and budgetary challenges, repealing the AMT for private-activity bonds, including outstanding bonds, and refinancings, conversions, and remarketings of outstanding bonds, is a sensible and efficient way to help state and local governments work within existing markets and regulations to access affordable financing for projects, which not only serve a public purpose, but also create jobs for communities."
SIFMA noted that historically, AMT bonds have paid a premium of 25 to 30 basis points over non-AMT bonds, but recent market turmoil has driven that spread as high as 100 basis points. "The AMT premium has made it difficult for state and local issuers to meet the financing needs of their communities," DeFife said.
On Friday, Ways and Means Committee members Reps. Richard Neal, D-Mass., and Paul Ryan, R-Wis., re-introduced a bill that would exempt PABs from the AMT. Neal had introduced the bill late last year.
Sens. John Kerry, D-Mass., Olympia Snowe, R-Maine, and Blanche Lincoln, D-Ark., introduced a similar measure earlier this month, hoping it will be included in the stimulus package.
The AMT, which applies to interest earned on private-activity bonds and some governmental and 501(c)(3) bonds, was created to prevent high-income households eligible for tax breaks from paying little or no taxes.
