WASHINGTON — The nation’s governors are urging House and Senate conferees working on a final highway bill to avoid doing anything that would restrict flexibility for tax-exempt financing or have a chilling effect on public-private partnerships.

The National Governors Association made the plea in a letter sent to leaders of the conference committee, Sen. Barbara Boxer, D-Calif., and Rep. John Mica, R-Fla..

The group asked the committee to embrace a range of bond-friendly provisions included in the Senate transportation bill and to reject some proposals deemed unfriendly to highway P3s.

The committee officially convened last week and is tasked with creating multi-year surface transportation legislation that can win approval in both chambers before the current funding law expires June 30.

The letter expresses support for some of the causes most championed by municipal market groups, including raising the limit on bank-qualified bonds for small issuers to $30 million from $10 million through July 2013, and exempting private-activity bonds issued this year from the alternative minimum tax.

The governors also are pushing for provisions that would exclude water and sewer facilities from the PAB cap, authorize state infrastructure banks to issue tax-credit bonds for infrastructure projects, and expand federal loans for transportation projects under the Transportation Infrastructure Finance and Innovation program. Only the Senate measure has the bond provisions, but bills in both chambers have expressed strong support for increasing TIFIA funding.

“Governors support investments in infrastructure projects through existing and new self-sustaining financing mechanisms to help mitigate public funding shortfalls,” the letter reads.

The NGA urged lawmakers to prevent language in the Senate bill championed by Sen. Jeff Bingaman, D-N.M., from making it into the final transportation bill. Those provisions would prevent private-activity bond financing of highways leased to private companies, and also would prevent the federal government from taking such highways into consideration when calculating how much federal money a state should receive.

Bingaman has said these are common-sense provisions that would protect taxpayers from exploitation by private companies through tolling. Though the letter states that the NGA understands the intent of the language to “prohibit federal subsidies to private investors,” it further explains that “governors are concerned that proposals governing public-private partnerships would limit state flexibility to use this tool by chilling investor interest.”

The NGA also said it supports maintaining the current dedicated funding levels for public transit. An earlier version of Mica’s bill proposed to eliminate public transit funding from the Highway Trust Fund and replace it with a one-time appropriation. That move proved extremely controversial, and state and local officials worried about the potential for bonds backed by federal mass transit money to receive downgrades. Mica withdrew that provision and his bill was replaced by a measure that extended the current highway funding law.

The letter concludes with an appeal to supply state governments with the power to meet the needs of their citizens, and strive for “intergovernmental partnership, not top-down mandates.”

“Governors believe that states, not the federal government, should establish specific performance targets that track national goals, and that performance metrics must be clear, measurable, customer-focused and attainable,” the NGA said.

Overall, the group hopes passage of a bill will finally restore stability to state planning, which it said has been hampered by the failure of Congress to approve new multi-year legislation since the previous such bill expired Sept. 30, 2009.

“Since the expiration of the last federal authorization three years ago, states have executed surface transportation plans and delivered projects under a cloud of short-term extensions,” the NGA said. “We look forward to working closely with all conferees to help advance a new authorization that delivers a comprehensive national strategy for surface transportation infrastructure.”

Also receiving copies of the letter were congressional leaders not serving as conferees, including House Speaker John Boehner, R-Ohio, House Minority Leader Nancy Pelosi, D-Calif., Senate Majority Leader Harry Reid, D-Nev., and Senate Minority Leader Mitch McConnell, R-Ky.

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