Roads, Freight Transfer to Get Most DOT PABs

TEMPE, Ariz. — The U.S. Department of Transportation expects to allocate about $12 billion of the $15 billion of tax-exempt private-activity bonds it will dole out to road and freight-transfer facility projects. “Within a year or so, we will have run through $12 billion of the $15 billion” of overall volume cap, Jack Bennett, a DOT official who helps oversee the agency’s PAB program, told those attending The Bond Buyer’s Eighth Annual Transportation/P3 Conference last week. “If we [continue] at this rate, sometime in 2009 we should be through the $15 billion national limitation.”The program was established by the Safe, Accountable, Flexible, Efficient Transportation Equity Act: a Legacy for Users, a transportation law enacted in 2005. SAFETEA-LU changed the tax law by adding surface transportation and freight-transfer projects to the list of exempt facilities that may be financed with PABs. To date, the DOT has allocated a total of $1.5 billion of private-activity bonds to two projects, including $900 million for the $1.2 billion Port of Miami Tunnel project, which involves boring underwater tunnels to create a bypass for cruise-bound buses and freight traffic. The departent has also allocated $600 million for a plan by Missouri to repair or replace about 800 bridges. The plan calls for a private-sector partner to handle the construction and operate the bridges for 25 years. The state is currently seeking an additional $100 million of PABs for the plan, Bennett said, adding, “We will be acting on that very soon.”Another six projects have applied for a total of $4 billion of PABs. Two of the six projects — the Capital Beltway high occupancy toll lanes project in Virginia, and the Knik Arm River Crossing in Alaska — will be approved “in a matter of weeks,” Bennett said.The HOT lanes plan, which is seeking an $800 million private-activity bond allocation, will build 14 miles of HOT lanes on the Capital Beltway. A private team consisting of Transurban and Fluor will operate, maintain, and collect the tolls from the HOT lanes for 75 years after construction. The team will also design and build the project at a fixed $1.7 billion within a strict five-year time frame.The Knik Arm crossing is seeking a $600 million PAB allocation to finance construction of a roughly two-mile toll bridge between Anchorage and the Matanuska-Susitna Borough. The two communities are separated by a stretch of Cook Inlet known as Knik Arm. Three Illinois freight transfer projects have applied for private-activity bonds, including facilities in Joliet, Crete, and Will County. They are seeking allocations of $1.1 billion, $500 million, and $591 million, respectively.Lastly, the Texas Department of Transportation is seeking a $288 million allocation for improvements to Interstate 635. Bennett said that there are about 10 other projects, which he did not name, that are expected to seek between $6 billion and $7 billion of PABs. Authorization for the private-activity bond program expires with SAFETEA-LU at the end of fiscal 2009. In order to influence the debate ahead of the expiration of the law, the DOT intends to submit a reauthorization proposal to Congress next spring, Bennett and other department officials said.One thing the proposal may recommend is removing the cap on the PAB program. “The first thing would be to ask either for a new limitation — another $15 billion or $20 billion — or to do away with the national limitation altogether,” Bennett said. Private activity bonds also have other limitations, including an effective ban from being used to finance the acquisition of existing assets.“We are thinking about those issues and seeing if there is anything we might do to address some of those things that apply generally to [PABs] and make them easier for transportation projects,” Bennett said. “We are not sure we will do that. We would have to first discuss all this with” the Internal Revenue Service and the Treasury Department.