WASHINGTON — Sen. Ron Wyden is pushing for the highway and transit reauthorization bill to authorize a certain amount of TRIPs — tax-credit bonds that could be used for transportation projects.
Joshua Sheinkman, a Wyden staffer, urged a group of state transportation officials at a Washington conference Monday afternoon to support the Oregon Democrat’s efforts to authorize state infrastructure banks to issue transportation and regional infrastructure project, or TRIP, bonds for projects that would otherwise be funded through the gas-tax-fueled Highway Trust Fund.
The trust fund is facing insolvency in coming months, according to a recent report by the Congressional Budget Office.
Wyden and Sen. John Hoeven, R-N.D., have proposed amending the $109 million, two-year highway and transit reauthorization bill pending in the Senate to authorize the state banks to issue up to $500 million per state of TRIP bonds over the two years. That bill is sponsored by Sen. Barbara Boxer, D-Calif.
Wyden and Hoeven have a five-year TRIP bond bill pending in the Senate, but created the scaled-back, two-year amendment version to fit the timetable of Boxer’s bill. However, Sheinkman said the amendment, if passed by the Senate Finance Committee, is only a “placeholder” generally authorizing the proposal but devoid of specific dollar amounts. Participation would be “totally voluntary,” Sheinkman said, and states could combine their authorizations with neighboring states for regional projects.
Wyden has argued that since both the hugely popular Build America Bonds and a federal gas tax increase have become politically infeasible, the TRIP bond proposal is a realistic way to tackle the nation’s infrastructure funding challenges. Since the bonds would offer investors a tax credit on interest earned, instead of tax-exempt interest, the program would also be far less costly to the government, he contends.
There are some obstacles in the way, despite the support of the American Association of State Highway and Transportation Officials, which hosted the conference.
Eighteen states have not set up or used infrastructure banks, so some attendees were skeptical the proposal has much to offer them. But Sheinkman said the amendment contains a provision allowing states a certain amount of time to create an infrastructure bank if they do not have one.
Another problem is the lukewarm reception market participants traditionally have had for tax-credit bonds, a stark contrast to the popularity of direct-pay bonds. While Congress, in the American Recovery and Reinvestment Act, permitted issuers to sell BABs as tax-credit or direct-pay bonds, the only ones issued were direct pay.
With the Senate returning to work on the highway and transit bill in coming days in an effort to approve a final bill ahead of the March 31 expiration of the current law, Sheinkman said there is only a small window of time to get TRIPs included in the final bill.
Geoffrey Yarema, a partner at the law firm Nossaman LLP, said the outlook for innovative or nontraditional financing methods is mixed under Boxer’s bill and the five-year, $260 billion measure sponsored by House Transportation and Infrastructure Committee chairman John Mica, R-Fla.
Yarema gave high marks to both legislative plans for proposing to increase funding for the Transportation Infrastructure Finance and Innovation Act, and for containing provisions increasing from 33% to 49% the portion of a project’s cost federal TIFIA assistance can cover.
However, Yarema wasn’t as keen on prospects for the use of private-activity bonds for highway finance. The existing highway funding law authorized $15 billion of PABs for highways, about half of which has been used so far. While the Senate bill as amended in the Senate Finance Committee would exempt PABs from the alternative minimum tax through fiscal year 2012, industry advocates are fighting to make that exemption permanent. Furthermore, Yarema said, the current $15 billion cap should be lifted.
Yarema gave very low marks to a Senate provision added by Sen. Jeff Bingaman, D-N.M., that would disallow PAB financing of highway property leased to private interests.
“This would reduce the tax benefits available to private equity for brownfield projects that would be passed through to the public owner in the auction,” he said.
Yarema also took issue with provisions in Mica’s bill calling for increased federal oversight of public-private partnerships. If it became law, the bill would provide for the Department of Transportation to encourage P3 development by creating model P3 agreements for states.
“These provisions would establish a slippery slope toward stronger federal regulation of P3 contracts, and should be resisted,” Yarema said.
With his bill under fire from many quarters and House leaders suggesting it might be drastically overhauled in the coming days, Mica defended his legislation in a speech to the conference on Tuesday.
“I think it’s the best bill in history, as far as getting transportation done forward,” Mica said. Mica said he spoke to House Speaker John Boehner, R-Ohio, last night and discussed “a host of options.”
A Republican aide said Monday that the bill’s time frame could be scaled back to as short as 18 months, though Mica said he wants the longest term bill possible.
Mica maintained that his legislation, though it strips mass transit of dedicated funding, is the best proposal on the table.
He claimed the six-year plan included in President Obama’s budget and championed by Transportation Secretary Ray LaHood is dishonest, and criticized LaHood for blasting his own proposal in favor of Obama’s “smoke-and-mirrors, cockamamie” plan to pay for transportation with savings from the end of the Iraq war.
“It’s a mirage,” Mica said.