Sens. Jeff Bingaman, D-N.M., and Chuck Grassley, R-Iowa, have introduced two bills that pro-tolling market participants worry would put a halt to public-private partnerships for highways.
On the private-sector side, the bills would eliminate many of the benefits that private investors currently receive when they enter into lease agreements and toll highways, and would make such projects ineligible for private-activity bond financing. On the state and local side, the legislation would reduce federal highway funding that states with tolled highways could receive.
Proponents of the measure argue that it would eliminate unfair subsidies to private companies that enter into long-term tolling lease agreements, and would prevent the public from paying twice for the highway - through both taxes and tolls. Opponents say it would chase off much-needed private investment.
Both bills were introduced late last month by Bingaman, who chairs the Senate Finance subcommittee on energy, natural resources, and infrastructure. Grassley, the ranking minority member on the committee, is a co-sponsor of both bills, one of which is pending before the Senate Environment and Public Works Committee and the other before the Finance Committee.
The bill in the Environment and Public Works Committee would require any privately operated or tolled length of highway to be excluded from the state's total highway lane miles that are tallied for the purpose of calculating apportionments to states from the federal highway trust fund. It's not clear when the bill, if approved, would take effect.
"It simply makes no sense that the [toll] road should continue to qualify for highway funding if the road is privately operated," Bingaman said on the Senate floor.
The bill in the Finance Committee would amend 1986 amendments to the Internal Revenue Code to provide special depreciation and amortization rules for highways under long-term leases, essentially to curtail long leases. Lease agreement terms for toll roads can be as long as 99 years and generally must be as long as the "useful life" of the highway - 45 years or more - to allow the private investor to attain certain tax benefits, Bingaman said.
Macquarie Group bought 99-year concession rights to the Chicago Skyway in 2004 for $1.8 billion. A Cintra-Macquarie joint venture bought 75-year concession rights to the Indiana Toll Road in 2006 for $3.8 billion.
"It is true that private lessors are merely following the letter of the law," Bingaman said. "But when cost-recovery rules subsidize forms of investment that contravene the public interest, Congress should change those rules."
The restrictions would take effect for leases entered into after the bill's enactment.
Advocates for public-private partnerships strongly oppose the legislation, saying it too strongly favors tax-exempt financing of state and local highway projects that do not involve private entities.
"What we should be doing right now is leveling the playing field between the public sector and the private sector with respect to the cost of capital for highway projects," said David Horner, senior counsel at the New York office of Allen & Overy.
The legislation "continues a monopoly of public-sector tax-exempt financing that prevents us from benefiting from private capital that has been organized to invest in infrastructure," he contended, adding that states and cities would not be able "to conduct procurements of their choosing" if the legislation is approved.
But Jude McCartin, a spokeswoman for Bingaman, said the intent of the legislation is to "have the tax code reflect what is fair to the taxpayer," because current tax laws "were not written with these kinds of deals in mind."
The generally P3-averse trucking industry supports the measure.
"These public-private partnerships threaten to divide the nation into a patchwork quilt of separate highways with toll booths to slow down the travel from one state to another," said Clayton W. Boyce, vice president of public affairs and press secretary of the American Trucking Association. "After we've seen what happened on Wall Street, this isn't a good time to place your trust in these new schemes to finance highways."
Boyce noted that rural and Western states - such as those that Grassley and Bingaman represent - generally cannot benefit from tolling partnerships as much as urban states because of less traffic.
Asked if Bingaman would seek to include the provisions in an upcoming multi-year highway funding package if the bills are still pending when lawmakers roll out that package, McCartin said the senator "is examining all possible options."