Trump administration pushes for more private activity bonds

Kent Nishimura/Bloomberg

The U.S. Department of Transportation is urging the Senate to increase the private activity bonds cap in the next surface transportation bill and expand TIFIA and RRIF project eligibility in a bid to boost private investment in transportation projects.

"Our nation's infrastructure, including our airports, needs further investment," transportation secretary Sean Duffy said in a Wednesday letter to the six senate leaders who will craft the next five-year transportation bill. "The private sector can unlock funding for improvements to transportation projects of regional and national significance."

PABs are a key financing tool for public-private partnerships, as are the Transportation Infrastructure Finance and Innovation Act and the Railroad Rehabilitation and Improvement Financing loan programs. The current five-year transportation law, the Infrastructure Investment and Jobs Act, doubled the private activity bond ceiling to $30 billion.

But the DOT has already hit the limit and the Build America Bureau, which oversees the program, estimates the pipeline of projects at $50 billion.

The IIJA expires Sept. 30. The House Transportation and Infrastructure Committee has crafted and passed its own version, the $580 billion Build America 250 Act, without the funding provisions. The House Ways and Means Committee is responsible for the funding portion and would be the committee in charge of the PABs cap.

The Senate, meanwhile, will make its own stamp on the bill. Senate Democrats in June sent a letter to Senate leaders that urged them to prioritize affordability and safety, reduce political interference and address the nation's maintenance backlog. It did not mention the PABs cap or TIFIA or RRIF loan programs.

Duffy's letter, which was reported by Punchbowl News, asks senators to expand the PABs limit "with conforming eligibility" with the TIFIA and RRIF programs, "except for transit-oriented development and airports."

The administration asked senators to remove the Sept. 30 sunset on the IIJA provision that expanded TIFIA program to airports, and expand the current "limited" definition "so more project sponsors can finance critical infrastructure."

The bill should also lift the RRIF Program cap to $50 billion from $35 billion, in part to help fund the renovation of New York's Penn Station. Congress should also remove limitations on rail shipper access to RRIF financing for facilities along the national rail network to "open significant new opportunities to attract private investment and enhance supply chain connectivity," the letter said.

Duffy also said the next bill should axe the transit account in the Highway Trust Fund, which funds transportation projects, in an effort to whittle away at the fund's decades-long structural deficit. "Neither transit systems nor transit users pay into the Highway Trust Fund, despite its continued shortfalls," Duffy said. "We propose eliminating the Mass Transit Account and consolidating all Federal fuel tax revenues into the Highway Account. This will re-establish a direct user-pays model and address the Fund's looming structural deficit."

The letter did not specifically weigh in on the House's proposal to impose an annual registration fee on hybrid and electric vehicles to shore up the trust fund.

The administration also proposed establishing a new interstate competitive grant program that would fund projects that expedite the completion of unfinished segments of future interstate corridors and expand existing interstates to provide at least three lanes of traffic in each direction, as well as a separate grant program to fund projects that address "significant freight bottlenecks" on highway interchanges.

The Senate should eliminate at least 12 grant programs created in the IIJA, Duffy said, including the $5 billion National Electric Vehicle Infrastructure program. "The program activities are market distorting, and funding EV charging infrastructure is not an Administration priority," Duffy said, recommending that Congress rescind the unobligated money.

Congress should allocate an additional $1 billion in Federal-State Partnership for Intercity Passenger Rail Grant Program funding for the renovation of New York's Penn Station and allow Amtrak to enter into agreements requiring payments in lieu of taxes.

Other policy targets include giving DOT the ability to condition transit funds on whether a system is able to prove it has made its system safer for passengers and workers, Duffy said.