Financial District: Hurry up and wait
“I would like to see different flavors of BABs created. That would allow us to adjust the subsidy and give, for example, transportation infrastructure investment a larger subsidy than other types of projects because transportation projects typically create more jobs and other public benefits.”
“I would like to see different flavors of BABs* created.”
— Sen. Ron Wyden, D – Oregon
Currently, state and local governments can issue an unlimited amount of BABs to finance capital expenditures with the option of receiving direct federal payments equaling 35% of their interest expense. By mid-December, only eight months after ARRA’s enactment, issuers had sold more than $64 billion of direct-pay BABs, according to Thomson Reuters.
Airports want Congress to extend the temporary alternative-minimum tax exemption for private-activity bonds, saying the AMT exemption saved airport bond issuers millions of dollars and kept some projects from being halted. Issuers had sold $5.4 billion of AMT-exempt airport PABs as of Dec. 11, according to Jane Calderwood, vice president for government and political affairs at Airports Council International-North America. The debt supported projects at 35 different airports, she said. McCarran International Airport in Las Vegas was in the midst of a $2.5 billion project and “would have had to close the door” on it, but the AMT exemption enabled them to sell $550 million of debt to keep it alive, Calderwood said.
Another ARRA program will result in one of the most-anticipated announcements of the winter: the Federal Railroad Administration’s choice of a state or states to receive $8 billion in high-speed rail funding that was authorized under the law. The FRA received 259 applications for projects totaling $57 billion. Already, lawmakers are appropriating funds to build the high-speed rail network, which the U.S. High Speed Rail Association recently said will cost $600 billion to complete. Tacking onto the initial ARRA investment and following the designation of 11 high-speed rail corridors, Congress last month approved $2.5 billion for high-speed rail projects in its fiscal 2010 transportation appropriations bill.
The FRA’s administrator Joseph C. Szabo said recently the Obama administration is evaluating high-speed rail proposals in keeping with its “desire to lay the groundwork for a truly national high-speed and intercity passenger rail program.”
But the lingering, crucial problem for transportation officials — how to generate revenue for federal and state transportation trust funds — is not likely to be solved soon, according to sources.
Only one multi-year surface transportation authorization has been introduced so far, by House Transportation and Infrastructure Committee chairman James L. Oberstar, D-Minn. It does not yet include a tax title establishing a revenue source for the program. The bill would establish a bond-related metropolitan mobility program for metro areas with more than 500,000 residents, including the establishment of metropolitan infrastructure banks.
Oberstar said that $1 billion of federal funds would be provided for the metro mobility program.His bill also would merge more than 100 federal transportation funding categories into four major programs, and create a federal P3 office to oversee and approve state and local governments’ tolling of highways financed with federal aid.
Transportation advocates have all but placed bets on the nation moving toward a mileage tax to replace the current revenue source, gasoline and diesel fuel taxes and vehicle-related fees. But White House officials have stated emphatically that they will not consider a new transportation tax in a struggling economy.
The delay in finding a new revenue source could spark more participation from the private sector and more public-private partnerships. If Congress does not raise fuel taxes significantly, states and localities will look more and more to the private sector for capital to support their needs, said Jack G. Finn, senior vice president and national director of toll services of HNTB Corp. But commenting on prospects for a gas tax increase, Finn said, “I think that’s doubtful.”
One potential mechanism to pay for infrastructure is a national infrastructure bank, which has been proposed by congressional lawmakers and the White House, among others. However, the current multi-year transportation proposal does not yet include such a bank, and Congress voted not to appropriate any money for it this fiscal year, opting instead for the bank to be created under the authorization process. Additionally, transportation experts have warned that a bank would not be a cure-all for funding woes.
“An infrastructure bank is not a substitute for money,” said Joshua Schank, director of research for the Bipartisan Policy Center’s National Transportation Policy Project, which is pushing for a performance-based federal policy and wants tolling — particularly congestion pricing — to play a larger role in transportation finance.v
Editor’s Note: Bond Buyer is a SourceMedia publication. SourceMedia is owned by Investcorp, which also owns Randall-Reilly, the parent company of Better Roads.
MORE FROM Financial District
- Sydney uses water curtains to alert drivers to stop (VIDEO)817 Views
- Obama signs memorandum to expedite infrastructure projects625 Views
- Florida’s Red Light Camera Game: G R E E N orange R E D332 Views
- Big four cellphone companies jointly launch anti-texting campaign267 Views
- Acceptance of connected vehicles depends on cost, LaHood says258 Views