It’s probably not a line that would get 007 any action, but for President Obama, it’s downright cheeky.
In his latest bid to prove once and for all that he really, really supports infrastructure, the President proposed creating a special new class of municipal bonds specifically aimed at public-private partnership (P3) infrastructure investment.
According to a White House statement, these new financial instruments “will extend the benefits of municipal bonds to public private partnerships.” In order to make this sort of investment more attractive, the bonds would not be subject to the dreaded Alternative Minimum Tax, which places a limit on exemptions higher-end earners can claim.
These new bonds will differ from currently available Private Activity Bonds (PABs) in two other major respects: there would be no issuance caps and they can be used to finance a broader range of projects than under PABs, including port, solid waste, sewer, airport and surface transportation. One major condition? The new bonds cannot be used for privately-owned projects or for the privatization of public facilities.
A fairly extensive search for reactions to this proposal revealed virtually no naysayers. Entities ranging from the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association, the Bond Dealers of America, and various members of Congress, all supported the proposal.
So… it obviously doesn’t stand a chance. Well, not so fast.
In the aftermath of the President’s State of the Union address, an unusual amount of bi-partisan chatter seems to be coalescing around infrastructure. Yes, the two parties seem may have drawn battle lines over raising the gas tax, but even the some of the most loyal conservative Republicans have expressed an interest in putting all funding options on the table. Increasing flexibility for P3 financing is one mechanism that generally receives unanimous support.
When discussing the future of infrastructure funding, most advocates use some variation on the theme that “private financing is no substitute for public investment.” That’s true, but success in the DOT TIFIA program demonstrates that every dollar of public financing can help leverage ten times or more additional private investment.
Having sat in DOT leadership meetings in the past several years where we were informed that policy talking points about specific funding options were strictly verboten, I am struck by the creative thinking now being offered openly by politicians on all sides of the debate. I’ll admit, the Administration’s proposal to replenish the Highway Trust Fund with money “saved” by our withdrawal from Iraq never seemed to pass the red-face test. But reforming corporate and foreign investment tax laws to move money directly to the Fund is real, even if analysts disagree about how much would actually be raised by such action.
Creating new investment bonds, with even more flexibility on how they can be used and with substantial tax incentives, is similarly real. That action could also represent a significant political foundation upon which a broader effort to tackle the public financing piece could be launched.
At least until Congress finds a modern-day Goldfinger to finance our nation’s infrastructure deficit, we may be relying on the Qualified Public Infrastructure Bond to save the day.