Some recent events, taken together, provide evidence that policy-makers in the United States are growing more comfortable with public-private partnerships as a vehicle for project delivery, in particular with respect to the nation’s decaying infrastructure and bridging the resultant financing challenges.

Following President Obama’s “Build America Investment Initiative” early this summer, the U.S. Department of Transportation established the Build America Transportation Investment Center (or “BATIC”) that would, among other things, enable non-federal but still public project sponsors the opportunity to “utilize federal transportation expertise, apply for federal transportation credit programs and explore ways to access private capital in public private partnerships.”  If it survives the conference committee, the recently-passed House transportation bill, the “Surface Transportation Reauthorization and Reform Act of 2015,” would create another new entity, the National Surface Transportation and Innovative Finance Bureau.  The Bureau would focus on establishing and employing public-private partnerships (or other “innovative financing”) to deliver the projects themselves.  That there are two new entities focused on project delivery with express mention of accessing private participation in the project is news.

Second, the reconciliation process of the House transportation bill with the DRIVE Act, the Senate’s transportation bill, is being led by U.S. Senator Deb Fischer (R-Neb.).  Senator Fischer is chair of the Commerce Subcommittee on Surface Transportation and participated in passing the DRIVE Act within the Senate this past July and, following her appointment as chair, highlighted the value of the long-term scope of the bill, as well as its effort to “enhance project flexibility for states,” including her home state of Nebraska.  This comes as Nebraska has recently started to examine alternative project financing.  Of note in this process is that both bills fund only three of the authorized six years.  The existing BATIC and the planned “Bureau” likely are envisioned, as a policy matter, to tap private capital for the public infrastructure contemplated for at least part of the unfunded final three years.

Third, the U.S. Internal Revenue Service recently promulgated regulations addressing, among other things, issuing tax-exempt bonds that encourage financing of the public sponsor’s contribution to a public-private partnership.  Under the new regulations, clarification on the limitations of “private use” in the context of mixed-use developments affords the public issuer the ability to finance its contribution to a public-private partnership with tax-exempt bonds.  See 80 FR 65637, preamble, Section IV (The “Final Regulations” are in response to “recognition of the development of various financing and management structures for government … facilities that involve the participation of private businesses, to provide flexibility to accommodate public-private partnerships, and to remove barriers to tax-exempt financing of the government’s … portion of the benefit of property used in joint ventures….”).

What we have is the President and both houses of Congress actively promoting transportation financing innovation and education.  At the same time the IRS is issuing tax-exempt finance-favoring regulations.  While much will be clearer when the conference committee’s work is over, the signals coming out of Washington seem to favor innovative financing and broader use of public-private partnerships.