17 May BPC Action Applauds Recent Infrastructure Finance Legislation in Infrastructure
The United States faces a $2.6 trillion infrastructure funding gap over the next 10 years, above and beyond planned investments to maintain, modernize, replace, and upgrade our nation’s infrastructure. As negotiations over an infrastructure package continue, BPC Action is encouraged to see members of Congress from both sides of the aisle introduce creative solutions to fund and finance our nation’s transportation, water, energy, and broadband needs.
While the federal government has several programs designed to provide state and local governments with access to low-cost financing for infrastructure projects, new financing options could attract new investors, support a wider range of public and privately developed projects, and give governments another tool in the toolbox to deliver urgently needed projects.
Five recent pieces of legislation would advance a key recommendation made by BPC’s Executive Council on Infrastructure—to create new and leverage existing financial tools, while preserving the existing tax-exempt bond market.
S. 1403, the Move America Act: Sens. Ron Wyden (D-OR) and John Hoeven (R-ND) have reintroduced the Move America Act, which would authorize a new type of private activity bonds for qualified infrastructure projects and exempt the interest from the Alternative Minimum Tax. The legislation would also authorize states to convert the bonds into tax credits in order to attract additional equity investments, further promoting the use of private finance to help meet our nation’s infrastructure needs. BPC’s Infrastructure Council called for the expanded use of private activity bonds and tax credits such as those included in this legislation because they would extend the benefits of tax-exempt debt to public-private partnerships that are critical for addressing our infrastructure funding gap. According to the Joint Tax Committee, the Wyden-Hoeven bill would leverage an $8 billion taxpayer investment to achieve a total of $226 billion worth of infrastructure investments.
S. 1308, the American Infrastructure Bonds Act: Sens. Michael Bennet (D-CO) and Roger Wicker (R-MS) reintroduced the American Infrastructure Bonds Act, legislation that would create a “direct pay,” taxable municipal bond to help local governments finance critical public projects. These bonds would offer investors a new product—a taxable bond for which the issuer receives a direct payment from the federal government to help offset higher interest costs. Unlike traditional municipal debt, direct payment bonds are attractive to investors who do not receive the tax advantage from traditional tax-exempt bonds, such as pension funds, insurance companies, and foreign investors. By providing a new taxable bond option, the Bennet-Wicker bill could bring private capital to the table to support more infrastructure projects.
S. 479, the Lifting Our Communities through Advance Liquidity for Infrastructure (LOCAL Infrastructure) Act: Sens. Roger Wicker (R-MS) and Debbie Stabenow (D-MI), along with 20 other Senate sponsors, reintroduced the LOCAL Infrastructure Act which would restore tax exemption for advance refunding of municipal bonds. Advance refunding allows local governments to minimize the costs of financing infrastructure projects, such as water and wastewater facilities. With advance refunding, borrowers repay their outstanding debt to take advantage of a favorable interest rate environment, just as homeowners do when refinancing a mortgage. From 2012-2017, municipalities saved more than $14 billion of taxpayer money through this financing tool. However, the Tax Cut and Jobs Act of 2017 removed the tax exemption from advance refunding of municipal bonds, making it more difficult for local governments to access private capital and take advantage of low interest rates. Advance refunding facilitated by the LOCAL Infrastructure Act would help local governments meet their ever-increasing infrastructure needs.
H.R. 2634, the Local Infrastructure Financing Tools (LIFT) Act: Rep. Terri Sewell (D-AL) has introduced the Local Infrastructure Financing Tools (LIFT) Act, which—like S. 479 and S. 1308—would authorize the use of American Infrastructure bonds, a new direct payment bond, and restore the advance refunding tax exemption for municipal bonds. Together, these would provide flexible tools for local governments that increase their capacity to finance critical infrastructure projects and address their long-term funding gaps. The bill would also make it easier for small municipalities and nonprofits to sell their debt directly to local banks.
S. 1499, the Reinvesting Economic Partnerships and Infrastructure Redevelopment (REPAIR) Act: Sens. Mark Warner (D-VA), Roy Blunt (R-MO), Amy Klobuchar (D-MN), John Cornyn (R-TX), Richard Blumenthal (D-CT), Lindsey Graham (R-SC), and Chris Coons (D-DE) have reintroduced the REPAIR Act—legislation to establish an Infrastructure Financing Authority to leverage private infrastructure investment. This independent and non-partisan authority would be initially capitalized with federal funding but designed to be self-sustaining over time. It would help finance needed projects with federal loans and loan guarantees, while also advancing other key priorities like helping accelerate project permitting and approvals, providing technical assistance to rural and other under-resourced communities, and supporting innovations in project delivery.
BPC Action commends the sponsors of these bills for taking on the important work of designing additional infrastructure financing tools. While the details may differ, they are all intended to help meet the challenge of addressing America’s infrastructure needs and demonstrate the broad, bipartisan support for policies that empower local communities to meet their needs. We encourage Congress to consider them as part of any future infrastructure package.