Keywords: private investment, US highways,
President Obama today announced a series of proposals to
encourage greater private investment in US highways and other
infrastructure assets. The president's proposals include an
increase from $15 billion to $19 billion in the amount of
tax-exempt private activity bonds (PABs) that may be issued for
surface transportation projects. The president announced his plan
while visiting the Port of Miami Tunnel in Miami, Florida, one of
the nation's pioneering public-private partnership projects,
which is currently under construction.
The president's announcement comes just one day after the
Indiana Finance Authority issued $676 million in PABs for the
construction of the East End Crossing, a new bridge over the Ohio
River connecting Louisville, Kentucky, and Southern Indiana. WVB
East End Partners, LLC, a private development consortium comprising
affiliates of Bilfinger Project Investments North America, Inc.,
VINCI Concessions S.A.S. and The Walsh Group Ltd., was selected by
the Indiana Finance Authority in late 2012 to construct, operate
and maintain the East End Crossing under a 35-year public-private
agreement. The East End Crossing financing is the largest issuance
of PABs to date. Mayer Brown represented WVB East End Partners,
LLC, in the PABs financing, as well as in negotiating the
public-private agreement. Mayer Brown also acted as
underwriters' counsel in 2010 for the issuance of PABs to
finance private sector development of portions of the Denver
Regional Transportation District's FasTracks project, the first
and only use to date of PABs for mass transit.
Surface transportation PABs were authorized under a federal
transportation statute enacted in 2005 and have gained increased
market acceptance in the past several years. Under this statute,
private entities can access low-cost, tax-exempt financing for the
development and construction of highways, bridges and tunnels, mass
transit and freight intermodal projects. This produces significant
cost savings for both the government entity sponsoring the project
and its private sector partner.
The president also proposed to create a new form of taxable
infrastructure bond, known as America Fast Forward Bonds, as an
alternative to the issuance of tax-exempt bonds. America Fast
Forward Bonds are modeled after Build America Bonds, which were
authorized under 2009 stimulus legislation and provided for the
payment of a direct subsidy to bond issuers in lieu of providing an
exemption from federal income tax to holders of the bonds for
interest received. Under the president's proposal, the subsidy
for America Fast Forward Bonds would equal 28 percent of the
interest payable to holders, instead of the 35 percent provided for
Build America Bonds. Finally, qualified uses for America Fast
Forward Bonds would be broader than those previously authorized for
Build America Bonds.
President Obama's proposals for encouraging greater private
investment in US infrastructure also include granting foreign
pension funds tax-exempt status when selling infrastructure or real
estate assets, $4 billion in increased spending for the
Transportation Investment Generating Economic Recovery (TIGER)
grant program and the Transportation Infrastructure Finance and
Innovation Act (TIFIA) loan program, exempting water infrastructure
projects from the state-by-state PABs volume cap, authorizing
private ownership of tax-exempt PAB-financed airports, docks,
wharves and mass commuting facilities, and a renewed call for a $10
billion national infrastructure bank.
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