Administration Announces New Infrastructure Finance Programs

Today, from the site of the D.C. Water large-scale Anacostia River Tunnel Project, the Obama Administration announced new steps that federal agencies are taking to bring private sector capital and expertise to bear on improving our nation’s infrastructure, focusing on utility infrastructure. President Obama launched the Build America Investment Initiative in July 2014, calling on federal agencies to find new ways to increase investment in ports, roads, bridges, broadband networks, drinking water and sewer systems and other projects by facilitating partnerships between federal, state and local governments and private sector investors. Today’s announcements are part of the evolution of that initiative. The administration is launching a new Water Infrastructure and Resiliency Finance Center at the Environmental Protection Agency designed to stimulate private investment and make federal dollars go further. Around the country, towns, cities and states are exploring ways bring innovative financial tools such as public-private partnerships to the water sector in an effort to get more projects off the ground. The new center will help interested local and state governments bring private sector investment and expertise into water system construction and management. Among other roles, the center will bring together investors and project sponsors; highlight promising deals; provide peer-to-peer learning and workshops; and develop case studies and toolkits. The center will work with states to maximize the benefits to annual federal water investments. The center is also designed to help attract investment to small communities. Many rural communities are served by small water utilities that lack the resources to explore financing alternatives and engage the private sector. The new water center will work with on-the-ground partners to provide financial training and technical assistance to small communities and rural water systems. The administration also announced the Rural Opportunity Investment (ROI) Initiative at the U.S. Department of Agriculture (USDA), to help water, energy, and broadband infrastructure projects in rural areas attract more investment, thereby in creating jobs and accelerating economic growth. In close collaboration with both public and private partners, the ROI Initiative will connect projects to investors catalyzing rural investment opportunities for the public and private sectors.  The initiative will also focus on opportunities to leverage private sector financing against the $30 billion in existing USDA programs and resources to provide funding to vital rural infrastructure projects; including water and wastewater systems, energy efficiency improvements, broadband networks, and other rural infrastructure needs. Perhaps most interesting, the administration is proposing to create an innovative new municipal bond, the Qualified Public Infrastructure Bond (QPIB). Today, public-private partnerships that combine public ownership with private sector operation and management (O&M) expertise cannot take advantage of the benefits of municipal bonds. QPIBs will extend the benefits of municipal bonds to public private partnerships, like partnerships that involve long-term leasing and management contracts, lowering the cost of borrowing and attracting new capital. A similar existing program, Private Activity Bond (PABs), has already been used to support financing of over $10 billion of roads, tunnels, and bridges. Unlike PABs, the QPIB bond program will have no expiration date, no issuance caps, and interest on these bonds will not be subject to the alternative minimum tax. These modifications will increase QPIB’s impact as a permanent lower-cost financing tool to increase private participation in building our nation’s public infrastructure. QPIBs would not be available for privately-owned facilities or privatizations of public facilities. It is unclear at this stage exactly how these new programs fit in with existing programs like the State Revolving Funds and Water Infrastructure Finance & Innovation Authority (WIFIA) at EPA, the Rural Water and Waste Disposal Loan Program at USDA, and Treasury’s Private Activity Bonds. AGC will continue to find out more on how the various agencies intend to use these new programs and what they mean for the infrastructure funding and finance programs that AGC members and their state & local government partners already use to build the nation’s water, sewer, and stormwater infrastructure. For more information, contact Scott Berry at (703) 837-5321 or berrys@agc.org