AGC-supported Private Activity Bond Legislation Introduced

This week legislation was introduced in the House and Senate that would remove water and wastewater from under the private activity bond volume cap, making it easier for up to $5 billion to be invested in water infrastructure annually. Private activity bonds (PABs) or exempt facility bonds are a form of tax-exempt financing that encourages state and municipal governments to collaborate with sources of private capital to meet a public need. Congress provides states an annual allocation of the federal tax-exempt bonds, based upon population.  In 2011, the state allocation or volume cap shall be the greater of $95 per resident or $277.82 million. Historically, most of the tax-exempt bonds have been issued to politically attractive, short-term projects in the more than 20 other categories eligible for these bonds, such as housing and education loans.  The annual volume cap hinders the use of PABs for water and wastewater infrastructure, which are generally multi-year projects and out of sight.  In 2007, only 1.3 percent of all exempt facility bonds were issued to water and wastewater projects. Exceptions from the volume cap are currently provided for other governmentally owned facilities such as airports, ports, housing, high-speed intercity rail and solid waste disposal sites. The legislation could make it easier for between $2 and $5 billion a year in private capital to be invested in water infrastructure, at a cost of just $35.4 million a year. The legislation, the Sustainable Water Infrastructure Investment Act of 2011, was introduced on a bipartisan basis in both the House and the Senate. On the House side, Reps. Pascrell (D-N.J.) and Davis (R-Ky.) introduced the bill with their Senate partners, Sens. Robert Menendez (D-N.J.) and Mike Crapo (R-Idaho). For more information, contact Scott Berry at (703) 837-5321 or berrys@agc.org.