Washington governor calls for federal infrastructure bonds

Washington State Governor Christine Gregoire speaks to local business leaders during a breakfast in Seattle, Washington, May 25, 2006. Gregoire called on Sunday for the federal government to issue up to $60 billion in bonds to fund infrastructure projects across the country.

WASHINGTON (Reuters) - Washington State Gov. Christine Gregoire called on Sunday for the federal government to issue up to $60 billion in bonds to fund infrastructure projects across the country.

"It's an idea whose time has come," the Democratic leader said at the National Governors Association meeting, adding that raising the federal gas tax could be politically problematic and state governments do not have the resources to finance what she called "mega-infrastructure projects."

Gregoire said she met with other governors recently to discuss bonding and that Sen. Patty Murray, a Democrat from Washington, has argued the federal government should issue up to $60 billion in debt for loans or grants to states.

Addressing a meeting on surface transportation during the governors' two-day conference, U.S. Transportation Secretary Mary Peters said the bonds raised revenue concerns.

"What is the source of funds that would repay those bonds?" she said.

Peters is staunchly opposed to raising the federal gas tax and worried increased taxes would be used to pay the debt.

The National Surface Transportation Policy and Revenue Study Commission, created to find ways to finance transportation improvements, said in its January report the tax levied on gasoline should rise between 25 and 40 cents over five years. While she chaired the commission, Peters refused to sign the report because of the tax suggestion.

Peters recommended using private-public partnerships and said at the meeting that $400 billion in private equity was available for roads projects. A spokesman could not immediately say what groups would provide those funds and how much would come from foreign investment.

Gov. Eliot Spitzer, a Democrat from New York, said the federal government should include funding for the country's ailing infrastructure and roads in a second economic stimulus bill. He argued infrastructure assistance would help more than "sending consumers checks to spend at the mall," referring to tax rebates included in a law President George W. Bush signed this month to keep the country out of a recession.

But Peters said infrastructure projects take too much time to pump cash into the economy, and she did not know if a second stimulus bill was in the works.

(Reporting by Lisa Lambert; editing by Gunna Dickson)