WASHINGTON, July 28 U.S. Senator Ron Wyden on Thursday introduced long-awaited infrastructure financing legislation that presents a grand departure from the popular Build America Bonds program that expired seven months ago.
Wyden's bill will likely be folded into a larger, long-term spending authorization for roads, bridges and highways.
In lieu of tax-exempt interest payments, the bonds would pay investors annual credits against their taxes. They would be issued by state infrastructure banks and capped at $50 billion over six years.
Wyden, a Democrat from Oregon, said the bonds would "leverage private funding in a fair and efficient (way) that has been proven to save taxpayer money."
Sen. John Hoeven, a Republican from North Dakota, and Sen. Mark Begich, a Democrat from Alaska, co-sponsored the legislation.
Many in the U.S. municipal bond market had hoped Wyden would revive the Build America Bonds structure, which gave issuers federal rebates for the taxable bonds they sold. From April 3, 2009, through Dec. 31, 2010, state and local governments sold 2,275 BABs equal to $181 billion.
Issuers had had the option of selling BABs as tax-credit debt under the stimulus plan -- an option that no state or local government selected. The U.S. government has offered other tax-credit bond programs that both the market and issuers largely ignored.
Republican resistance to reviving BABs has been strong, with members of both houses questioning whether the bonds were used for infrastructure and if the steep rebates -- equal to 35 percent of interest costs -- rewarded profligate states.
President Barack Obama has suggested making BABs a permanent program, albeit with a much lower subsidy. But moves in Congress to bring BABs back have fizzled.
Analysts say that tax credits, instead of tax exemptions on interest payments, are much cheaper for the U.S. government.
According to Wyden's proposal, the Transportation and Regional Infrastructure Project, or "TRIPs," bonds would not require an offsetting tax increase and would cost the federal government $12.3 billion. It would rely on $900 million from customs user fees that would be deposited into a trust fund.
With the nation's roads and bridges deteriorating, the federal government is scrounging for money to pay for massive repairs. The American Society of Civil Engineers said this week the country will need to invest roughly $220 billion annually to maintain U.S. infrastructure in "minimum tolerable conditions."
The tax charged on gasoline sales frequently cannot cover those costs and Congress, in the midst of a debt and deficit fight, is resistant to spending increases.
House of Representatives Transportation Committee Chairman John Mica has yet to introduce his legislation for authorizing transportation spending. But outlines he released earlier this month show it also emphasizes pushing programs through state infrastructure banks. A little less than two-thirds of the states -- 32 -- have infrastructure banks.
The previous $285 billion, five-year authorization expired in 2009 and Congress has relied on a patchwork of short-term extensions as it debates the next round of authorization. The current extension ends Sept. 30.
The country spends about $160 billion annually on highways alone, with roughly $40 billion coming from the federal government, according to the Congressional Budget Office. (Reporting by Lisa Lambert; Editing by Dan Grebler)