The Trump Administration's FY 2019 Budget Proposal, while still important, has diverted coverage away from another important proposal released the same day - the Trump Administration's proposal for a comprehensive infrastructure package. It should be noted that no actual legislative language was released alongside the 55-page proposal; President Trump has repeatedly stated that it is up to Congress to come up with the actual legislative language that would fit within the parameters set forth by the White House.
One major takeaway from the infrastructure proposal is that the Trump Administration wants to see the following changes made to Private Activity Bonds:
- Requiring new public attributes for infrastructure projects:
- Either state/local government ownership or private ownership with rates for services set by state/local governments (either through regulations or contractual control/approval).
- Projects will either be made available for public use (i.e. the creation of a new road) or will provision services to the general public (i.e. water services).
- When a government leases a project to a private entity, the following conditions are included so as to still meet public attributes requirement (and also to still be treated as "government-owned")
- Term of lease is to be no longer than 95% (instead of the current 80%) of the reasonably expected economic life of the project.
- Private lessee agrees not to take depreciation or investment tax credit with respect to the project
- Project cannot be purchased by lessee at any rate other than fair market value.
- Broadening the eligibility of which projects can utilize PABs (the proposal specifically mentions including rural broadband services and qualified surface transportation facilities (i.e. roads and bridges)).
- Elimination of Alternative Minimum Tax preference so as to encourage utilization through lower borrowing costs.
- Removal of state and transportation volume caps for public purpose infrastructure projects (the proposal cites clean drinking water projects and high-speed intercity rail infrastructure as specific examples of how PABs can be used; housing projects are not mentioned).
- Expansion of eligibility specifically to ports and airports.
- Providing change-of-use provisions to protect tax exempt status of PABs, and change-of-use "cures" to preserve tax exemption for infrastructure projects.
While the Administration recognizes the Federal government has a role to play in infrastructure development, the White House also proposes that the infrastructure package place the most burden on state and local governments. In addition to approving projects, state and local governments must come up with the majority of funding for projects under the Trump Administration's proposal. It should be noted that many states and local governments would likely find themselves in a bind trying to come up with the funds necessary to move projects forward, which in turn could negatively impact the entire effort to rebuild our nation's infrastructure.
Finally, concerning current housing needs, the proposal does not discuss them at all. The Trump Administration, while discussing other very important areas of infrastructure development, has neglected to include any proposed solution to addressing our nation's growing housing crisis. A key element of infrastructure has been neglected in this proposal by the Trump Administration, and that in turn casts further doubts about the overall viability of the Administration's proposal.