Using his background in financing, freshman Congressman John K. Delaney believes he has crafted legislation that will help address the nation’s infrastructure problems, and that will gain support from both sides.
The Partnership to Build America Act, introduced by Delaney (D-Dist. 6) on Wednesday, would create a $50 billion infrastructure fund by encouraging global corporations based in the U.S. to purchase bonds.
For every $1 the corporations invest in bonds, they would be allowed to repatriate, or bring home, a certain dollar amount in their overseas earnings tax-free. The fund will then provide loans to local governments for infrastructure projects built through public-private partnerships.
Delaney’s background is in finance; he founded and ran two financial companies.
Unlike failed bills in the past that have attempted to create infrastructure banks, Delaney, of Potomac, believes his bill is gaining traction with both Republicans and Democrats because of the unique way the bank would be funded. No taxpayer money will be involved, and bonds will not be guaranteed by the government.
The bill is co-sponsored by a bipartisan group of 13 Republicans and 13 Democrats.
Republican Congressman Rodney Davis (Dist. 13) of Illinois supports the act because it is an innovative way to finance projects, said Andrew Flach, Davis’ press secretary.
“Folks in Washington love to talk big on transportation issues, but this bill represents a truly outside-the-box solution that will generate results and address our nation’s crumbling infrastructure,” Flach wrote in an email.
Delaney’s bill would establish the American Infrastructure Fund, an entity separate from the government, with its own board of trustees, that would issue $50 billion of infrastructure bonds to corporations, with a 50-year term and a fixed interest rate of 1 percent, according to the bill text.
The amount that the corporations would be allowed to repatriate for each dollar spent in bonds would be set by a “reverse Dutch auction,” the bill states. For example, a 1:4 ratio would allow the corporations to repatriate $4 tax-free from overseas earning for each $1 purchased in bonds.
U.S. corporations currently had overseas earnings of $1.9 trillion in 2012, according to a May 2013 report by research firm Audit Analytics. Since tax rates to bring the money back into the U.S. are so high, corporations often keep their money abroad, Delaney said.
Local governments could apply to receive a loan or guarantee for transportation, energy, communications, water, and education projects. The government would have to pay back the loan at market rate, the bill states.
At least a quarter of the projects funded must be of a public-private partnership, with at least 20 percent of funding from the private sector.
A recent report by the American Society of Civil Engineers estimated that a $3.6 trillion infrastructure investment was needed in the United States by 2020.
“Right now there is a staggering infrastructure need in this country, and a situation where federal, state and local governments are largely strained,” Delaney said. “... To the extent we can create opportunities for private businesses to invest, we should.”
Delaney has thought of “a clever way to build an infrastructure bank,” said Patrick Sabol, a researcher with The Brookings Institution.
Sabol is on the institution’s metropolitan infrastructure team, where he works closely with local governments. He said his comments to do not represent the institution.
Since the economy plummeted, local governments have struggled to find a way to boost their credit and bond rating to secure loans, he said.
This bill would give an option for local governments that have been searching for long-term financing, Sabol said.
An example of a public-private project that could have dipped into this fund is Virginia’s new commuter lanes on the Capital Beltway, Delaney said.
Patrick Lacefield, a spokesman for Montgomery County government, said the proposal is interesting and the county is reviewing it.
“We need to know more in the details,” Lacefield wrote in an email.
Patrick J. Natale, executive director of the American Society of Civil Engineers, believes Delaney’s bill is a good first step.
“I’m pleased that someone has picked up the ball and is running with it,” he said.
The act is the first legislation Delaney has introduced since taking office in January. He said he intentionally wanted to make his first bill a bipartisan bill, as there was “no point” in writing the bill otherwise.