A New Proposal to Encourage P3s

Subscribe to our Blog


Posted on

A New Proposal to Encourage P3s

by Geoff Corey  |  January 27, 2015

The Obama Administration plans to release their budget proposal on February 2nd, and just like in the State of the Union, infrastructure is likely to be a prominent feature. One intriguing proposal is to create a new class of public infrastructure bonds, called Qualified Public Infrastructure Bonds (QPIBs). The administration seems to be embracing alternative financing for infrastructure projects, and this is just the latest example.

While Republicans in Congress have stated opposition to much of President Obama’s policy proposals, they have yet to comment on this proposal, suggesting that it could be an area of bipartisan support. The proposed bonds would be issued to fund airports, roads, mass transit and water/wastewater systems among other projects, but they would be the first kind of municipal bonds available for public-private partnerships (P3s). Furthermore, the Alternative Minimum Tax (AMT), which places a limit on exemptions higher-end earners can claim, would not apply to these bonds. In exempting them from the AMT, the administration hopes to make them more attractive to investors.

The American Society of Civil Engineers estimates we need to spend more than $3 trillion by 2020 to improve our infrastructure. Yet with that kind of public funding unlikely, it makes sense the President would propose a number of measures to leverage private investors to fund infrastructure projects.

The administration said in a statement, “QPIBs will extend the benefits of municipal bonds to public private partnerships, like partnerships that involve long-term leasing and management contracts, lowering the cost of borrowing and attracting new capital.”

DBIA’s advocacy team is monitoring developments around this proposal because P3s continue to grow in popularity, and design-build is an inherent part of almost every P3 project. More details are expected when the President releases his 2015 budget.