Industry battling PABs reforms

Industry experts have told P3 Bulletin that they will fight the decision to scrap the ability to use private activity bonds (PABs) to develop transport projects, following the release of the new federal tax bill last week.

Delegates at the Canadian Council for Public-Private Partnerships (CCPPP) conference in Toronto said that the move to scrap PABs could have a lasting impact on the industry in the coming years.

As previously reported, PABs would no longer receive preferential tax treatment under the proposal issued last Thursday by congressional Republicans. The changes would eliminate nearly $40bn in subsidies over the next decade if passed.

“Since the bill has been released, I have never seen the industry rally this way,” said CEO of Plenary Concessions Mike Marasco.

“I have already seen a number of letters from industry organizations that have been sent to the White House and their representatives, as well as from individual corporations.

“When corporate America is upset, the fallout can be pretty significant.”

However, Jim Ray, special advisor, Office of the Secretary of Infrastructure for the US Department of Transportation, stressed that the bill was only in draft form at this stage and highlighted that there remained room for change.

“This is gives us an element of hope”, said another lawyer. “But if this does pass, it could be utterly devastating for transportation P3s in the US. We will fight this tooth and nail.”

The Ways and Means Committee began marking up H.R. 1 – the Tax Cuts and Jobs Act on Tuesday, with a second hearing on Wednesday. For more information click here.

Fitch said this week potential elimination of PABs and 501(c)3 non-profit bonds would likely lower the interest in and feasibility of P3s. "Eliminating PABs would raise airport financing costs and possibly cause a reduction in private participation in water projects" the ratings agency added.