August 2017 Vol. 72 No. 8
Features
Construction Industry Applauds PAB Legislation
Legislation that would open the door to private investment in water and wastewater infrastructure investment was introduced recently by U.S. Reps. John “Jimmy” Duncan (R-TN) and Bill Pascrell (D-NJ). The Sustainable Water Infrastructure Investment Act, which would remove water and wastewater infrastructure from under the state volume cap subject to private activity bonds (PABs), was quickly endorsed by a broad-based group of construction contractors, equipment manufacturers, distributors and labor unions.
PABs are effective in financing long-term, capital-intensive infrastructure projects through public-private partnerships (P3s), usually between state and municipal governments, and private entities. The P3 approach makes repair and construction of infrastructure more affordable for municipalities and ultimately for American taxpayers, in large part because the projects utilize private capital in lieu of public debt, shifting the risk and long-term debt from the municipality to the private partner.
The federal government limits the number of PABs that can be issued by each state. This state volume cap usually results in PABs being used for more politically attractive, short-term projects such as housing and education loans. On average, less than 2 percent of all PABs are issued to water and wastewater projects, underscoring the need for increased investment.
Industry support
“With federal water infrastructure investment dwindling over the years, it is vital that state and local governments have access to all the tools they need to fix our aging water infrastructure,” said Stephen E. Sandherr, CEO of the Associated General Contractors of America. “This legislation could unlock billions in private money that benefits our economy, public health and the environment.”
“Our nation’s water infrastructure is in a state of crisis and we need a combination of robust public investment and private financing to address it,” added Terry O’Sullivan, general president of the Laborers International Union of North America (LiUNA). “The Sustainable Water and Wastewater Infrastructure Investment Act is legislation that will help unlock desperately needed private funds for communities with urgent water infrastructure needs, as well as creating tens of thousands of good jobs building our nation.”
“Water and sewer projects are increasingly done through horizontal directional drilling and other trenchless excavation,” said Daryl Bouwkamp, senior director of Vermeer Corporation. “This infrastructure has been neglected for too long, and we thank Reps. Duncan and Pascrell for stepping up again and introducing this important legislation.”
Rob Darden, executive vice president of the Distribution Contractors Association underscored the potential offered by increased PAB financing in today’s water infrastructure market. “The tax-exempt status of PABs provides lower-cost financing for the water project and ultimately for end users, creating a win-win for both sides,” Darden said. “Of course, the biggest win goes to our water and wastewater infrastructure, which is in serious need of repair.”
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