[Congressional Record Volume 143, Number 13 (Wednesday, February 5, 1997)]
[Senate]
[Page S1025]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. CHAFEE (for himself, Mr. Warner, Mr. Moynihan, and Mr. 
        Bond):
  S. 275. A bill to amend the Internal Revenue Code of 1986 to provide 
for tax-exempt financing of private sector highway infrastructure 
construction; to the Committee on Finance.


              the highway infrastructure privatization act

  Mr. CHAFEE. Mr. President, today, I am introducing legislation which 
will allow the private sector to take a more active role in building 
and operating our Nation's highway infrastructure. The Highway 
Infrastructure Privatization Act will allow the private sector to gain 
access to tax-exempt bond financing for a limited number of highway 
projects. I am pleased that my distinguished colleagues, Senators 
Warner, Moynihan, and Bond, have agreed to join me in this effort.
  One needs only to venture a few blocks from here to see the terrible 
condition of many of the Nation's roads and bridges. Regrettably, the 
United States faces a significant shortfall in funding for our highway 
and bridge infrastructure needs.
  The investment need comes at a time when we in Congress are 
desperately looking for ways to reduce spending to balance the budget. 
State governments face similar budget pressures. It is incumbent upon 
us to look at new and innovative ways to make the most of limited 
resources to address significant needs.
  In the United States, highway and bridge infrastructure is the 
responsibility of the Government. Governments build, own, and operate 
public highways, roads, and bridges. In many other countries, however, 
the private sector, and private capital, construct and operate 
important facilities. These countries have found that increasing the 
private sector's role in major highway transportation projects offers 
opportunities for construction cost savings and more efficient 
operation. They also open the door for new construction techniques and 
technologies.
  To help meet the Nation's infrastructure needs, we must take 
advantage of private sector resources by opening up avenues for the 
private sector to take the lead in designing, constructing, financing, 
and operating highway facilities.
  A substantial barrier to private sector participation in the 
provision of highway infrastructure is the cost of capital. Under 
current Federal tax law, highways built by Government can be financed 
using tax-exempt debt, but those built by the private sector, or those 
with substantial private sector participation, cannot. As a result, 
public/private partnerships in the provision of highway facilities are 
unlikely to materialize, despite the potential efficiencies in design, 
construction, and operation offered by such arrangements.

  To increase the amount of private sector participation in the 
provision of highway infrastructure, the Tax Code's bias against 
private sector participation must be addressed.
  The Highway Infrastructure Privatization Act creates a pilot program 
aimed at encouraging the private sector to help meet the transportation 
infrastructure needs for the 21st century. It makes tax-exempt 
financing available for a total of 15 highway privatization projects. 
The total face value of bonds that can be issued under this program is 
limited to $25 billion.
  The 15 projects authorized under the program will be selected by the 
Secretary of Transportation, in consultation with the Secretary of the 
Treasury. To qualify under this program, projects selected must: serve 
the general public; be on publicly owned rights-of-way; revert to 
public ownership; and, come from a State's 20-year transportation plan. 
These criteria ensure that the projects selected meet a State or 
locality's broad transportation goals.
  A revenue estimate for this legislation has not yet been completed, 
however we anticipate that the bill will not result in a revenue loss 
for the Federal Government. The projects that are candidates to 
participate in this pilot program are ones that are likely to be funded 
by tax-exempt bonds issued by State and local governments. Therefore, 
the bill should not result in an increase in the amount of tax-exempt 
bonds that will be issued. Furthermore, it is possible, depending on 
the efficiencies resulting from substantial private sector 
participation, that the bill actually would result in fewer bonds being 
issued and therefore would provide a revenue increase for the Federal 
Government.
  The bonds issued under this pilot program will be subject to the 
rules and regulations governing private activity bonds. Moreover, the 
bonds issued under the program will not count against a State's tax-
exempt volume cap.
  This legislation has been endorsed by Project America, a coalition 
dedicated to improving our Nation's infrastructure, and the Public 
Securities Association.
  I hope that this bill can be one in a series of new approaches to 
meeting our substantial transportation infrastructure needs and will be 
one of the approaches that will help us find more efficient methods to 
design and to build the Nation's transportation infrastructure.
  I encourage my colleagues to join me as cosponsors of this important 
initiative.
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