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US ports warn of project funding tax hike

US ports warn of project funding tax hike

 

NEW YORK: The American Association of Port Authorities (AAPA) has said the current federal tax reform plan could hurt financing for infrastructure projects in ports, according to the Maritime Executive.

Reforms would eliminate the federal tax-exempt status currently held by Private Activity Bonds (PABs) states use to fund infrastructure. About $20 billion in PAB financing is currently earmarked towards US infrastructure projects, including wharf improvements.

But Section 3601 of the House bill, the Tax Cuts and Jobs Act (H.R. 1), calls for the termination of tax-exempt PABS. On behalf of all US ports, AAPA has asked Congress to expand the exemptions, which are increasingly used, not eliminate them.

It also noted removing the PABs tax exemption would hurt several port projects currently planned. Read a related paper from Royal HaskoningDHV Good infrastructure is essential to efficient operations, and represents a major development cost.

The NorthWest Seaport alliance Terminal 5 modernization project is estimated to cost US$15 million to $50 million more if it had to use taxable bonds instead of PABs with respect to a a 30-year loan of $260 million for the project.

In a November 8, 2017 letter to Orrin Hatch, Chaiman of the Senate Committee on Finance, AAPA said: “Abruptly ending this incentive for private sector financing would further constrain available funding for certain infrastructure projects.

“Thus, the public would never fully enjoy the economic, quality of life and other benefits from these projects. Moreover, the absence of PABs could increase funding pressures on states, leading to the elimination or delay of all manner of planned projects, including those to be funded exclusively with public dollars.”