Brattle Principal Elaine Buckberg recently co-authored an article in the Infrastructure Policy Issue of Public Works Financing, which presents a short-list of federal infrastructure financing policy options. The Performance Infrastructure Review Committee (PIRC), a bipartisan committee of individuals with expertise in federal policy, infrastructure development, and project finance, of which Dr. Buckberg is a member, prepared the proposals.
Dr. Buckberg’s article, “Why Tax Credit Bonds Should Be a Key Part of Any Federal Infrastructure Policy Initiative,” explains the benefits of tax credit bonds in broadening the market for infrastructure debt, and why they should be a key component in new federal infrastructure policy initiatives. While other debt instruments such as PABs and “direct pay” tax credit bond programs like Build America Bonds have been helpful, these options offer less borrowing capacity to project sponsors per dollar of “scored” impact on the federal budget.
Dr. Buckberg and her co-author, David Seltzer, argue that qualified tax credit bonds offer important benefits including significantly increasing an issuer’s debt capacity. From a federal policy viewpoint, tax incentives are better able to harness the market discipline of private capital to ensure that a project’s repayment plan is feasible. Furthermore, tax credits attached to bonds can often be simpler to market than equity-based investment tax credits, and are more “budget-efficient” since they stretch out the fiscal impact over a longer time period that corresponds appropriately with the economic lives of the assets being financed.
The full article can be downloaded below.