Removing Barriers to Infrastructure Investment

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As do virtually all State of Union addresses, President Obama’s speech Tuesday evening spanned a wide range of themes encompassing both foreign and domestic policies, priorities, and prerogatives.  But if there was unifying thread throughout, it was that 15 years into the 21st century—and six years on from the largest global recession since the Great Depression—the United States is thriving.

One particular aspect that I was very pleased to hear the president mention at several key points was infrastructure:  “21st century businesses need 21st century infrastructure — modern ports, stronger bridges, faster trains and the fastest internet.”  I couldn’t agree more, and it’s easy to see that airports absolutely fit into this conversation.  As we said in our countdown infographic on Tuesday, “Roads, rail, water, and air are what move American opportunity.”  Comprehensively investing in all our modes of transportation, and especially modernizing how we fund this infrastructure, strengthens the backbone of our economy and our global reputation as a country where products, services, and ideas flourish unobstructed.

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But there is one element to the president’s vision regarding infrastructure that, unfortunately, could hamper progress in modernizing our airports.  It relates to an important source of funding for airport capital improvement projects: municipal bonds.

Although not explicitly mentioned in Tuesday’s State of the Union, President Obama has proposed to permit private entities to issue public municipal bonds.  Airports long have been open to idea of increasing opportunities for public-private partnerships—or P3s—as one approach to getting serious about tackling necessary capital improvement projects.

On the other hand, though, President Obama also has called for significantly increasing the cost of municipal bonds for public entities—such as airports—by proposing that tax deductions for municipal bond interest be capped for certain investors.  In short, this would mean that bond investors would then demand a higher rate of return from the bond issuer.  And this, in turn, would make the cost of the infrastructure projects that municipal bonds help fund only more expensive.

The U.S. in 2015 arguably is on far better footing economically than we’ve been in recent years, so it’s incongruous to me that we’d now want to create barriers to investment.  Instead we should be fostering easier market access and local control for airports to finance the new construction and upgrades they’ll need to keep pace with future demand and expectations.  Removing the tax-deduction cap on municipal bonds from his upcoming proposed budget—as well as also removing the Alternative Minimum Tax (AMT) burden from private activity bonds, a form of municipal bonds—would be an exceptionally strong signal from President Obama that he is as optimistic about the future of our airports as I am.

Kevin M. Burke
President and CEO
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