Among the host of funding recommendations and new initiatives put forward in President Obama’s FY16 budget plan were several new bond programs to finance infrastructure upgrades, alongside cuts to the U.S. Army Corps of Engineers. Some notable proposals include:
- A new category of private activity bonds (PABs), known as “qualified public infrastructure bonds.” QPIBs could be used by private entities to finance infrastructure construction (including water and sewer systems), as long as the resulting project is owned by a state or local government and is regularly available for public use. State volume caps on PABs would not apply to QPIBs, which could allow them to attract higher levels of private investment. Interest earned on QPIBs would be exempt from federal income tax.
- A new America Fast Forward (AFF) bond program based on the expired Build America Bond program. Interest on AFF bonds would be taxable, but the government would offer issuers a subsidy equal to 28% of their interest costs. The bonds could be used to finance a wide range of infrastructure projects, including water and sewer improvements.
- $4.7 billion for the U.S. Army Corps of Engineers, $800 million below its FY15 funding level.
- $1.1 billion for the Bureau of Reclamation, a slight decrease from its FY15 appropriation of $1.13 billion.
The extent to which Congress may embrace these ideas is unclear, but in previous years lawmakers have rejected plans to cut Army Corps funding. The AFF proposal was also part of President Obama’s FY15 budget plan, but it did not advance on Capitol Hill.