A new way to rebuild [Editorial]

Last summer, we sang the praises of Maryland Rep. John K. Delaney's proposal to create a $750 billion fund to rebuild and expand America's neglected public infrastructure. Turns out the freshman Democrat's measure continues to build on its bipartisan support — now with a companion bill introduced in the U.S. Senate.

What makes the 6th District Democrat's Partnership to Build America Act so appealing is that it hits two birds with one stone. The fund would be financed by borrowing money privately — allowing private companies to repatriate foreign profits by purchasing $50 billion in 50-year bonds that will pay for the badly-needed road, transit, water, sewer, energy and other projects.

Mr. Delaney's background in finance has obviously come in handy. Most in Congress understand that the nation has an enormous infrastructure backlog — estimated at $3.6 trillion by the American Society of Civil Engineers — and many probably also recognize that the billions of dollars in profits American-based multinational companies have parked off-shore pose a challenge, too.

That's because those foreign profits can accumulate for years without paying a dime in federal taxes, which can be deferred indefinitely. The infrastructure proposal would at least put the money to work. Companies like Apple could participate in a "reverse Dutch auction" in which they'd bid to buy the bonds by offering the lowest "multiplier." For each dollar in bonds the winning bidder purchases, it will be allowed to repatriate a certain amount in foreign profits.

Under Mr. Delaney's example, a winning bid of a 1-to-4 would mean that for every dollar of bonds a company purchases, it would be allowed to repatriate $4 to spend as it likes. Thanks to the magic of borrowing, the $50 billion in bonds can then be leveraged into $750 billion of infrastructure loans or guarantees.

Obviously, this won't "fix" the nation's enormous infrastructure needs by itself, and some may argue that it would be better for the U.S. to reform the tax code to end unlimited deferrals or perhaps even lower the corporate tax rate. But no proposal involving enormous new spending or tax reform is likely to make it out of a highly partisan Congress, particularly in an election year.

The Maryland congressman's proposal is appealing in large part it appears do-able. The House bill has 25 Democrats and 25 Republican backing it while the Senate bill was introduced last week by Republican Sen. Roy Blunt of Missouri and Democratic Sen. Michael Bennet of Colorado and has already attracted a handful of Senate co-sponsors.

Meanwhile, suggestions that the federal gasoline tax be raised (after 20 years of stagnation) and indexed to keep up with inflation have fallen on deaf ears on Capitol Hill. The inability of the U.S. to keep up with its transportation needs is, unfortunately, only going to worsen as vehicles become more energy efficient.

States are also capable of creative ideas, of course. Last week, the Maryland House travel plaza on Interstate 95 reopened as a P3 — a public-private partnership. Redesigned, rebuilt and operated by a private company, the rest stop is still a money-maker for the state, but its operations and upkeep are the responsibility of Areas USA.

And the General Assembly proved willing to raise Maryland's gas tax last year — to finance an estimated $4.4 billion in new transportation spending over the next half-decade. But even that may not prove sufficient given the uncertainty of federal transportation spending and the rising cost of road and transit projects — not to mention the desire of local governments to get a bigger share of the tax revenue pie.

Some in Montgomery County, for instance, would like to see tolls on the Intercounty Connector rolled back to encourage greater use of the highway. Others want more of those transportation dollars to go into fixing local roads, restoring what is known as "highway user revenue." And in Baltimore County, officials even want to shrink the state's transportation financing pie by exempting county-owned vehicles from the gas tax.

This much is clear. The old days of financing transportation and other forms of public infrastructure are gone. What's left is going to have to be an "all-of-the-above" patchwork of partnerships, tolls, taxes, grants and fees. Given that reality, creative ideas like Mr. Delaney's are exceedingly valuable.

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