After months of negotiations between the Biden Administration and a small working group of Senate Republicans, hopes for a grand infrastructure compromise have taken a major hit, laying the groundwork for a likely massive spending package that will pass along party lines later this year.
While the most likely path for passage will be via budget reconciliation, a new bipartisan group of 10 Senators late last night announced that they reached a deal on an 8-year infrastructure plan with nearly $579 in new spending and a total price tag of over 1 trillion dollars. The group plans to present the plan to the Administration in the coming days to find a common path forward. However, much progress seems unlikely as this package has yet to be endorsed by the leadership of either party and falls well short of the Administrations’s original 2 trillion dollar goal.
There are still several legislative avenues to pass infrastructure legislation, as noted the most likely is budget reconciliation. However, Congressional Leadership may pursue multiple bills with the first being the recently introduced 547 billion dollar surface transportation package the INVEST in America Act. The reauthorization package needs to be passed by October 1 to avert a lapse in funding, the most likely catalyst for Congressional action on infrastructure that could include some portions of the Senate groups compromise-yet there are many unknowns with that proposal.
Following the passage of the surface transportation package, expect a hard push by the Biden Administration to carry out other infrastructure priorities including the American Jobs Act and the American Families Plan.
Regardless of the legislative path chosen, the BDA and MBFA remain confident that key muni provisions remain a priority for Congressional leadership and the Administration.
PABs Gain Traction/Other Priorities Remain Well Positioned
The Biden Administration has released its annual “Green Book,” which includes a plethora of proposed tax changes for the coming fiscal year. The “Green Book” included several bond provisions, including some BDA and MBFA priorities. While the tax document did not include key priorities such as the reinstatement of tax-exempt advance refundings, Congressional Leadership remains priorities.
The Administration is calling for an increase in the PAB limit for transportation infrastructure, doubling the limit to 30 billion dollars.
The plan also calls for the authorization of a new direct-pay bond, Qualified School Infrastructure Bonds. According to the Green Book, the QSIB’s would:
- Have a total national QSIB limitation of $50 billion $16.7 billion each for 2022, 2023, and 2024.
- Interest on QSIBs would be taxable and either the bondholders’ interest would take the form of a tax credit equal to 100% of the interest on a QSIB of or the bondholders would receive cash from the bond issuer, and the Federal Government would make corresponding direct payments to the bond issuer.
- Each State would have to use no less than 0.5 percent of its total QSIB allocation for outlying areas
BDA Legislative Expectations and Predictions
Other priorities remain atop the Congressional tax-writers wish list. The BDA recently released expectations and predictions piece outlining expected legislative outcomes for municipals in the remainder of 2021.
Included in the BDA legislative outlook:
Restoration Tax-Exempt Advance Refundings
- Sentiment on Passage: BULLISH
Raise BQ Debt Limit
- Sentiment on Passage: NEUTRAL
New Direct Pay Bond Exempt from Sequestration
- Sentiment on Passage: BULLISH (with a caveat on sequestration exemption)
Expand the Usage of PAB’s
- Sentiment on Passage: BULLISH