Friday, May 4, 2012

Private Activity Bonds (PABs)

Something is going to have to give.  With increased demand due to population increases and our aging infrastructure - - we are going to need money for water and wastewater improvements.  It seems delusional to think that public funding will be able to cover the tab for all that is required.

Innovative sources of funding will be required - - where both the public and private entities combine in partnership.  One example would be Private Activity Bonds (PABs).  Currently utilized on transportation projects - - PABs are tax exempt bonds issued by private equity investors for public purposes, such as water and wastewater infrastructure.  PABs have been typically used for projects involving new technologies or when there is a higher perceived performance risk or situation where the municipality doesn't want to issue long-term debt.  Under a formula, Congress controls the total volume of tax-exempt PABs by capping issuance in each state, but bipartisan legislation is moving in both the House and Senate that would remove the cap for water projects, raising as much as $5 billion a year in additional financing.

This document is a good source for additional information - -

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