The American Association of Port Authorities (AAPA) says it is concerned over the House-passed tax bills, citing provisions that it says undermine U.S. seaports via the elimination of several bonds and tax credits.
The tax reform bill passed in November by the U.S. House of Representatives contains several provisions that hamper seaport operations, according to a statement from the American Association of Port Authorities (AAPA).
The AAPA said that those provisions would eliminate tax-exempt status for Private Activity Bonds (PABs) and repeal the tax exemption for advanced refunding of bonds – both of which are used to fund U.S. port infrastructure, said AAPA. The Senate bill also includes repealing the tax exemption for advanced refunding of bonds, affecting the ability of issuers to refinance those bonds at lower rates – and approximately 27 percent of the $451 billion in long-term, tax-exempt U.S. municipal bonds were advance refunded in 2016 to take advantage of lower rates, said AAPA.
According to AAPA, U.S. member ports and their private sector partners are in a building boom and are planning to invest $155 billion into capital projects between 2016 and 2021. Many of these improvements will be financed through municipal and private activity bonds.
Additionally, the House version of the bill includes rolling back wind energy Production Tax Credits to its 1992 level of $15 per megawatt hour, which is a substantial decrease from the current inflation-adjusted $24 per megawatt hour. AAPA argues that such a provision would negatively impact investments in U.S. wind energy projects and could threaten U.S. port jobs.
“While we applaud the intentions of Congress and the Administration to simplify our complicated and oftentimes burdensome tax structure and incentivize investments into our economy, a number of tax changes in both versions of the legislation run counter to those intentions,” said Kurt Nagle, AAPA president and CEO. “AAPA supports maintaining the historic system of tax-exempt bonds and encourages these bonds to also be permanently exempt from the Alternative Minimum Tax. AAPA also opposes any rollback and supports a permanent extension of the existing wind energy Production Tax Credit, which is set to expire in 2019. Furthermore, we thank the Senate for deleting a provision in its bill to impose a new tax on the cruise industry. That provision would have hindered American economic growth and jobs. We congratulate the Senate for taking this into account as they considered the many aspects of this important legislation.”
AAPA has “deep concerns about the provisions in the House bill to eliminate the tax-deducibility of PABs, as well as the impact of a repeal of advanced refunding of municipal and certain PAB bonds in both the House and Senate bills,” the organization said in the statement. It cited the ports of Los Angeles and Long Beach, which have each estimated that the loss of tax exemptions on PABs and advance refundings would increase the cost of financing their port infrastructure.
According to the AAPA, the Port of Los Angeles estimates its costs would increase $30 million over 30 years if it couldn’t use tax-exempt PABs, while the proposed changes to advanced refunding would cost $28.17 million over the same time period. The Port of Long Beach says it has $823 million of outstanding long-term debt, of which $394 million is in tax-exempt PABs and $395 million is eligible to be “advance refunded.” For every $100 million of borrowing that can’t be issued as PABs, the port estimates its debt service costs would increase by approximately $19 million, said AAPA.
AAPA, which represents 140 seaport authorities in the U.S. Canada, Latin America and the Caribbean, “advocates for maintaining the existing tax-exempt financing tools to allow America’s infrastructure to keep pace with demands and entice more public-private partnership agreements to fund and finance infrastructure improvements,” the organization said.
AAPA: Tax reform must maintain existing tax-exempt financing tools
