Posted on January 27, 2012 9:23 AM
Proposed Regional Infrastructure Improvement Zones Act
On January 18, 2012, the Regional Infrastructure Improvement Zones (RIIZs) Act was introduced in the U.S. House of Representatives. The bill would allow private businesses or individuals to contribute tax-deductible funds to support the construction or maintenance of public infrastructure, including transportation and water projects. Eligible infrastructure projects, which include highways, public transportation systems, green infrastructure, and storm water treatment facilities, must be included in a relevant, approved regional plan and undergo the public approval process; operational expenses are not eligible for tax benefits. Private entities wishing to establish an RIIZ would petition the relevant regional planning organization, which would determine whether the project is consistent with established regional plans and has the support of local stakeholders. Upon approval of the application, the regional planning organization would notify the state attorney general and Internal Revenue Service. The regional planning organization would designate an unincorporated or incorporated association of local businesses and individuals to administer the RIIZ.
Current revenue sources are inadequate to maintain, modernize, and enhance the Chicago region’s infrastructure, and GO TO 2040 recommends that the region consider new approaches to funding transportation and other projects. One approach specifically identified in the plan is public-private partnerships (PPPs), which GO TO 2040 recommends be evaluated on a project-by-project basis. As proposed, RIIZs would help meet this goal: the tax benefit would provide incentives for private participation in infrastructure projects, and the required approval of regional planning organizations like CMAP would ensure project-specific review.
Furthermore, RIIZs would support another GO TO 2040 funding recommendation: value capture. A private entity could donate funds to a transportation project if it expected to receive direct benefits from that project. To the extent an RIIZ can capture some of the future benefit of an infrastructure development, the policy provides another flexible mechanism to implement value capture. In that sense, RIIZs would support CMAP’s commitment to innovative financing of infrastructure projects.
RIIZs are but one in a growing toolbox of innovative finance tools for transportation and other major projects. The policy could allow private businesses and individuals to contribute critical funds to bridge the gap in public financing, particularly for large, complex projects. While the RIIZ proposal has merits, it is a voluntary program that cannot fully meet the region’s larger needs for infrastructure investment, and its provisions are set to expire five years after enactment. RIIZs should not come at the expense of the federal government’s core funding programs to support local and regional infrastructure.