An amendment added to the Senate Finance Committee's portion of the highway bill on Tuesday would change the tax code to prohibit companies from depreciating the value of highways they lease from states. The measure, sponsored by Sen. Jeff Bingaman (D-N.M.), would apply only to so-called "brownfield" highways that have already been built.
Highway leases came under increasing scrutiny in the United States after the Indiana Toll Road and the Chicago Skyway were leased for 75- and 99-year terms to foreign companies in the 2000s.
Bingaman's proposal is strongly supported by the trucking industry, because privatizing highways generally results in higher tolls. But as the Senate transportation bill moves forward -- the Senate approved cloture on a motion to proceed in discussing it Thursday -- it could face increased opposition from Wall Street and law firms that stand to gain on fees from such deals.
“The tax code is encouraging the privatization of public highways by offering generous tax breaks to private entities, and U.S. taxpayers are footing the very expensive bill. This practice doesn’t make any sense and I’m glad we’re a step closer to changing it,” Bingaman said in a statement Wednesday.
Currently, when a private operator leases a toll road for a period of 75 or 99 years, its value can depreciate over 15 years, which translates into a quicker tax break. Bingaman's amendment would spread out the depreciation over 45 years, and also forbid states and municipalities from issuing private activity bonds with cheap interest rates on the behalf of private toll road operators. The bill would apply both to federal interstates and state highways.
Phineas Baxandall, a senior analyst at the US Public Interest Research Group, told HuffPost that if passed, Bingaman's legislation could translate into fewer of the long-term leases that so incensed toll road opponents. That would be a positive move, he said.
"The further out it is, the more the public can't adequately know how to handle its own risks in these deals," he said. "They won't know what kinds of contingencies they'll have to be paying extra side fees for."
The Senate bill faces a long slog through Congress, with a dueling House bill raising hackles on everything from mass transit funding to drilling in the Arctic National Wildlife Refuge, so Bingaman's amendment may never make it into law. But if it did, it could make highway leases less attractive to some toll road investors, according to the director of government affairs at the International Bridge, Tunnel and Turnpike Association.
"It presumably would have the effect of reducing investment interest," said Neil Gray. Still, he added, other investors less interested in making a quick return through the tax system, like pension funds, might step up to the plate. "I don't think this is turning a switch and killing off anything, it would just alter what sort of deal you can generate."
Thursday's 85-11 cloture vote in the Senate on a motion to proceed with the transportation bill means that it is one step closer on coming to the floor for a debate.
Sen. Barbara Boxer (D-Calif.), a prime sponsor of the Senate legislation along with Sen. James Inhofe (R-Okla.), pleaded with her colleagues on both sides of the aisle to offer as few amendments as possible to the bill, and to keep it bipartisan, in contrast to the House legislation.
"Please do not mess up this bill and load this bill down with extraneous matters," Boxer said on the Senate floor.