Private Activity Bonds (PABs)

Federal Agency

Sub-Department

Build America Bureau

Purpose

To provide private developers and operators with access to tax-exempt interest rates, thereby lowering the cost of capital and enhancing the investment prospects for transportation infrastructure.

Applicant and/or Project Eligibility Requirements

Projects must concern qualified Highway or Surface Freight Transfer Facilities. These generally include surface transportation projects, international bridge/tunnel projects, and rail-to-truck/truck-to-rail freight transfer facilities governed by Title 23, U.S. Code.

Decarbonization Considerations

Any surface transportation project which receives Title 23 assistance is qualified to benefit from private activity bonds. Because projects that receive TIFIA credit assistance are Title 23 projects, this means that TIFIA projects are also eligible to receive this tax-exempt bonding authority. This provision therefore extends eligibility to TIFIA-assisted public transportation, intercity bus or rail facilities and vehicles, including vehicles and facilities owned by Amtrak, public freight rail facilities or private facilities providing public benefit for highway users, and intermodal freight transfer facilities. Together TIFIA and private activity bonds should provide substantial incentives for private equity investment in highway and freight projects.

Equity Considerations

See the "Equity Design Considerations for Federal Funding" for general considerations and additional sector-based resources: https://cityrenewables.org/resources/equity-design-considerations-for-federal-funding/

Helpful Tips

In making application to the Department, applicants should note that there are no specific standards, beyond those set forth in applicable laws or regulation, that apply to the consideration of the applications. The intent is to provide maximum flexibility in the Secretary's award of the $15 billion bonding authority. The Department is particularly concerned that once it makes an allocation, tax-exempt facility bonds are issued in timely fashion. Hence, if the schedules agreed upon in the final allocation action are not met, the allocation may be withdrawn.

Other Notes

The program is designed to spur private investment. Applicants must pass private activity bond legislation supporting the Government's desire for increased private investment in U.S. transportation infrastructure. A copy of the passed resolution is required with the application, though it may be contingent on receipt of DOT funds.