Last month, the Obama administration proposed the creation of a new kind of municipal bond —Qualified Public Infrastructure Bonds (QPIB), as a way to extend the benefits of municipal bonds topublic private partnerships.

Presently, the government has in place the Private Activity Bonds program, which has been used by local and state governments to finance over $10 billion of roads, tunnels, and bridges.  The QPIB would function essentially as a cross between governmental bonds and private-activity bonds.  Public Activity Bonds are restricted by issuance caps, expiration dates, and the interest is subject to the alternative minimum tax. QPIBS would not be subject to these restrictions and would widen the scope of financing for different types of infrastructure projects, including airports, ports, mass transit, solid waste disposal, sewer, and water, and more surface transportation projects.

The introduction of QPIB increases flexibility for P3 financing and this lower cost financing tool may be exactly what is in order to generate more private sector participation in large-scale P3 projects.