Panel Details Public Works Funding Idea : Capital: U.S.-backed corporation would provide insurance and financing to make projects attractive to investors.

Congress should spend up to $5 billion over the next five years to create a new corporation intended to help raise tens of billions of dollars of private capital for investments in toll roads and other money-making public works projects, a congressional commission said Tuesday.

The federally chartered corporation proposed by the commission would attract investors by offering insurance and, in some cases, financing for projects that might otherwise prove too risky to attract investments from pension funds and other private sources, commission members said.

The commission’s recommendations came just as Fitch Investors Service of New York gave a “BBB” rating to $1.02 billion in senior revenue bonds to be issued as early as next week by the San Joaquin Hills Transportation Corridor Agency.

The agency is building a controversial, 17.5-mile tollway as an extension of California 73 from a point in Newport Beach near John Wayne Airport to Interstate 5 near San Juan Capistrano.

The rating is a major victory for tollway officials. Because this means the bonds are of so-called investment grade, they are considered less risky.

However, officials said it’s likely that the interest rate on the bonds will still be two percentage points higher than the rate for the top bond rating--AAA.

The pending sale of the bonds means that construction could begin within a few weeks, and erases fear in some quarters that the project could not be successfully financed.

“Their decision to rate the bonds investment grade is very positive and reflects the strength and viability of the San Joaquin Hills Corridor,” said Walter Kreutzen, executive vice president for finance at the tollway agency.

The tollway project still faces several court tests, any one of which could delay construction.

Despite the Orange County project’s success in gaining an investment-grade bond rating, it is the type of public works effort that the congressional commission in Washington has in mind for extra help.

The so-called “national infrastructure corporation” could initially help projects attract $10 in private capital for every $1 spent by the federal government, said Daniel V. Flanagan Jr., chairman of the Commission to Promote Investment in America’s Infrastructure. Eventually, Flanagan said, the figure could rise to $18 in private funds for every federal dollar spent.

The commission, which unveiled its proposal Tuesday at a Capitol Hill press conference, was established by Congress more than a year ago to devise ways to secure private money, particularly from large pension funds, for revenue-generating public works projects such as toll bridges, toll roads or commuter rail systems. Pension fund managers now control about $4 trillion in assets.

To help make public works projects more attractive to private investors, Flanagan and six other commissioners proposed that the new corporation engage in four major activities.

The corporation, for a fee, would insure bonds used to finance construction projects that might not qualify for insurance from private vendors. The debt insurance would make the bonds much more marketable, Flanagan said.

Secondly, the corporation would insure both private businesses and local or state governments for the expense of developing potentially risky projects. That would ensure that a project would not be killed off early because of fears that it would not pass environmental or other hurdles.

The new organization also would provide limited financing for specific projects that had attracted some but not all of the capital needed to proceed.

And finally, the corporation could eventually issue its own bonds to finance a pool of public works projects. The bonds would be paid off with project revenue.