U.S. Transportation Secretary Ray LaHood told municipal leaders meeting in Washington Friday that he would help protect the tax-exempt status of municipal bonds but also urged them to take advantage of federal loan and grant programs to strengthen their local infrastructure investment.
Speaking on a transportation panel at the annual winter meeting of the U.S. Conference of Mayors, LaHood heard a passionate plea on behalf of tax-exempt financing from Laredo, Tex. Mayor Raul Salinas. Mayors at the conference have expressed alarm at the prospect that munis could either lose their tax exempt status or have a cap placed on the amount of interest that would be tax free, potentially driving up borrowing costs and harming infrastructure investment.
After inviting LaHood to visit his city, a key “inland port” featuring two border crossings with Mexico, Salinas asked LaHood to help prevent the municipal finance formula from changing.
“I want to ask for your leadership in protecting municipal bonding,” Salinas told the secretary.
LaHood, who told the mayors that the administration would probably begin closely examining a second-term infrastructure policy in the next several months, said he would provide it.
“Thank you,” LaHood told Salinas. “We will do that.”
The exchange over munis was part of a larger discussion on the future of transportation finance.
LaHood told the mayors that their voices would be needed in the coming congressional session as lawmakers mull a new transportation bill to replace the current funding law after it expires on Sept. 30, 2014.
“Over the next two years, Congress will debate,” LaHood told the panel, which was chaired by Atlanta Mayor Kasim Reed. “The debate is going to be how are we going to pay to be number one in infrastructure again?”
The secretary’s suggestion was to make even greater use of the Transportation Infrastructure Finance and Innovation Act, known as TIFIA. The current transportation funding law passed last summer authorized $2 billion of loans and loan guarantees under the program, which states and localities can use augment bond financing and leverage more private investment.
“I urge you to look at the TIFIA program,” LaHood said. “The money is really in the TIFIA program.”
LaHood also added that a new Transportation Investment Generating Economic Recovery, or TIGER, grant program will be put in place if Congress approves an appropriation for it. Though a Senate committee approved $500 million for the very popular grant program, it has not gotten full approval from either chamber.
LaHood continued to be unclear over whether he plans to stay in his post for President Obama’s second term. Though he initially said he would not, he has backtracked. LaHood told the mayors that they should speak up loudly for policy changes they believe in.
When Oak Park, Ill. Mayor David Pope said he would support a federal gas tax increase, LaHood said municipal leaders need to make Congress hear them, “We need your help on this,” he told the mayors. “We can’t be bashful. Now’s the time to step up.”