WASHINGTON – Roughly 600 members of the American Public Power Association plan to meet with U.S. lawmakers on Tuesday and Wednesday to urge them to preserve the tax exemption for municipal bonds, Sue Kelly, APPA's chief executive officer told reporters.
"This is a key issue for us, probably the number one issue we will be pursuing on Capitol Hill during our legislative rally," Kelly said.
The meetings come as APPA's legislative and regulatory committee passed a resolution in support of the federal tax exemption for municipal bonds on Wednesday. The resolution will go before the group's national conference in June to be finalized, with possible changes or additions if needed by then.
The resolution states that in the last decade, more than $2 trillion of new infrastructure investments by state and local governments and their entities were financed with muni bonds, including more than 1,300 power-related projects worth an estimated $100 billion.
More than 2,000 public power utilities nationwide own and operate a massive web of infrastructure to reliably provide electric power to more than 49 million Americans, according to the APPA.
The resolution adds that, if the status of tax exempt munis is continued, another $2 trillion to $3 trillion in new infrastructure investments by states and localities and their entities, including public power utilities, will be financed during the next decade with such bonds.
The APPA is opposed to eliminating, impose a surtax on, or capping, muni bond interest, its members said.
Kelly noted that, "Anytime that tax reform becomes a topic of discussion on Capitol Hill, tax exemption for municipal bonds perennially is on the menu as a 'pay for'" to be restricted in some way to provide revenues for some other revenue-losing provisions.
APPA members will be focused on three things on Capitol Hill, she said. First, they want to talk to members about the importance of the tax exempt financing.
"I think it's safe to say that with over 600 public power advocates, many dozens of members of Congress are going to be reminded of stories from their districts about the power of municipal bonds to strengthen communities and create jobs," Laura Marshall Schepis, APPA's senior vice president of advocacy and communications, told reporters.
Kelly added that the city of Idaho Falls, a sponsor of the resolution, financed its local generation hydropower facility with 30-year tax exempt bonds and recently had a celebration in honor of the bonds' maturity.
Schepis said that tax exempt bonds are "front and center our top priority issue" and that members plan to tell lawmakers they issue a total of $11 billion of them annually to finance public power infrastructure.
She also said the members want to red flag for the lawmakers that, "There are no alternatives that work better than tax-exempt bonds." Some APPA members issued Build America Bonds when they were available in 2009 and 2010, only to see their subsidy payments cut through sequestration. "That had a real impact on our members, it is not a substitute," Schepis said.
Build America Bonds, authorized for two years under the American Recovery and Reinvestment Act, are taxable, with the Treasury Department making subsidy payments to issuers equal to 35% of their interest costs in lieu of tax exemption for investors. But sequestration has cut those 35% subsidy payments over the years.
Second, the APPA members want to get congressmen to sign on to a draft letter Reps. Randy Hultgren, R-Ill., and Dutch Ruppersberger, D-Md., co-chairs of the Municipal Finance Caucus in the House, plan to send to leaders of the House Ways and Means Committee to stress the "vital role of tax-exempt bonds" as tax reform legislation is drafted.
The letter points out that nearly two thirds of core infrastructure investments in the U.S. are financed with municipal bonds, including $400 billion of munis in 2015 alone.
And finally, the APPA members will urge lawmakers in the House to join the Municipal Finance Caucus, Kelly said.
