Advance refunding bill readied for infrastructure consideration
WASHINGTON — A long-awaited bipartisan House bill to restore advance refundings has been introduced with 10 original co-sponsors ahead of expected committee action later this spring on infrastructure.
The Investing in Our Communities Act, H.R. 2772, has the support of the bipartisan co-chairs of the Municipal Finance Caucus with seven Democrats and three Republicans as co-sponsors.
President Trump is expected to lay out the administration's plan for raising revenue to pay for a $2 trillion infrastructure plan at a White House meeting in the coming week with House Speaker Nancy Pelosi, D-Calif., and Senate Minority Leader Chuck Schumer, D-N.Y.
Advanced refundings were terminated beginning Jan. 1, 2018, as one of the provisions of the Tax Cuts and Jobs Act passed by Republicans without any Democratic support.
The provision, which the nonpartisan Joint Tax Committee estimated would increase federal revenue by $16.8 billion over 10 years, was used as one of the many revenue raisers that only partially offset the overall deficit increases caused by the legislation. The provision contributed to a plunge in municipal bond volume since the tax act took effect, as issuers lost a tool to take advantage of lower interest rates.
Several analysts have estimated that state and local governments have lost out on as much as $4 billion or more of present-value savings annually because of the loss.
Restoration of advance refundings is expected to be part of any package that is considered by the House Ways and Means Committee. Restoration is a high legislative priority of the Government Finance Officers Association, the National Association of Bond Lawyers and the Securities Industry and Financial Markets Association.
Municipal bond industry groups have been clamoring for advance refundings to be included in any infrastructure legislation as well as an expansion of private activity bonds and another round of direct-pay bonds similar to Build America Bonds.
Utah State Treasurer David Damschen, president of the National Association of State Treasurers, issued a statement Friday calling the new bill introduced May 15 as essential to “enable states to more efficiently finance critical infrastructure, including roads, bridges, hospitals, schools, water systems and more.”
In addition to House Municipal Finance co-chairs Dutch Ruppersbrger, D-Md., and Steve Stivers, R-Ohio, the bill is co-sponsored by Democrats Terri Sewell of Alabama, Subramanian Krishnamoorthi of Illinois, John Garamendi of California, Derek Kilmer of Washington State, Henry Cuellar of Texas and Delegate Eleanor Holmes Norton of the District of Columbia.
Republican co-sponsors in addition to Stivers are Lee Zeldin of New York, and Andy Barr of Kentucky.
House Ways and Means Committee Chairman Richard Neal, D-Mass., is a former mayor who has been a supporter of advance refundings and other uses of tax-exempt municipal bonds.
Neal told state treasurers earlier this year that he expects there “will be a combination of funding” sources for infrastructure. Neal also told the treasurers he has consulted Princeton University Economist Alan Krueger, who helped develop Build America Bonds, in developing a yet-to-be-released infrastructure bill.
Several members of the Ways and Means Committee have, in the meantime, filed bills to expand the use of private activity bonds.
SIFMA and NABL have told congressional policymakers that any new form of direct pay bonds will need to be exempt from across-the-board budget cuts under a sequester to attract market interest.