WASHINGTON — A group of middle-market municipal bond dealers are banding together with issuers, analysts and others to form Municipal Bonds for America, a coalition created to head off threats to the tax-exempt status of municipal bonds.
The group, which had roughly 20 members Tuesday, will “provide a unified advocacy voice to promote and defend the municipal securities market” and serve as the market’s voice in communications with the media and policymakers, according to a press release.
The coalition will allow the market to respond with a unified voice to threats coming from Washington, said Bond Dealers of America chief executive officer Michael Nicholas, who is overseeing its formation.
“Instead of having multiple organizations going independently to the Hill, we need a coalition of like-minded nonpartisan individuals and muni-market professionals to help educate D.C. policymakers about the importance of the tax exemption,” he said in an interview.
The group plans to host a website that will post white papers, case studies and videos showcasing the importance of tax exemption.
Nicholas said munis could be negatively affected by tax and budget plans put forth by both President Obama and Republican presidential candidate Mitt Romney.
Obama, in a jobs bill floated last year and his 2013 budget, said he wants to re-establish the Build America Bond program with lower subsidy rates and proposed placing a 28% cap on the value of tax-exempt interest for wealthy taxpayers, which would be retroactive. Romney said he plans to close tax loopholes and eliminate certain tax preferences, but has not provided details. But many tax pros say he can’t cut tax rates 20% across the board and avoid adding to the deficit without drastic cuts in spending and expenditures.
Other threats include deficit reduction commissions that proposed eliminating tax exemption for all or certain new bonds, and legislation introduced by Sen. Ron Wyden, D-Ore., that would make all new muni bonds taxable tax-credit bonds.
“The muni tax exemption is in the spotlight as a revenue raiser like its never been before,” said Nicholas.
The coalition plans to work with city, county and state leaders from all states to help ensure issuers continue to access tax-exempt bonds to finance critical public projects, including schools, hospitals and roads.
MBA’s founding members include Marc Jahr, president of the New York City Housing Development Corp., Marc S. Gerken, president and CEO of American Municipal Power, Marty Vogtsberger, senior vice president and managing director at Fifth Third Securities Inc., and Ken Williams, manager of the muni office at Stifel, Nicolaus & Co. Vogtsberger, Williams and Jahr, a board member at the National Association of Local Housing Finance Agencies, are the coalition’s leaders, the media release said.
Other members include John Murphy, executive director of NALHFA, Richard Larkin, director of credit analysis at Herbert J. Sims & Co. and Russell Truell, assistant administrator of finance for Franklin, Tenn. Sixteen BDA-affiliated firms are also members. Nicholas said he is is recruiting more state and local finance officials and individuals affiliated with groups like National Association of Bond Lawyers, National Association of State Treasurers and Government Finance Officers Association.