WASHINGTON – The co-chairs of the bipartisan House Municipal Finance Caucus introduced bipartisan legislation Tuesday to reinstate advance refundings as a way to generate savings that state and local governments could use to help finance infrastructure projects.
Rep. Randy Hultgren, R-Ill., told members of the National Association of State Treasurers meeting here that he and Rep. Dutch Ruppersberger, D-Md., expect broad bipartisan support for the bill, which has three Republicans and three Democrats as cosponsors so far.
“We’d love for you to reach out to your delegations in your states and have them join with us on this,” Hultgren told the state treasurers.
Ruppersberger, who was not at the conference, issued a press release pointing out that advanced refunds have helped his home state of Maryland save nearly $37 million annually.
Illinois saved $80 million last year and even Elgin Community College saved $240,000 through an advanced refunding in 2012, Hultgren told the state treasurers.
The mayor of the Illinois community of Hawthorne Woods also issued a statement saying his community saved $1 million with advanced refundings. “These savings have been passed on directly to our residents and would not have been possible without the use of tax-exempt bonds," said Mayor Joseph Mancino.
“I don’t think this is controversial at all,” Hultgren said in an interview. “And I think there is a real misunderstanding and somehow a miscalculation that this is big savings to the government by doing away with this. I just don’t believe that’s true and certainly if there are any savings it’s on the backs of local communities and local projects, limiting their ability to provide additional teachers or additional police officers.”
Many municipal market participants agree.
“In my opinion advanced refundings don’t cost the federal government money,” said John Miller co-head of fixed income for Nuveen Asset Management, who spoke on a NAST panel along with Hultgren.
Senate allies include Republican Sen. Pat Toomey of Pennsylvania, Hultgren said, although there is no companion bill in the Senate yet.
The nomenclature for advanced refundings and private activity bonds might be changed to properly describe what they do, Hultgren said.
Advanced refundings should be renamed “refinancing to save taxpayer dollars” and private activity bonds should be called "public good bonds," or PGBs, he said.
Last year Hultgren and Ruppersberger circulated a bipartisan letter signed by 156 House lawmakers opposing a Ways and Means Committee proposal to terminate private activity bonds.
PABs were retained in the final legislation, but advance refundings were terminated after Dec. 31.
Both were targeted for termination as revenue raisers to help offset tax cuts.
“They just didn’t really get what these are, how to me, common sense they are and how foolish it is to get rid of them,” Hultgren said. “On the whole there are so many good things in the tax bill, but this is just one of them that got missed. That’s okay. Let’s just go back now and let’s fix it.”
Although the Hultgren-Ruppersberger bill to restore advanced refundings is being promoted as an infrastructure measure, it would restore them for all municipal bond issues, according to Hultgren’s spokesman.