NLC Arms Issuers with Tools to Defend Muni Bonds

The National League of Cities is helping arm issuers with informational materials about proposals to eliminate or limit the municipal bond tax exemption.

The NLC has created an online municipal bond interest calculator that shows the interest cost increases that could occur should tax exemption be capped or eliminated.

Issuers can use the interest calculator by plugging in three numbers; annual interest rate on a project, the term of the loan and the principal amount.

There are three calculations that appear after the numbers are entered. The first is for interest costs for a project under current law with bond interest earnings fully tax-exempt. The NLC said residents save 25% to 30% on interest costs with tax-exempt bonds compared to taxable bonds.

The second calculation shows interest costs for the project if there is a 28% cap on the interest earned. The third calculation shows interest costs for the project if tax exemption is fully repealed. Analysts estimate eliminating tax exemption would raise borrowing costs by at least 200 basis points or 2%.

“The bottom line is that, if the federal income tax exemption is eliminated or limited, cities and their taxpayers will pay more to finance infrastructure projects or there will be less infrastructure investment and fewer jobs created,” the NLC said.

In an email blast sent out to 30,000 members Tuesday, the NLC also urged them to contact their congressional representatives during the August recess while they are in their home districts.

“Please take action to urge them to oppose any changes to this critical intergovernmental partnership, which is essential to infrastructure investments, jobs and the economy,” the NLC said in the email.

The group said that members’ efforts during August will “be invaluable to help get the issue ‘off the table.’”

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