Public Finance Network, BDA lobby for bond legislation
A coalition of state and local public sector groups and infrastructure related organizations are urging a key House committee to expand the use of tax-exempt municipal bonds as a part of any infrastructure legislation.
More than 24 members of the Public Finance Network signed onto a letter sent Wednesday to the House Ways and Means Committee urging the restoration of advance refunding for tax-exempt bonds and enactment of other measures to expand the muni market.
The letter, spearheaded by Emily Brock of the Government Finance Officers Association, is a follow-up to a Jan. 29 hearing by the committee examining possible ways to fund and finance new infrastructure.
The hearing marked the initial effort by Committee Chairman Richard Neal, D-Mass., to examine possible ways to finance a $760 billion, five-year framework released by House Democrats last month for improving surface transportation, waterways, ports, airports and broadband.
The size of the municipal bond market shrank to $3.8 trillion in 2018 from $4 trillion in 2010, testified Philip Fischer, founder of eBooleant Consulting and former head of municipal bond research for several major banks.
Fischer testified that there is strong investor demand for expanding the municipal bond market.
House Democrats want restoration of direct-pay Build America Bonds and advance refunding for municipal bonds to be key parts of the plan.
That’s exactly what members of the Public Finance Network wanted to hear.
The letter highlights five priorities that begin with “relying on the municipal bond tax exemption” followed by “restoring the ability for governments and other qualifying entities to advance refund tax-exempt municipal bonds.”
Another priority is “restoring and expanding the use of Build America Bonds (BABs) and ending their exposure to sequestration.”
The fourth priority is increasing the borrowing limit for small issuers to $30 million for bank-qualified loans and applying it to borrowers rather than issuers.
Lastly, the groups want the federal government to maintain popular grant programs that support capital investment.
“Tax-exempt bonds are issued to pay for capital needs that directly benefit our communities,” said the letter. “Billions of dollars are saved across tens of thousands of governmental entities through the issuance of tax-exempt bonds every year.”
The letter sent to the committee Wednesday is signed by groups that include the U.S. Conference of Mayors, the National League of Cities, the National School Boards Association, the Association of Public & Land-Grant Universities, the American Hospital Association, the American Public Power Association and the American Public Transportation Association.
Municipal finance groups such as the Bond Dealers of America, the National Association of Municipal Advisors and the National Association of Bond Lawyers also signed the letter.
BDA also sent a separate six-page letter to the House committee as part of the public record that provided more detailed arguments for expanding the market for tax-exempt bonds.
“The advance refunding (AR) technique allows state and local government issuers to refinance, and thus benefit from lower interest rates, when the outstanding bonds are not currently callable,” BDA wrote. “It is important to note that, under pre-2018 law, tax-exempt bonds could be issued to advance refund an outstanding issuance only once, a significant restriction on these transactions.”
The BDA letter also cited data from the Government Finance Officers Association that found more than 9,000 advance refundings were used between 2012 and 2017 to save taxpayers over $14 billion.