The heavy supply of municipal bonds flooding the market in recent years has expanded the definition of infrastructure, complicating lobbying efforts in Washington, D.C., while regulatory proposals and policy shifts coming from the Trump administration may undermine the strong credit conditions that have supported supply.
So said panelists Monday at The Bond Buyer's annual Infrastructure conference, held this year in Chicago.
As the market is on track for
"It's easy to have conversations with members of Congress about ... 'bricks and sticks,' — pipes and roads and things like that," said Emily Brock, federal liaison at the Government Finance Officers Association. "But we're starting to see diverse thoughts about how you may be able to use financings for public services," Brock said.
"This explosive growth has brought a wide variety of things that bonds are used for that are hard to describe to Congress," she said.
On the flip side, the muni market has yet to tap some newly authorized tools.
Congress in 2021 allowed tax-exempt private activity bonds to be used for broadband and carbon capture projects in the Infrastructure Investments and Jobs Act, and in 2025 expanded them
But
"It's five years later and we're still waiting on regulatory guidance on how they're supposed to operate," Klavan said.
When Congress expands financing options but then doesn't write the rules for years, "was that a wasted effort, when we could have done something bigger for the market, like bring back advanced refunding?" asked Brock, prompting applause from the audience.
Many expected that regulation would play a minor rule under the Trump administration, but the opposite has been true, panelists said. Market participants should especially pay attention to a White House Office of Management and Budget grant rule overhaul proposal, and the slow-moving but potentially impactful Financial Data Transparency Act.
The OMB in May
"The bond market should be watching this conversation," Brock said. In particular, a provision allowing discretionary termination after the grant has been awarded carries implications for issuers, she said.
The discretionary termination provision is "especially concerning," Klavan agreed.
"Large infrastructure projects aren't financed with one pot of money," she said. Funding, like grants, comes in at different points and different levels, and when federal dollars are involved, "the rules become really important," Klavan said. "The municipal market needs to be paying attention here."
Meanwhile, the FDTA is
"We are watching AI technology leapfrog over what is systematically being written in code now," she said. "Everyone is putting a ton of time and attention to this, and AI is like 'cool, see you when you catch up with us in 20 or 30 years,'" she said. "This is like a trainwreck we're watching in slow motion."
"My job has turned into 90% regulations," Brock added, noting that long-standing
Putting a cost on all proposed regulation is key to the lobbying effort, Brock said.
"One SEC commissioner doesn't listen to us anymore unless we have data," she said. "You've got to have a number to show them how much it costs, then you have their attention."
The policy and regulatory shifts — as well as the final end of substantial federal pandemic aid — could begin to weaken the strong conditions that have supported supply, panelists warned.
"Over the last few years, we've benefited from a strong credit backdrop," said Liberty Ziegahn, managing director at Oppenheimer & Co. Inc.
But the "elephant in the room," is that the "environment is becoming more challenging," she said.
That's particularly true for the flow of funds between federal, state and local levels of government, Ziegahn said.
The Trump administration wants to overhaul programs like disaster aid, key to credit stability, while Congress has sliced funding to many state and local programs.
States receive roughly 30% of their funding from the federal government, and about 30% of local government funding is state aid, Ziegahn said.
Credits with "meaningful exposure to federal programs... are going to feel the impact more" of policy changes, Ziegahn said.
"We have the time to adapt — the key question will be, do we have the appetite?"
Management will become more important as credit conditions weaken, said Alex Wallace, head of public finance at Flagstar.
"We've had an incredibly strong credit base in the municipal market that has allowed us to do a variety of things that other markets haven't been able to do," Wallace said.
"Drilling down, credit selection is going to be more highlighted going forward," he said.
Credits in subsectors facing challenges — such as higher education and charter schools — will be able to access the market but it may be more expensive for them to do so, Wallace said.
"The key in my view is going to be how those credits are analyzed going forward," Wallace said. "It's going to be the policy impact versus the market impact versus the management impact," he said. "Because when conditions change, management becomes very important."
