WASHINGTON — Two key House lawmakers are planning to introduce legislation to restore tax-exempt advance refunding, and are simultaneously working to gather legislative support for the municipal market's role in infrastructure finance.
Democratic Rep. Dutch Ruppersberger of Maryland and Republican Rep. Steve Stivers of Ohio, co-chairs of the Municipal Finance Caucus, explained their efforts and goals in separate interviews with The Bond Buyer Wednesday. The bipartisan duo said the measure to restore advance refundings, which were terminated in the 2017 Tax Cuts and Jobs Act, could be offered as an amendment to infrastructure legislation crafted by the Ways and Means Committee.
“If we see something moving faster and we don’t have time to introduce a bill, we may do it just as an amendment,” Stivers said, noting that Ways and Means is also expected this year to pass a miscellaneous tariffs bill, a bipartisan tax corrections bill and a pensions bill.
“There’s lot of ways to make laws,” Stivers said. “It’s an art, not a science. When we see a train leaving the station we are going to try to hitch our car to it whether it’s our train or another train.”
Ruppersberger, a former Baltimore County executive who served in local government for 17 years, said Wednesday that advance refundings “take advantage of lower interest rates and saves not only our government, but our taxpayers, money.”
“By not allowing our local governments to do these refinancings it will cost billions of dollars and thousands of jobs,” Ruppersberger said. “By taking away this ability, it makes no sense."
House Ways and Means Committee Chairman Richard Neal, D-Mass., was asked last month about the possible reinstatement of advance refundings at a conference held by the National Association of States Treasurers and responded that there “will be a combination of funding” sources as part of an infrastructure the package.
He did not specifically comment on advance refundings, but two of the state treasurers interviewed by The Bond Buyer at that time took Neal’s comments as a positive sign.
“Clearly it’s a priority for all of us and it sounds like it’s a priority for him too,” Massachusetts Treasurer Deborah Goldberg, senior vice president of NAST, told The Bond Buyer. She noted that Neal “opposed it being taken away” as a municipal finance tool in the Tax Cuts and Jobs Act.
Goldberg predicted advance refunding “will be on the table” as the House deliberates on financing.
Stivers and Ruppersberger also said Wednesday that more than 70 of their colleagues have signed a letter in support of municipal bonds as a financing tool for infrastructure. The two have a goal of getting more than 100 of the 435 House members to sign the letter, which is addressed to Neal and the Ways and Means Committee's ranking Republican, Kevin Brady of Texas.
“The point of the letter is to support municipal finance and tax exempt bonds,” Stivers said. “And just to send a note to the Ways and Means Committee how far and wide the support is. We plan to get it to at least 100 and undersell expectations because I want to get way more than that.”
Stivers said that he and Ruppersberger are “working the floor” of the House during daily votes to gain new signatories to the letter, which describes tax-exempt municipal bonds as “a potent tool.”
“For more than a century, states and local governments have depended on this reliable and efficient means of financing,” the letter states. “Nearly two-thirds of core infrastructure investments in the United States are financed with municipal bonds. In 2018 alone, more than $325 billion in municipal bonds were issued to finance the projects that touch the daily lives of every American citizen and business.”
“A combination of local control and local responsibility makes municipal bonds an effective tool and an expression of fiscal federalism,” the letter states. “Voters throughout the country overwhelmingly support tax-exempt municipal bonds, which are either approved by locally-elected officials or directly through bond referenda. The federal tax exemption reduces the cost of issuing municipal bonds, making important community infrastructure cheaper for taxpayers and freeing up resources for other needs. Should this tax exemption be preserved, it is estimated that municipal bonds will finance another $3 trillion in new infrastructure investments by 2028.”
Neal and Brady’s committee has begun hearings on infrastructure-related tax measures that the panel is expected to vote on this spring.
