Tax

The elimination of private activity bonds would remove a financing tool that supports many public private partnerships.

While Congress sets its focus on overhauling the nation's tax code, one provision of plans introduced in both the U.S. House and Senate could have unexpected and far-reaching implications for LSU fans.

Tax reform legislation will be front and center this week, snatching the market’s attention as Congress moves ahead with measures that will change the bond marketplace in the near- and long-term. Both the House and Senate are taking up muni proposals that will directly impact issuers, underwriters and bond buyers.

The municipal market will get another healthy dose of issuance in the final full week before Thanksgiving. The calendar is chock full of deals from Illinois, as all issuers look to price bonds before the tax laws change.

The 20% corporate tax rate also would have an adverse impact on the muni market.

While some buy side analysts see a supply “nightmare” following the tax reform proposal, others are looking for opportunities to "stock up" on munis.

The muni market would fare better in the Senate Republicans' tax reform proposal, which would preserve private activity bonds and enhance them through the repeal of the alternative minimum tax. However, advance refundings and the SALT deduction would be terminated, a "one-two punch" for state and local governments.

The Illinois Finance Authority authorized a passel of deals that would be outlawed by a GOP tax bill.

Many large schools have already dipped their toes into the taxable bond market, but smaller schools would find it tougher.

The elimination of private activity bonds “would throw gasoline on a housing shortage," said John Chiang, California's treasurer.

Blow-back from the sell-side centered on the proposal's potential to drive up infrastructure financing costs and accelerate the departure of smaller firms from the business.

Mayor Bill de Blasio's advisors worry about the effect of eliminating advance refundings and private activity bonds.

Tax-exempt student loan bonds have saved families $815M over the last 20 years.

Senate Finance Commitee chairman Orrin Hatch's tax proposal will likely be kinder to municipal bonds than the House's bill, but harder on states and localities.

Voters in seven California cities approved marijuana taxes Tuesday.

Some House Republicans pledged to work with Democrats to save PABs, advance refundings in tax reform legislation.

Smaller hospitals and colleges and affordable-housing developers will be more challenged in distributing their bonds under proposed tax reforms.

Kansas City voters advanced a proposed P3 to rebuild the city's airport terminal.

To work well, public policy in a democracy must be transparent and allow time for debate, input and analysis. The given time frame on the House GOP tax bill, which will have broad ramifications for infrastructure development, healthcare and higher education costs and affordable housing, provides little opportunity for a democratic process of debate and compromise to take place.

In a document rife with broken promises and misstatements about the muni market, the “Tax Reform” proposal beats up on the municipal bond market and state and local bond issuers to an extent never envisioned prior to the publication of that proposal.