The municipal finance community is promoting infrastructure bills that its members say would expand the availability and use of tax-exempt bonds.
Exempt bonds are critical to responding to the COVID-19 pandemic and getting the economy back on track, according to 26 groups representing public finance that reached out to House leadership just before the chamber approved the Moving Forward Act (H.R. 2).
“Expanding the use of tax-exempt financing for public and nonprofit entities will keep existing infrastructure projects alive and support local economies through newfound capital in the municipal bond market,” the groups wrote in their June 30 letter.
Along with throwing their weight behind H.R. 2, the groups, which include the Government Finance Officers Association and the National Association of Bond Lawyers, supported the Lifting Our Communities Through Advance Liquidity for Infrastructure Act (S. 4129), introduced by a bipartisan group of senators July 1.
Both bills would bring back advance refunding bonds, which were eliminated by the Tax Cuts and Jobs Act.
Restoring advance refunding “will save state and local governments billions in debt service and provide much needed flexibility to state[s] and localities in managing their debt,” the Bond Dealers of America (BDA) said in a July 1 letter to Sen. Roger F. Wicker, R-Miss., sponsor of S. 4129, and Senate Finance Committee member Debbie Stabenow, D-Mich.
H.R. 2 would also expand the use of small issue industrial development bonds, whose proceeds are used by small manufacturing companies and first-time farmers.
The provision, which incorporates the Modernizing Agricultural and Manufacturing Bonds Act (H.R. 5422) into the larger infrastructure bill, would raise the capital investment limitation for manufacturing companies from $10 million to $30 million and index the limit for inflation thereafter, the BDA noted in a July 1 letter to House leaders.
“An important part of restoring American manufacturing is to promote and assist small manufacturers to grow and expand,” the BDA wrote. “That is exactly the goal of [the industrial development bonds provision], as well as to encourage and aid small farmers.”
In addition to passing that provision and resurrecting advance refunding bonds, Congress should pass H.R. 2 to expand small issue bank qualified bonds and restore direct pay bonds, according to the BDA.
“Together . . . these initiatives would help ensure a quick economic recovery and would promote substantial new investment in our nation’s infrastructure,” the BDA concluded.