U.S. Reps. Dutch Ruppersberger (D-MD) and Steve Stivers (R-OH) introduced legislation that allows governments to refinance outstanding bonds for projects such as new roads, schools, hospitals, and fire stations.
Their bill – the Investing in Our Communities Act – would restore the tax-exemption for advance refunding bonds, which was eliminated by the Trump administration’s tax reform law of 2017. The change enables governments to take advantage of lower interest rates, similar to homeowners refinancing their mortgages. The use of tax-exempt advance refunding bonds saves taxpayers an estimated $2.35 billion a year, freeing up resources for other community improvements, which will be vital in the recovery from the COVID-19 crisis.
“This is a complicated finance issue that has a simple end result – saving American taxpayers money,” Ruppersberger said. “County and state governments have served on the frontlines of the COVID-19 pandemic, facing historic revenue losses amid unforeseen costs while still cutting paychecks to our teachers, law enforcement, and public health workers. We must do everything we can to help them invest in projects that improve our communities, create jobs, and, ultimately, reduce the need to raise taxes.”
Ruppersberger and Stivers are co-chairs of the House Municipal Finance Caucus.
“Municipal financing makes so much of daily life possible; from highways to telecommunications towers, municipal bonds allow for the delivery of services and connections for millions of Americans,” Stivers said. “By enhancing the status of tax-exempt bonds, we’re empowering state and local governments and saving taxpayer money along the way.”
The legislation comes as Congressional leaders discuss a national infrastructure package with the Biden administration.
The bill is cosponsored by Reps. John Garamendi (D-CA), Lee Zeldin (R-NY), Brian Fitzpatrick (R-PA), Andy Barr (R-KY), Joyce Beatty (D-OH), Terri Sewell (D-AL), Julia Brownley (D-CA), Eleanor Holmes Norton (D-DC), Earl Blumenauer (D-OR), Cindy Axne (D-IA), Andrew Garbarino (R-NY), Daniel Kildee (D-MI), James P. McGovern (D-MA), Henry Cuellar (D-TX), Haley Stevens (D-MI), Gerry Connolly (D-VA), Judy Chu (D-CA), Jimmy Panetta (D-CA), Derek Kilmer (D-WA), Dean Phillips (D-MN) and Fred Upton (R-MI).
“Allowing our cities and towns to refinance their outstanding bonds will save our communities, and our constituents, money,” Kildee said.
SIFMA, a trade association for broker-dealers, investment banks, and asset managers, supports the legislation.
“Advance refunding is an important tool which allows state and local governments to save billions of dollars in interest costs by refinancing their outstanding debt to a lower interest rate. By reducing their debt service expenses, states and localities would free up their borrowing capacity for new investments in infrastructure and other important public projects, in turn boosting their local economies with the creation of new jobs and making public services more affordable. Our state and local governments have a critical need, especially this deep into the COVID-19 pandemic, to fund the repair and even new construction of the bridges, roads, schools, health care facilities, water and sewer facilities, transportation facilities our communities rely on,” SIFMA president and CEO Kenneth Bentsen, Jr. said.