State and local governments have issued municipal bonds for centuries to help build our communities and our economy. Over the last decade, the use of tax-exempt financing has provided funding for approximately $1.7 trillion in infrastructure investments nationwide such as bridges, roads, hospitals, and public natural gas systems.
As units of state and local government, public natural gas systems are able to issue tax-exempt bonds for projects that promote the public good. Just as cities and counties issue tax-exempt bonds for projects like schools and hospitals, public natural gas systems use these bonds for investments in infrastructure and long-term energy purchases.
To reduce the federal deficit, Congress and the administration are seeking new sources of federal revenue. Ideas include proposals to limit tax-exempt financing, an essential financing tool used by our members. One proposal the Obama administration has made is a cap on deductions and exemptions limiting the value of the municipal bond exemption to 28 percent for investors.
Learn more about tax-exempt financing by watching this APGA video.
This limitation would have the effect of driving investors out of the municipal bond market, thereby forcing states, local governments, and public natural gas systems to offer higher rates in order to sell their bonds. This would ultimately result in reduced infrastructure investment, higher taxes and fees, and higher costs to states, localities, and public natural gas systems.
APGA therefore opposes proposals like this to eliminate or restrict the use of tax-exempt financing.
Just as state and local governments should not—and could not—shift their costs by taxing federal bonds, the federal government should not try to shift its costs to state and local governments—and their residents—by imposing an unprecedented tax on municipal bonds or restricting the ability of state and local governments to utilize tax-exempt financing.
What can we do?
Now is the time for public natural gas systems, as well as others who utilize tax-exempt financing, to communicate to Congress the important role that tax-exempt financing plays. Efforts to address tax-exempt financing are most likely to occur in a larger tax-reform package, which are often introduced in Congress.
We encourage you to contact your congressional delegation to discuss the benefits that tax-exempt financing provide in your community.
To contact your senator, click here.
To contact your representative, click here.