Regulatory Submissions

This week, APGA and other trade associations asked the Supreme Court of the United States (SCOTUS) to address whether the federal government can revoke its binding commitments, specifically refund payments, to state and local governmental entities. These refunds were a part of the Build America Bonds (BABs) program, which was the first-ever direct federal program for general purpose state and local borrowing.  Public utilities that have used BABs for projects in their communities are impacted.

SCOTUS action is needed because the Federal Circuit issued an opinion allowing the Internal Revenue Service (IRS) to cancel federal refund payments on BABs. BABs were very unique because they provided federal intervention in the municipal bond market to encourage state and local entities to issue taxable bonds, giving up the considerable advantages of tax-exempt bonds. However, state and local issuers made this decision in reliance on Congress’ promise to refund 35% of the interest payments on the bonds. Now, that refund is not being provided. Allowing the federal government to renege on its BABs program commitments has many negative implications. Most importantly, if the Federal Circuit’s opinion isn’t reversed by SCOTUS, states and localities, including public utilities, could shoulder unexpected financial burdens, affecting their ability to provide essential services and projects.