Bond Dealers of America is spearheading a newly restructured municipal bond lobbying effort just as a new presidential administration begins and lawmakers show an interest in financing infrastructure with bonds.
BDA announced Wednesday morning that Municipal Bonds for America, a group of buy and sell-side stakeholders, will push for specific municipal bond initiatives on Capitol Hill. MBFA had previously been issuer-focused, but now includes only those on the business side such as dealers, trading platforms, bond lawyers and buy-side firms.
“It’s a stronger MBFA because we’re utilizing different components of the muni business to advocate for muni issuance," said Michael Nicholas, BDA CEO.
“The advantage is that it’s taking the whole business side and then working with the issuers to advance this, as opposed to just being dealers and issuers," Nicholas added.
This year, Nicholas is hopeful about the outlook for hoped for muni legislation ranging from the reinstatement of tax-exempt advance refunding to increasing the cap on private activity bonds and incentivizing the use of public private partnerships. The current volume cap on PABs for surface transportation projects is $15 billion and $14.9 billion of it has already been allocated and issued, according to the Build America Bureau within the Transportation Department.
That cap is separate from the state-specific PAB volume caps.
“There is a real opportunity in 2021 to advance municipals,” Nicholas said.
The MBFA Council is tasked with helping the Biden administration and Congress with funding infrastructure and working with state and local governments to advance the agenda for municipal bonds.
Heading up the MBFA’s advisory board are a few familiar faces such as Chris Hamel, RBC Capital Market’s former head of municipal finance; Sheila Amoroso, formerly Franklin Templeton’s head of municipals and Lynnette Kelly, former CEO of the Municipal Securities Rulemaking Board.
“Defense and promotion of the municipal bond market as one solution to the country’s infrastructure challenges is critical for investors and tax-payers nationwide and creation of the MBFA will focus on and advance that important mission,” Amoroso said.
Kelly is hopeful for both more municipal bond provisions and an infrastructure bill, saying those things fit nicely into President Joe Biden’s climate initiative. During his campaign, Biden called for broad infrastructure investments and to move the U.S. to net-zero greenhouse emissions. MBFA wants to have muni bonds included in clean energy infrastructure discussions.
“Anytime there is an opportunity to work with a new administration on infrastructure and of course the municipal bond market, it’s an exciting opportunity to do that,” Kelly said.
MBFA plans to focus on is bringing back tax-exempt advance refunding, which disappeared following passage of the 2017 Tax Cuts and Job Act, bringing back a form of direct pay bonds, and discussing how ESG bonds are defined.
“There is a lot of interest in ESG and companies that invest in good ESG policies,” Kelly said. “Many people think that municipal bonds are ESG by definition because they’re used for public purpose projects. The real question is, how do you measure what is an ESG?”
The market needs more concrete measurements on how to define a green or ESG bond, Kelly added.
MBFA also plans to work with the Public Finance Network, a group of state and local government entities, to push its bond initiatives. Those issuers in the former MBFA were also in PFN and will not be a part of the newer MBFA.
Muni provisions have a solid outlook in a new Congress and administration. Last week U.S. Transportation Secretary nominee Pete Buttigieg told a Senate panel that he sees a great benefit in restoring tax-exempt advance refunding to pay for infrastructure.
Last summer House Democrats passed the Moving Forward Act, which has expired and will need to be introduced in the new Congress but which contained numerous bond provisions. Among those were expanding the use of tax-exempt private activity bonds, permanently reinstating Build America Bonds and reinstating tax-exempt advance refunding bonds. Those provisions were headed by House Ways and Means Chair Richard Neal, D-Mass, who will continue to chair that committee in 2021.
