Private activity bonds that fund hospitals and higher education are emerging as prime targets as lawmakers search for a way to pay for extending the Tax Cuts and Jobs Act, while the pressure on munis may be easing thanks to intense lobbying efforts.
"If everyone in this room is not getting off your ass and figuring out how to advocate for municipal bonds, you're either looking to retire or finding another line of work," said Chuck Samuels, a member at Mintz and counsel to the National Association of Health & Educational Facilities Finance Authorities.
"Let's not fool ourselves that somehow the pressure is off, because there have been some positive recent developments."
The comments came during a panel discussion at the Council of Development Finance Agencies' Federal Policy Conference in Washington D.C.
The positive developments include a pair of inter -committee
The possibility of eliminating tax-exempt PABs remains of special concern.
"Unfortunately, nonprofit bonds and even more specifically, higher-ed bonds, may be very much threatened," said Samuels. "The category of private activity bonds are still in peril."
Hilltop Securities believes PABs remain on the chopping block but they are lowering the danger level on munis due to a reduced spending cut target recently approved in the House.
"If lawmakers only target $1.5 trillion of spending cuts, the odds the municipal bond tax-exemption for state and local governments being targeted as a pay-for has dropped significantly," writes Tom Kozlik, head of public policy and municipal strategy at Hilltop.
"Odds of its elimination, only if this spending target remains, and only in 2025, is closer to 10%. The threat to tax-exemption for private activity bonds remains elevated, still at 50% or greater."
The Trump administration has pushed higher education and its tax-exempt status into the headlines by feuding with Harvard University and raising the possibility of Internal Revenue Service involvement.
The challenge of what and where to cut tax exemptions and/or spending was brought into clearer focus this week by another letter sent to House Speaker Mike Johnson by twelve House Republicans with a warning that their support for the requested "one big, beautiful bill," that checks all the President's boxes hinges on no cuts to Medicaid benefits.
Hard choices are putting lawmakers into tough spots.
"If I challenge you to go to a town hall and argue that bonds are more important than Medicaid, you wouldn't take that one, right?" said Eric Silva CDFA legislative representative, North South Government Strategies.
Lobbying efforts for preserving tax exempt munis and PABS are ongoing as the messages to Congress lean on bond-financed projects in individual districts and comparisons to other potential targets.
"They want to take money out of Medicaid to keep corporate tax rates low," said Silva.
"They want to take money out of water, sewer, bridges, your utility rates, the school down the street, the hospital being built, they want to make all that more expensive so that big corporations out in Silicon Valley pay less taxes."
"I think that message resonates, because it is the truth. It's shifting dollars from one side of the ledger to the other."
