The battle for the budget is underway pitting tax cuts against paying for the Trump administration's new priories as advocates for keeping the tax-exempt status of municipal bonds work on maintaining a valuable tool.
"Losing tax-exempt bonds would devastate American communities and set economic development efforts back decades," said Toby Rittner, president and CEO of the Council of Development Finance Agencies.
"Communities use bonds to finance their built environment, infrastructure, schools and future growth needs."
"The housing industry uses bonds for affordable, senior and workforce housing. There are no alternatives to bonds and the United States is the only country in the world that has a market of this nature."
Cutting the tax exemption showed up on a
The list includes a savings estimate of $250 billion over 10-years for losing tax exempt munis and $114 billion of savings tied to cutting private activity bonds, which play an integral role in financing affordable housing.
The threat to PABs appears as the most eminent danger, despite the President's history with them.
"Many of President Trump's real estate projects have used private activity bonds as their source of financing," said Rittner.
"Eliminating this tool would have massive ramifications for state and local governments. Based on CDFA research, without this critical tool, communities would face an increase in capital cost of 35-45%."
To combat the repeal effort The Government Finance Officers Association teamed up with Bond Dealers of America to stage
"Traditional bond issuers, who we represent, are aware of the threat to tax-exempt bonds and are very engaged in our efforts to preserve them," said Rittner.
"The average, everyday community leader does not fully understand what is being considered on Capitol Hill."
The CDFA, a charter member of the
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The threat to munis isn't the only one on the Congressional budget table. The CDFA is also wrangling support for new market tax credits, greenhouse gas reduction funds, brownfield development, the Community Development Financial Institutions Fund and the State Small Business Credit Initiative program.
The current strategy for lobbyists working the Hill is to educate while also keeping a low profile. The industry believes it has four or five champions in place in the House and the Senate representing both parties.
This week Reps. Rudy Yakym R-Ind., David Kustoff R-Tenn., Gwen Moore D-Wisc., and Jimmy Panetta D-Calif., introduced a bill restore tax-exempt advance refunding for municipal bonds. Terri Sewell D- Ala., is also known to be friendly to muni interests.
Imagining a worst case scenario includes possible alternative avenues for funding large-scale infrastructure projects.
An investment advisory published by CreditSights last month said, "Should traditional issuers of municipal bonds lose their tax-exempt status, many may turn to issuing taxable bonds. Although this shift would raise borrower costs, it could simultaneously enhance the appeal of municipal credit and boost demand for taxable municipal bonds."
"An alternative method of restricting the tax exemption could involve imposing limitations on investors rather than issuers, such as capping the amount of tax-exempt interest a taxpayer can earn."
"While this proposal might appear attractive to congressional negotiators, in practice, it would introduce significant complexity, complicating market participants' ability to assess the relative value of any particular bond against other fixed-income investments."
