U.S. Transportation Secretary nominee Pete Buttigieg told a Senate panel he sees a great benefit in restoring tax-exempt advance refunding as part of a broad approach to making much-needed investments in infrastructure.
Buttigieg answered questions on the future of infrastructure in a new presidential administration from the Senate Committee on Commerce, Science and Transportation Thursday morning.
“Now is the time, and we have a real chance to deliver for the American people,” Buttigieg said. “We need to build our economy back, better than ever, and the Department of Transportation can play a central role in this, by implementing President Biden’s infrastructure vision — creating millions of good-paying jobs, revitalizing communities that have been left behind, enabling American small businesses, workers, families and farmers to compete and win in the global economy, and tackling the climate crisis.”
Sen. Roger Wicker, R-Miss., outgoing chair of the Senate Committee on Commerce, Science, and Transportation noted historically low-interest rates could lead the way for more financing tools to help municipalities, such as tax-exempt advance refunding.
“In terms of stretching local dollars, one thing we found in past eras where interest rates were dropping is that the use of advance refunding techniques allowed state and local governments to refinance at lower interest rates, while still holding harmless the holders of the bonds,” Wicker told Buttigieg and asked if he agreed it would be a way to provide additional financing tools for municipalities.
“Yes, as mayor few things gave me more fiscal pleasure than to find that we could save taxpayer dollars by refunding previously existing debt especially since we do our accounting on a cash basis,” Buttigieg said. “This holds a lot of promise for relief to local governments.”
As a presidential candidate, Buttigieg was well-liked among municipal market participants who noted that as a former mayor of South Bend, Indiana, he has an understanding of how municipal bonds work.
In July, Wicker and Sen. Debbie Stabenow, D-Mich., introduced a bill to bring back tax-exempt advancing refunding, which was outlawed by the Tax Cuts and Jobs Act of 2017.
Wicker said he plans to continue to work with Stabenow and wants Buttigieg’s support.
Buttigieg also voiced the administration’s support for reinvigorating funding of the Highway Trust Fund, which has been depleted for years. The HTF fund runs mostly on gas taxes, but also receives money from the Treasury’s general fund.
In his campaign plan, Biden promised to stabilize the Highway Trust Fund and ensured new revenues would be secured to build roads, bridges and public transportation projects.
Infrastructure is a part of an economic recovery, Buttigieg said, meaning that every part of infrastructure gets investment.
“I believe that there are certainly challenges in funding any of the different modes of transportation,” Buttigieg said. “For example, we know that the Highway Trust Fund has more going out than coming in but for the regular transfers from the general fund that are being authorized by this Congress. I think we need to develop more sustainable and predictable means of delivering that kind of funding.
Buttigieg said he supports putting all options on the table, adding that the gas tax has not been raised for decades.
“In the near term, we need a solution that can provide some predictability and sustainability,” Buttigieg said.
If funding goes the user pay route, a vehicle miles traveled fee could be used, Buttigieg said.
“These are examples of some of the things that could be part of the solution but I know that’s going to have to be a conversation, not only in the administration but with Congress too,” Buttigieg added.
During the hearing, Buttigieg also said there needs to be “major investment” in Better Utilizing Investments to Leverage Development Transportation and Infrastructure for Rebuilding America Grants. Both are used to augment bond financing.
