As warning signs flash over the fate of the municipal bond tax exemption, the University of Chicago's Center for Municipal Finance is set to publish first-of-its-kind ground-level data that advocates will use to help make the case to Congress about the importance of preserving state and local government's main infrastructure financing tool.
The data drill down to the congressional district level, highlighting the amount of muni bond investment, the variety of bond-financed projects, and savings from tax-exempt debt, to show "how the tax exemption plays out on the ground level," said Justin Marlowe, research professor at the University of Chicago's Harris School of Public Policy.
The center has been crunching the numbers for months and had planned to publish the data by late February or early March. But it sped up the project as the debate in Congress heated up more quickly than expected, Marlowe said.
"We had been planning to do this work and put it out in time for what our understanding of the timeframe of the debate was, and that would have meant getting through the first 100 days of the administration and then the debate about tax policy," Marlowe said. "But since inauguration day, lots of people have come to us and said, 'This debate is happening right now, so this information would be very useful sooner rather than later.'"
Municipal market participants have worried for months about threats to the tax exemption as Congress hunts for revenue to offset the roughly $4.6 trillion cost of extending the Tax Cuts and Jobs Act.
The threat level amped up two weeks ago when a
The university plans to publish the data, which include reports on all 435 congressional districts, on its
It's one of several lobbying materials that muni market advocates like the Public Finance Network and Government Finance Officers Association will use to help make their case for the importance of municipal bonds to lawmakers. Lobbyists are also promoting the GFOA's new website,
The center has heard from a wide swath of people looking for the information, from congressional staffers to inside-the-beltway types to bond issuers and municipal market professionals.
Based on bond data from ICE, the reports reveal each district's total dollar amount of projects built by state, local and sub-state governments financed with outstanding tax-exempt bonds, the savings from tax-exempt debt, and the percentage of each district that was reached by the bond-financed investments. For example, roughly 70% of the geographical area of Idaho's 2nd Congressional District was touched by muni bond investment. That number rose to 100% for California's 2nd district.
The data show the breadth and depth of the municipal bond market, Marlowe said.
"One of the first things anybody would notice is just how much investment is happening in every congressional district — red, blue, urban, rural and otherwise," Marlowe said. "There are nonprofit hospitals and higher education and water and sewer — to see the actual breakdown and scope and scale even in the most rural districts, it really jumps out," he said.
"You also develop an appreciation very quickly for the levels and types of governments where these investments are happening," he said. "The cool thing about these data is they do allow you to look at the activity of the[substate] conduit issuers and state authority issuers and see where their investment are happening — and it's all over the state."
The center broke down the use of proceeds to show what kinds of projects have been built, and features a list of all the local and sub-state governments that have financed projects with municipal bonds.
The center plans to analyze the data for future research on the trends and impact of the municipal market, Marlowe said.
