On July 1, a bipartisan group of lawmakers introduced the Lifting Our Communities through Advance Liquidity for Infrastructure (LOCAL Infrastructure) Act, which would amend the federal tax code to restore state and local governments’ ability to use advance refunding to manage bond debt and reduce borrowing costs for public projects. The legislation is championed by Sens. Roger Wicker (R-Miss.) and Debbie Stabenow (D-Mich.), and co-sponsored by Shelley Moore Capito (R-W.Va.) Michael Bennet (D-Colo.) John Barrasso (R-Wyo.) Bob Menendez (D-N.J.) Jerry Moran (R-Kan.) and Tom Carper (D-Del.).
Prior to the removal of the tax-exempt status under the Tax Cuts and Jobs Act in 2017, state and local governments utilized this financing tool to fund critical infrastructure projects including schools, hospitals, roads and jails. Advance refunding bonds also served as a cost saving mechanism for both counties and taxpayers. From 2012-2017, municipalities saved more than $14 billion of taxpayer money through this financing tool. Reinstating this key financing mechanism will alleviate the burden on local taxpayers and allow state and local governments to respond to market conditions more effectively.
In response to the new legislation, NACo Executive Director Matthew Chase issued the following statement:
“Counties are on the front lines of the COVID-19 pandemic, supporting nearly 1,000 hospitals, more than 1,900 public health authorities and other services essential to residents’ safety and well-being.
“The estimated financial impacts of addressing this health and economic emergency are staggering. By restoring our ability to advance refund tax-exempt municipal bonds, the Lifting Our Communities through Advance Liquidity for Infrastructure Act would lower borrowing costs and optimize our stewardship of taxpayer resources.
“This bill would improve our ability to invest in critical infrastructure projects, such as hospitals and other health facilities, schools, roads, bridges, water and sewer systems, ports, airports and other public works.
“We applaud this bipartisan group of lawmakers and urge passage of this important legislation.”
In addition to this new bipartisan legislation, the U.S. House passed the Moving Forward Act (H.R. 2), which includes a provision that would permanently reinstate advance refunding of tax-exempt municipal bonds. NACo strongly supports the reinstating of advance refunding bonds and will work with Congress to pursue a path forward for the legislation this year.