On October 15, the Congressional Oversight Commission (COC) released its fifth report on the Municipal Liquidity Facility (MLF), which was established under the CARES Act, to help address local government budget challenges and support the national economy.
Included in the report by COC, which is a bipartisan commission tasked with overseeing how the Treasury and Federal Reserve are utilizing specific taxpayer funds to provide economic stability as a result of the COVID-19 pandemic, were six recommendations for ways the Federal Reserve can take steps to ensure it is accessible to entities that need it most – state and local governments. COC’s recommendations align with those outlined in a bipartisan coalition letter that NACo, along with other state and local government organizations, sent to Treasury Secretary Mnuchin and Federal Reserve Chairman Powell on October 14.
In response to the detrimental fiscal impact of the COVID-19 pandemic, the Federal Reserve established the MLF to lend up to $500 billion to eligible cities, counties and states who experienced steep revenue declines. After the program was established, federal, state and local officials voiced concerns over the MLF’s restrictions on the support it could provide to states and localities struggling to deal with the adverse effects of COVID-19.
While we applaud the Federal Reserve’s previous announcements regarding MLF and appreciate its immediate positive impacts, the COC’s report recommends changes that would increase accessibility to MLF for counties. These recommendations include:
- The Federal Reserve should extend the MLF’s underwriting deadline beyond December 31, 2020
- The Federal Reserve should lower the MLF’s interest rates as they are unnecessarily punitive
- The Federal Reserve should lengthen the MLF repayment term to 10 years
- The Federal Reserve should expand the MLF’s use of proceeds
- The Federal Reserve should expand the MLF to more cities, counties, territories and tribes
- The Federal Reserve should create a facility to make secondary market municipal purchases
While NACo supports the recommendations outlined by the COC, we continue to call for direct and flexible funding for counties of all sizes to offset the devastating financial impacts to local governments as a result of the pandemic.
NACo will continue to monitor developments around the MLF.