NACo urges Treasury and Federal Reserve to expand local access to Municipal Liquidity Facility

-
BlogOn September 24, NACo sent a letter to the U.S.NACo urges Treasury and Federal Reserve to expand local access to Municipal Liquidity Facility
- NACo sent a letter to the U.S. Treasury and Federal Reserve urging that the agencies take steps to expand access to the Municipal Liquidity Facility to help address local government budget challenges and support the national economy.
- New NACo research estimates that the COVID-19 pandemic could have a $202 billion budgetary impact on counties of all sizes through fiscal year 2021.
-
Blog
NACo urges Treasury and Federal Reserve to expand local access to Municipal Liquidity Facility
On September 24, NACo sent a letter to the U.S. Treasury and Federal Reserve urging that the agencies take steps to expand access to the Municipal Liquidity Facility (MLF), which was established under the CARES Act, to help address local government budget challenges and support the national economy.
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 that 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.
In response to these concerns, the Federal Reserve took steps to expand access to the MLF by lowering the population threshold and restructuring the program’s pricing structure. Currently, eligible borrowers include all 50 states and Washington, D.C., counties with at least 500,0000 residents and cities with at least 250,000 residents. To ensure smaller jurisdictions may also be supported by the MLF, potential borrowers also include cities or counties identified by governors in states where less than two cities and counites meet these population thresholds. Additionally, the Federal Reserve reduced prices by 50 basis points for triple-A issuers (originally 150 basis points) and below investment-grade-related issuers (originally 590 basis points).
Despite these changes to the MLF, counties and our residents continue to experience devastating health and economic impacts as we remain on the frontlines of the ongoing coronavirus pandemic. New NACo research estimates that the COVID-19 pandemic could have a $202 billion budgetary impact on counties of all sizes through fiscal year 2021, including $172 billion in lost revenue and an additional $30 billion in COVID-19 response costs. This tremendous loss of revenue and increase in costs may ultimately result in cuts to essential county services including public safety, social services, child protective services, mental health, homelessness, jail diversion, reentry and more. Furthermore, many counties have already been forced to cut costs by furloughing or laying off workers to maintain mandated balanced budgets.
Although the MLF provided some stability to the municipal bond market when it was established, it is not practical or accessible to entities that need it most – state and local governments. In the letter, NACo provided recommendations to the U.S. Treasury and Federal Reserve to ensure that state and local governments may take advantage of this important tool. These recommendations include:
- The Federal Reserve should extend the MLF’s underwriting deadline beyond December 31, 2020
- The Federal Reserve should lower the MLF population threshold so that more counties are eligible to sell short-term debt to the facility
- The Federal Reserve should restructure the facility’s pricing structure and lower the current rates
NACo will continue to monitor developments around the MLF.
On September 24, NACo sent a letter to the U.S.2020-09-28Blog2020-10-01
On September 24, NACo sent a letter to the U.S. Treasury and Federal Reserve urging that the agencies take steps to expand access to the Municipal Liquidity Facility (MLF), which was established under the CARES Act, to help address local government budget challenges and support the national economy.
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 that 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.
In response to these concerns, the Federal Reserve took steps to expand access to the MLF by lowering the population threshold and restructuring the program’s pricing structure. Currently, eligible borrowers include all 50 states and Washington, D.C., counties with at least 500,0000 residents and cities with at least 250,000 residents. To ensure smaller jurisdictions may also be supported by the MLF, potential borrowers also include cities or counties identified by governors in states where less than two cities and counites meet these population thresholds. Additionally, the Federal Reserve reduced prices by 50 basis points for triple-A issuers (originally 150 basis points) and below investment-grade-related issuers (originally 590 basis points).
Despite these changes to the MLF, counties and our residents continue to experience devastating health and economic impacts as we remain on the frontlines of the ongoing coronavirus pandemic. New NACo research estimates that the COVID-19 pandemic could have a $202 billion budgetary impact on counties of all sizes through fiscal year 2021, including $172 billion in lost revenue and an additional $30 billion in COVID-19 response costs. This tremendous loss of revenue and increase in costs may ultimately result in cuts to essential county services including public safety, social services, child protective services, mental health, homelessness, jail diversion, reentry and more. Furthermore, many counties have already been forced to cut costs by furloughing or laying off workers to maintain mandated balanced budgets.
Although the MLF provided some stability to the municipal bond market when it was established, it is not practical or accessible to entities that need it most – state and local governments. In the letter, NACo provided recommendations to the U.S. Treasury and Federal Reserve to ensure that state and local governments may take advantage of this important tool. These recommendations include:
- The Federal Reserve should extend the MLF’s underwriting deadline beyond December 31, 2020
- The Federal Reserve should lower the MLF population threshold so that more counties are eligible to sell short-term debt to the facility
- The Federal Reserve should restructure the facility’s pricing structure and lower the current rates
NACo will continue to monitor developments around the MLF.

About Eryn Hurley (Full Bio)
Director of Government Affairs & Federal Fellowship Initiative
Eryn serves as the Director for NACo’s Government Affairs Department. In this capacity, she assists in Legislative and Executive Branch outreach and advocacy of the association’s legislative priorities and policy development.More from Eryn Hurley
-
Policy Brief
Support legislation that would restore advance refunding bonds.
Urge your members of Congress to introduce and support the passage of legislation that would restore advance refunding bonds. -
Policy Brief
Restore the Balance of Federalism and Optimize Intergovernmental Partnerships
ACTION NEEDED: -
Reports & Toolkits
Legislative Analysis for Counties: The Consolidated Appropriations Act of 2023
This analysis includes funding highlights for key programs impacting counties. -
Reports & Toolkits
Resource Hub for Counties: State, Local, Tribal and Territorial Fiscal Recovery, Infrastructure And Disaster Relief Flexibility Act
The bipartisan State, Local, Tribal, and Territorial Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act will provide additional flexibility for the $350 billion Coronavirus State and Local Fiscal Recovery Fund authorized under the American Rescue Plant Act. -
Press Release
State And Local Government Associations Commend Congress For Infrastructure And Disaster Flexibility
With the enactment of the Consolidated Appropriations Act of 2023, the seven leading organizations representing state and local governments at the federal level thank Congress for providing flexibility to use American Rescue Plan Act funds for purposes of infrastructure, neighborhood revitalization, and disaster relief. -
Reports & Toolkits
Legislative Analysis for Counties: State, Local, Tribal and Territorial Fiscal Recovery, Infrastructure And Disaster Relief Flexibility Act
VIEW YOUR COUNTY’S ARPA FLEXIBLE FUND ALLOCATION UNDER S. 3011
-
Reports & Toolkits
State and Local Fiscal Recovery Fund Resource Hub
Explore NACo's resource hub for the ARPA State and Local Fiscal Recovery Fund.Reports & Toolkitsdocument010512:15 pmReports & Toolkits<table border="1" cellpadding="1" cellspacing="1" style="width:100%" summary="call-out transparent">
<tbody>
<tr>
<td> -
Basic page
ClearGov
ClearGov® is the leading provider of Budget Cycle Management software, focused on helping local governments streamline the annual budgeting process by improving the collection, creation, and communication of their budgets.pagepagepage<table border="1" cellpadding="1" cellspacing="1" style="width:100%" summary="call-out transparent">
<tbody>
<tr> -
Basic page
Finance, Pensions & Intergovernmental Affairs Steering Committee
All matters pertaining to the financial resources of counties, fiscal management, federal assistance, municipal borrowing, county revenues, federal budget, federal tax reform, elections and Native American issues. Policy Platform & Resolutions 2022-2023 2022 NACo Legislative Prioritiespagepagepage<p>All matters pertaining to the financial resources of counties, fiscal management, federal assistance, municipal borrowing, county revenues, federal budget, federal tax reform, elections and Native American issues.</p>
Contact
-
Director of Government Affairs & Federal Fellowship Initiative(202) 942-4204
Related Posts
-
BlogU.S. Congress moves forward with financial data reporting standardsDec. 9, 2022
-
BlogGASB seeks input on subsequent reporting guidanceNov. 15, 2022
-
BlogLet’s Get automating: Why You Should Modernize Your County’s Expense SystemOct. 7, 2022
Related Resources
-
Policy BriefSupport legislation that would restore advance refunding bonds.Jan. 31, 2023
-
Policy BriefRestore the Balance of Federalism and Optimize Intergovernmental PartnershipsJan. 26, 2023
-
Reports & ToolkitsLegislative Analysis for Counties: The Consolidated Appropriations Act of 2023Jan. 17, 2023
More From
-
State and Local Fiscal Recovery Fund Resource Hub
Explore NACo's resource hub for the ARPA State and Local Fiscal Recovery Fund.
Learn More