NACo endorses the MINT Act to restore a proven credit enhancement tool for county bonds
Key Takeaways
On May 12, NACo sent a letter to Sens. Catherine Cortez Masto (D-Nev.), Todd Young (R-Ind.) and Jim Justice (R-W.Va.) endorsing their bipartisan Municipal Investment and Neighborhood Transformation Act (S. 3941), known as the MINT Act. The legislation would permanently restore the treatment of state and local bonds guaranteed by a Federal Home Loan Bank (FHLB) as not federally guaranteed for purposes of determining their tax-exempt status.
What the MINT Act would do?
The MINT Act amends Section 149(b) of the Internal Revenue Code to permanently restore the ability of FHLBs to provide letters of credit that enhance state and local tax-exempt bonds. This authority was originally enacted as part of the Housing and Economic Recovery Act of 2008 and helped counties and other local issuers access the municipal bond market on more favorable terms during a period of significant economic stress. The authority expired on Dec. 31, 2010.
The MINT Act would remove that sunset, update the related safety and soundness requirements to defer to standards established by the director of the Federal Housing Finance Agency (FHFA) and apply prospectively to guarantees made after enactment.
Why it matters for counties
As counties, we are among the nation’s largest issuers of tax-exempt municipal bonds, a critical financing tool for the long-term infrastructure and public facilities our residents rely on every day, including roads and bridges, water and wastewater systems, public hospitals, schools, courthouses, jails and affordable housing. Restoring FHLB letter-of-credit authority would deliver meaningful benefits for us and the residents we serve, including:
- Lower borrowing costs: Credit enhancement from a Federal Home Loan Bank can improve the credit quality of a bond issue, which is particularly valuable for small, rural and midsize counties that may not otherwise command the highest credit ratings on our own. Lower borrowing costs translate into more public infrastructure and affordable housing financed for each taxpayer dollar.
- Broader investor pool: Expanded access to credit enhancement broadens the pool of investors willing to purchase our bonds and supports market stability during periods of volatility.
- No new federal mandates: FHLB letters of credit operate within the existing regulatory framework of the FHFA, providing prudential oversight without creating new federal mandates or unfunded administrative burdens on county governments.
NACo’s broader position on municipal bonds
NACo strongly supports preserving and strengthening the tax-exempt status of municipal bonds and opposes restrictions that would drive up the cost of issuing tax-exempt bonds or impair state and local access to the municipal bond market. The MINT Act advances both of these principles by simplifying an existing statutory restriction and restoring a proven credit enhancement option for state and local issuers.
What’s next
The MINT Act is currently awaiting consideration in the Senate Finance Committee. NACo will continue working with the bill’s sponsors and members of the committee to advance the legislation and will keep counties updated as it moves through the legislative process.
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