As the U.S. Senate's tax bill moves ahead, a group of lawmakers urged leaders in Congress to reject the proposed elimination of tax-exempt advance refunding bonds that public power utilities use to reduce borrowing costs for infrastructure projects.
A group of 21 members of Congress, including U.S. Rep. Randy Hultgren, R-Ill., wrote to Senate Majority Leader Mitch McConnell, House Speaker Paul Ryan, and the heads of the House and Senate tax-writing committees to oppose a provision in the House's tax bill, H.R. 1, that would repeal those bonds. The House passed its tax bill Nov. 16 by a party-line vote.
The Senate also proposed to repeal advance refunding bonds in its tax bill, which the Senate Budget Committee approved Nov. 28, setting the legislation up for floor debate.
"This change in policy contradicts the growing need of the federal government to rely more, not less, on states and municipalities, as well as the private sector, to help finance needed infrastructure in a market driven, cost effective manner," the Nov. 28 letter said. "In fact, these changes are incompatible with President Trump's priority for infrastructure investment in the United States."
Municipal Bonds for America, a coalition of municipal bond issuers whose supporters include public power utilities, has estimated that advance refunding bonds have saved state and local governments $12 billion in the last five years. The American Public Power Association, whose CEO Sue Kelly sits on Municipal Bonds for America's executive committee, estimates public power utilities alone have saved at least $600 million and possibly closer to $1.0 billion from advance refunding bonds in that time frame.
U.S. Sen. Ben Cardin, D-Md., introduced an amendment to strike the repeal of those bonds in the Senate tax bill, but the measure was defeated along party lines in the Senate Finance Committee, where the bill originated. Supporters of the bonds, however, could seek to remove the provision going forward. The House and Senate must reconcile their bills before a tax package can reach President Donald Trump's desk.
In addition to repealing advance refunding bonds, the House tax bill would scrap issuance of tax-exempt private activity bonds, which help states and local communities fund privately backed projects that have a broader public benefit, including low-income housing, nonprofit schools and infrastructure such as airports. But those bonds rarely are used by public utilities, American Public Power Assocation's Senior Director of Government Relations John Godfrey said.
The Senate tax bill would not repeal private equity bonds. Both bills, however, would preserve the underlying tax exemption for municipal bonds that public utilities often use to finance infrastructure projects.
