Jul 02 2020
Legislation to Restore Advance Refunding for Municipal Bonds Has Earned Widespread Support
WASHINGTON – Yesterday, U.S. Senators Roger Wicker, R-Miss., and Debbie Stabenow, D-Mich., introduced the Lifting Our Communities through Advance Liquidity for Infrastructure (LOCAL Infrastructure) Act.
As the U.S. deals with the economic effects of the COVID-19 outbreak, the legislation 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 has earned bipartisan support, including Senators 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., who joined as original cosponsors of the legislation.
It has also been endorsed by over 40 organizations. Here is what they are saying:
National Conference of State Legislatures (NCSL): “NCSL strongly supports the LOCAL for Infrastructure Act as it provides another tool for states dealing with the catastrophic economic effects of the pandemic to local economies. Allowing states to advance refund outstanding municipal bonds will save states billions of dollars that can be used to fund infrastructure projects and otherwise help support communities. We thank the sponsors of this bill for responding to the needs of state and local governments in the wake of severe revenue shortfalls and continued economic uncertainty.”
National Association of Counties: “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. It 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 Senator Wicker and urge bipartisan passage of this important legislation,” said National Association of Counties Executive Director Matthew Chase.
National League of Cities: “The National League of Cities applauds Senators Wicker and Stabenow for their leadership in introducing the LOCAL Infrastructure Act. This bill is critically important to helping cities, towns and villages continue to be great fiscal managers. Advance refunding bonds have been a longstanding tool in local governments’ tool chests, allowing issuers to take advantage of lower interest rates while minimizing borrowing costs... With this legislation’s reinstatement of the provision, cities, towns and villages will be allowed more liquidity in their municipal budgets, which is especially critical now, during the COVID-19 pandemic when so many cities are struggling financially,” said Clarence E. Anthony, CEO and Executive Director of the National League of Cities.
National Association of Clean Water Agencies (NACWA): “NACWA applauds this bipartisan effort to restore advance refunding, allowing municipalities the opportunity to benefit from favorable market conditions and low interest rates. Advance refunding helps public utilities reduce the costs of clean water infrastructure and we strongly urge passage of this bill.”
American Society of Civil Engineers: “On behalf of the American Society of Civil Engineers (ASCE), I want to thank you for your leadership and commitment to improving our nation’s infrastructure. We applaud your efforts and offer our support for the LOCAL Infrastructure Act, your legislation that will reinstate tax-exempt advance refunding bonds… Simply put, the need to invest is great and we need multiple financing tools to help improve our infrastructure. By reinstating tax-exempt advanced refunding bonds, state and local governments will be able to take advantage of favorable interest rates to help build essential infrastructure projects.”
National School Boards Association (NSBA): “The COVID-19 crisis will have an impact on local school budgets for the foreseeable future. School boards are facing a supreme challenge as they develop their budgets – including funding for needed infrastructure efforts – with high expectations to do more to educate schoolchildren with less funding. The National School Boards Association (NSBA) supports the Lifting Our Communities through Advance Liquidity for Infrastructure Act because it will help our school districts refinance municipal bonds issued for new school facilities, building repairs, renovations, and other capital improvements that help foster safe and healthy learning environments for millions of our students, and also advance equity in education. Advance refunding of municipal bonds will lower debt service payments for school districts and other units of government and will provide a substantial savings to taxpayers, which they need and deserve,” stated NSBA Executive Director & CEO Anna Maria Chávez, Esq.
Association of Public and Land-grant Universities (APLU): “APLU applauds Senators Wicker and Stabenow for their leadership in introducing the LOCAL Infrastructure Act to ease the extraordinary financial emergencies states are facing amid the pandemic. By allowing tax-exempt entities to refinance debt at lower interest rates, the federal government can enable institutions of higher education to direct more money toward addressing the crisis. Public universities are experiencing massively reduced revenue and increased costs. Reinstating advance refunding would let public universities spend less money servicing debt and instead redirect those critical funds to stopping the spread of the COVID-19 and more effectively deliver on their education, research, and community research missions. We urge Senate leadership to advance this common-sense bill.”
American Council on Education (ACE): “We are pleased to endorse the LOCAL (Lifting Our Communities through Advance Liquidity) Infrastructure Act, which reinstitutes the ability to advance refund tax-exempt bonds. This would permit colleges and universities to take advantage of lower interest rates to reduce their debt service costs. This will help all institutions in managing the enormous expenses and revenue losses they are experiencing as a result of the COVID-19 crisis. It will also be particularly helpful to teaching hospitals, which are on the pandemic’s frontlines providing care and identifying effective treatments for the virus.”
Securities Industry and Financial Markets Association (SIFMA): “SIFMA commends Senators Roger Wicker (R-MS), Debbie Stabenow (D-MI), Michael Bennet (D-CO), Shelley Moore Capito (R-W.Va.), John Barrasso (R-WY), Bob Menendez (D-NJ), Jerry Moran (R-KS), and Tom Carper (D-DE) on their commitment to infrastructure investment, seen today with the introduction of the Lifting Our Communities through Advance Liquidity for Infrastructure (LOCAL Infrastructure) Act. This bipartisan, timely legislation reinstates advance refunding, which is a critical tool to help state and local governments lower their interest costs to more easily finance their infrastructure needs, such as schools, roads, and hospitals. Infrastructure spending is essential, and this legislation is particularly welcome now, when state and local governments are facing unprecedented expenses due to the COVID-19 pandemic.”
Government Finance Officers Association (GFOA): “State and local governments depend now more than ever on reliable and affordable financing to remain resilient through our current crisis. Tax-exempt municipal bonds have been used to finance repairs to and construction of public projects to sustain our local communities for over 100 years. The Government Finance Officers Association (GFOA) supports the Lifting Our Communities through Advance Liquidity for Infrastructure Act. Expanding the use of tax-exempt financing through advance refunding will keep existing infrastructure projects alive and support local economies. By wisely advocating for their use again, Senator Wicker and Senator Stabenow are arming those who directly serve the public with resources that can meet the needs of such demanding times,” stated GFOA President, Marion Gee.
National Association of Bond Lawyers: “The National Association of Bond Lawyers (NABL) thanks Senators Wicker and Stabenow for the introduction of the LOCAL Infrastructure Act, which will restore the ability of state and local governments to issue tax-exempt advance refunding bonds. Use of this financial tool is more important than ever as our state and local governments face unprecedented fiscal and healthcare challenges as a result of the COVID-19 pandemic. Tax-exempt advance refunding bonds allow state and local governments to lock-in interest rate savings and provide the flexibility for issuers to restructure debt service when unexpected events create cash flow challenges. In the past, this tool has allowed for billions of dollars of savings, allowing state and local governments to provide more comprehensive services, including infrastructure projects, at a lower cost to their citizens. The restoration of tax-exempt advance refundings would provide an essential tool to enable state and local governments to meet the challenges that await in the economic recovery ahead.”
Bond Dealers of America (BDA): “The Bond Dealers of America fully supports your initiative to restore the authority of state and local governments to conduct advance refundings of outstanding bonds. Once enacted, your legislation will save state and local governments billions in debt service and provide much needed flexibility to state and localities in managing their debt. State and local governments depend on the ability to issue tax-exempt bonds to finance investment in roads, airports, bridges and tunnels, schools, water and sewer systems, and all sorts of public infrastructure… Before the authority to undertake advance refundings in 2017, these transactions helped state and local government save billions in debt service. That flexibility is more important than ever under the shadow of the COVID-19 crisis.”
National Association of Towns and Townships: "The COVID-19 pandemic has taken an extraordinary toll on rural communities. Advance refunding bonds will finally give local governments the same opportunity American homeowners already have: to take advantage of historically low interest rates and save money. Those savings can be plowed into providing rural communities with much-needed resources during the national emergency, including distance learning, enhanced broadband access, and improved telehealth services--all without Congress having to appropriate another dime."