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Federal Policy

By Brett Bolton, BDA

A Bonding Time discussion with Toby Rittner, President & CEO of the Council of Development Finance Agencies (CDFA)

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Brett Bolton:

Welcome to another episode of Bonding Time. I'm Brett Bolton, your host, and today we have Toby Rittner, who's the president and CEO of the Council of Development Finance Agencies. Toby, thanks for joining us. We're looking forward to talking about your organization and what all you've been working on.

So for our listeners who might not know your organization as much as you and I do, can you just talk about the mission and maybe the priorities of the CDFA?

Toby Rittner:

The CDFA is a national trade association born out of the 1982 tax reform efforts. Our whole focus is to work with development finance agencies. These are traditionally tax-exempt bond-issuing authorities, either public issuers or quasi-public issuers, or a range of other nonprofit development finance agencies.

We have about 500 members around the country, as big as California Treasurer's Office and as small as a one or two-person bond authority in a small county in Ohio. Our whole focus is on the toolbox of tools, bonds, TIF, tax credits, revolving loan funds, access to capital, federal funding, but our heart and our soul is in bonds and the bedrock tools. That's how we got started. And our big main thrust is advocacy and education around bond finance, around other forms of finance, but obviously, we care a lot about bonds and private activity bonds in particular.

Brett Bolton:

What's the organizations main advocacy focus? Is it just the general obligation bonds or private activity bonds or how do you view that?

Toby Rittner:

I always try to be a little bit careful about this because we do represent people that are heavily invested in the tax credit markets, new markets and historic and low-income housing, as well as members in states that are doing redevelopment with tax increment finance. So right now our origins from '82 are our bonds and, obviously, we care a lot about bonds, so it always holds a special priority for us. We mostly work with House Ways and Means Senate Finance Committee, but over the years we've been able to work on other legislative items. And I don't know if you or your listeners know these things, but most of the bond technical correction bills in the 2000s were our bills.

So just little fixes to non-profit bonds or 501(c)(3) bonds or manufacturing bonds. But then under President Obama, we did recovery zone bonds. That was a piece of legislation we had introduced and passed. As well the State Small Business Credit Initiative 1.0 and 2.0. And then we crafted some of the language in the early days of 2015 and 2016 around opportunity zones.

So while tax-exempt bonds and preserving and protecting bonds and making them better is our primary love, we also work on other things. With that said, right now our focus is primarily on preserving and protecting muni bonds, private activity bonds, but we are getting word, and we can talk about this, on getting some new legislation introduced to help improve manufacturing and agriculture bonds.

Brett Bolton:

Yeah, let's touch on that in a moment, but I want to dig in on private activity bonds. So the BDA had a fly in earlier this month, and I do think there's a good understanding of what munis are, how they work, point to roads, bridges, et cetera. Folks get it on the hill. Private activity bonds though, it sounds almost ominous the way it's written. And I think that some automatically think there's a dark force at play here. What's your take about PABs on the hill? I know you guys, much like us, continue to do educational efforts. Is it resonating? How worried are you about private activity bonds in this tax bill?

Toby Rittner:

I think the first part is there is always this misunderstanding and this misnomer around muni bonds are easy to explain and then you get into private activity and suddenly you get all these little divergent PABs of, "Wait, what about this? And wait, what about this

And in the early days of this, private activity bonds were very well accepted. They were bipartisan. Both sides of the aisle loved them and understood them, but we lost a lot of institutional knowledge. And then you face 2017 with tax reform and a lot of misinformation around private activity bonds. It kind of permeated, when they say spoiled the well, it kind of poisoned the well, spoiled the well a little bit. So now, several years later, eight years later, there's still some of that lingering, "Well, I thought they do them for golf courses and Walmarts." None of that has happened since the 70s.

So that's just lingering misunderstanding. But you asked me if it's resonating, I think it absolutely is. Like you, we hit the hill about a month ago when we visited 10 House Republican offices. They were great conversations. They are very aware of the issue. They're very supportive of private activity bonds. And we're in the business, so we don't always name names, but you know who they are and you know which offices they are. We talked about bonds in their community.

We talked about the difference between municipal bonds, which they get, and the caveat of private activity. I'll say the only concern that pops up is there's this question about stadiums, "Stadiums, we hear their financed." And we say, "Yes, of course they are," but let's talk them through.

It's always the big stadiums they talk about, but then they forget that little minor league baseball stadiums and women's soccer stadiums and kids sports complexes all over the country have been using bonds and they call them stadiums. So we had a lot of offices ask those questions, but I think they know the importance of private activity bonds. I think they care about them more than they ever have. And we had three offices ask us, "Do you have ideas for how to improve private activity bonds?" And we said, "Yes, we love this. So as soon as this silly tax reform stuff is over, we're going to go and start getting legislation moving on improving private activity bonds."

Brett Bolton:

That's good to hear. And I agree with you, folks are more read-in, folks are more knowledgeable, folks are more willing to just have a healthy conversation. So that, to me, is a good sign as well.

Toby Rittner:

And here's what's crazy, and I would like to know this from your perspective, did you feel Republicans really understood the issue a lot better than 2017?

Brett Bolton:

Absolutely. Yeah. I don't think that's by happenstance. There's been such a coordinated effort from issuers and bankers alike since the advanced funding revoking in 2017. I think the educational efforts are paying off at this point.

Toby Rittner:

I also want to give a shout-out to those Republican offices. I feel like they're more engaged than they were in 2017 and willing to come in and listen and hear. I really found the conversations to be pretty positive and pretty forward-thinking and actually really collaborative, which is a change from what we were doing in '17. It was pretty much grind and fight. And I'm going to give a lot of credit to the House Ways and Means Republican offices. They opened their doors, they've been really thoughtful about letting us talk, and they're definitely saying, "We're here" in the message.

Brett Bolton:

Yeah, I was very concerned about the massive turnover on committee, but I think it's been a net positive, at least thus far. I guess we'll see what the final product looks like, but it definitely seems a little more positive. You touched on MAMBA and Aggie Bonds. Can you tell our listeners who might not know what the MAMBA legislation is a little background and maybe where it stands today?

Toby Rittner:

Well, you can imagine it's a little bit like a 21-year-old baby for me because I started working on this version of MAMBA about 10, 12 years ago. But I've been working on improving manufacturing bonds for 21 years, my entire time here, because that's kind of been the one we have always loved the most, and our issuers, is manufacturing bonds and Aggie bonds and 501(c)(3) bonds. Those are our big issue or concern. This version of MAMBA, it's called the Modernizing Agriculture and Manufacturing Bonds Act.

In Interest of full disclosure. I wrote most of it, so I probably know it more than other people know it, but really what it does is it modernizes manufacturing bonds and Aggie bonds and it allows those two bonds, which haven't been subsequently improved since 2008, to come into the modern era. It changes the levels and the amounts we can issue, the caps. It changes the capital expenditure limits. It does what I think is probably the most important thing, it redefines manufacturing. It says manufacturing from 1970 and 50 and 60 is not the same as 2024 or 2025.

So what we've said is, "Let's make it modern." It's technology, it's AI, it's all these things that aren't allowed to be done right now, so it redefines manufacturing. There's a couple of other small fixes that are just technical. It changes the rules around agriculture bonds so that it's clearer that a first-time farmer can borrow more in the market than is currently limited to. It's a technical change. I feel like an old man now, but I've had it introduced in the last six Congresses.

Imagine that. Yeah. We're like, "It's really hard to get a bill introduced in Congress." And I'm like, "I've done it six times. What are you talking about?" But we have very positive momentum this year to get it reintroduced in both the House and the Senate. We expect a Senate introduction of MAMBA in the next 15 days, probably.

Brett Bolton:

I've got to say, that fits into this administration's agenda about as perfectly as you could. And I also think the vast majority of Republican members we've met with this week are from areas that would benefit greatly.

Toby Rittner:

Yeah. And, Brett, what's crazy, when I started this job 20-some years ago, we almost exclusively went to Republican offices about bonds. And then it switched and it became Democrats loved them. Republicans didn't hate them, but they weren't as open to the conversations. And now it's kind of swung again. But I give the Democrats credit. Richie Neal and his team, they've been pretty awesome about talking about this. If we could finally get past tax reform, we might have a House Ways and Means and Senate Finance that would like to do some meaningful work on bonds. So I'm more excited about the future than I've ever been in this space.

Brett Bolton:

Finally, just anything else you guys are working on you'd like to plug?

Toby Rittner:

Your listeners and your members know we have got to continue to be loud and vocal on Capitol Hill. We cannot assume that Congress and members of Congress and junior staff of congressional offices know the issues and understand the impacts. I have met with people in congressional offices who do not know what a bond is. And that's okay. They're legislative aides. They're not focused on bonds all the time. So we have to keep being loud and keep being vocal and keep being present. The other thing is there are other cool things happening. We expect legislation on Opportunity Zones 2.0 to be introduced. CDFA is playing a role in that. That should be introduced anytime now, either as a new bill or as part of reconciliation. So that's great.

We're working to protect the CDFI Fund and the New Markets Tax Credit Program. And then this is the last thing I'll maybe leave you on is we have written legislation up that would create permanent disaster recovery bonds. This is sort of my one thing that I've been looking at for about five years. After every disaster, Congress has the option to create special categories of bonds. We did it for 9/11, we did it for Katrina, we did it for Midwestern Disaster and Recovery, Ike bonds. There's been a few others, but we haven't done it for about 10 years. And the problem is that it's political, right? So what we're proposing is a new category of tax-exempt bonds called Disaster Recovery Bonds.

And they are triggered by a act of FEMA, like an emergency declaration of FEMA. And when they're triggered, then the community is impacted by that disaster and are allowed to access those permanent disaster recovery bonds like Katrina bonds, like Ike bonds, like Liberty bonds. We have two House and two Senate offices interested, and our goal would be to kind of get that introduced sometime this year and start making progress towards a better Disaster Recovery Bond approach. So that's pretty exciting stuff.

Brett Bolton:

That is. And yet another timely discussion point is the administration looks at FEMA. We'll leave it there. You're always welcome back. I enjoyed talking with you and I think our members will enjoy the conversation as well.

Toby Rittner:

Hey, we appreciate you too. Thank you, Brett.