Kansas City Skyline
Municipal bonds are the principal engine for infrastructure growth and societal benefits for the U.S. and have been for more than 150 years. (Kansas City skyline and busy highway system leading to the city)
Private Activity Bonds
The MBFA strongly supports the expansion of the types of infrastructure facilities that are eligible to use tax-exempt PABs beyond the existing types, lifting the volume caps, and eliminate other restrictions such as the governmental ownership requirement for certain eligible facilities that apply under current law.
Tax-exempt PABs permit a greater degree of private sector involvement in infrastructure projects and programs that provide important public benefits that should be preserved and enhanced. By expanding the use of current infrastructure tools like PABs, rather than creating new financing methods such as a federal infrastructure bank (and the associated bureaucracy), these changes would help propel local communities forward, facilitate the ability of state and local governments to partner with private entities in a variety of projects, finance new infrastructure, and help maintain local control of much-needed projects in their communities.
Past proposals released or discussed in the last two Congresses have sent tremors through the municipal markets and have increased interest rates on tax-exempt bonds. The perceived risk to the tax exemption led some investors to seek higher yields on municipal bonds and to pull much-needed capital and liquidity out of the municipal markets. This, in turn, forces municipal governments to pay significantly higher borrowing costs—and the continuing domino effect forces some governments to reduce or abandon infrastructure projects they can no longer afford.