The Washington Weekly

Infrastructure Hits Another Roadblock
Spring 2022

BDA's federal legislative, regulatory and political report on policy impacting US bond markets.
Following extensive Congressional action on infrastructure in 2021 that included a substantial expansion of Private Activity Bonds, talk of additional legislation this spring has slowed drastically. The bipartisan infrastructure package that provided PAB use expansion for broadband and carbon capture, as well doubling the highway bond cap, was meant to set the stage for additional and more robust infrastructure legislation this year. However, at this time it seems that Congressional Democrats cannot find a path forward.
Can we expect anything infrastructure related this spring? And what additional opportunities may 2022 bring for key muni bond provisions that we continue to advocate for?
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Muni Watch 2022: Build Back Better or Bust?
Following passage of the Bipartisan Infrastructure Framework, Congress continued to press forward on a sprawling social infrastructure spending package early last fall, the Build Back Better Act. Initial drafts that totaled nearly $3.5 trillion in new spending included a vast expansion of municipal finance tools. These provisions included:
  • The reinstatement of tax-exempt advance refundings,
  • Raise the BQ debt limit to 30 million and tie it to inflation,
  • Creation of a new direct-pay bond with a varied reimbursement rate from 35%-28% over its life span, and
  • Expand the definition of exempt facility bonds.
The package stalled after House action, and has turned into a pollical squabble with no real movement forward in months.
In an effort to rein in spending to court Senate moderates, all muni provisions were removed from the package while also removing provisions not directly impacting health care, education, or climate brining the overall price tag to $1.75 trillion.
However, this slimmed packaged failed to court Senate Democratic moderates.
Currently, prospects for Build Back Better appear slim, albeit revived somewhat. The three pillars of this potential bill are:
  • Climate Change,
  • Prescription Drug Prices, and
  • Deficit Reduction.
While munis do not fit neatly into any of these pillars, we do believe that if this deal materializes, there will be a focus on tax reform, potentially rolling back some changes that the Tax Cuts and Jobs Act enacted. We continue to press for inclusion of muni priorities, and in this case tax-exempt advance refundings are a logical fit and that House Ways and Means Chair Richard Neal (D-MA) continues to vocally support this measure.
Senator Manchin (D-WV) continues to drive the narrative recently signaling that he would be open to restart negotiations. It seems that the Senator is interested in a narrow, $500 billion dollar package, however at this time it is unclear if the rest of the Democratic Caucus would back this deal.
If Not Build Back Better, Can Lame Duck Spending Include Muni Provisions?
We continue to work with our partners on Capitol Hill and within the issuer community to monitor and lay groundwork for inclusion of key muni provisions into the potential lame duck spending package that would follow the November midterm elections.
Congress recently passed a funding measure that will keep the government fully funded through late 2022, setting the stage for the additional spending bill. Size and scope of the package will rely fully on the outcomes of the upcoming November elections, however this packages tend to be rather robust, and include many priorities that have failed to move in the prior months.
While odds for inclusion of key muni provisions into a lame duck bill are low, we are told on the Hill that this is a possible avenue and it is being discussed. As mentioned above Chair Richie Neal continues to advocate for key muni provisions, and for this path to produce a victory, his advocacy will be instrumental.
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