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The Washington Quarterly
DC Insights – Quarterly Edition
April 2023Signs of Hope for Munis in DC
Signs of Hope for Munis in DC
By Brett Bolton
BDA's quarterly federal legislative, regulatory and political report on policy impacting US bond markets.
By Brett Bolton
BDA's quarterly federal legislative, regulatory and political report on policy impacting US bond markets.
In a huge development for the muni community, the Investing in Our Communities Act was introduced in the House, legislation that would reinstate tax-exempt advance refundings . The bill is sponsored by House Ways and Means Republican David Kustoff (TN), and House Municipal Finance Democratic Chair Dutch Ruppersberger (MD). The introduction of the long-standing BDA priority comes after extensive advocacy from the BDA and the issuer led Public Finance Network(PFN) to recruit bill sponsors and a bipartisan list of co-sponsors.
"It is crucial that every state and local government has the ability to invest in their future and make their communities a better place to live and raise a family," said Congressman Kustoff. "I am proud to introduce the Investing in Our Communities Act, with Congressman Ruppersberger, that will give state and local governments a critical financing tool to stimulate economic development, create jobs, and save taxpayer dollars."
Original Co-Sponsors:
- Rep. Andy Barr (R-KY),
- Rep. Brian Fitzpatrick (R-PA),
- Rep. Andrew Garbarino (R-NY)
- Rep. Dan Kildee (D-MI),
- Rep. Derek Kilmer (D-WA), and
- Rep. Gwen Moore (D-WI).
Companion legislation is expected to be introduced in the Senate in the coming weeks with similar if not identical language to the House bill.
While the bill faces strong political and legislative headwinds this Congress, it cannot be understated how important the addition of a Ways and Means Republican as a sponsor is to the trajectory of the provision. The PFN continues to work with bill sponsors to grow co-sponsorship of the legislation with an extra emphasis of adding Ways and Means Members, especially on the Republican side of the aisle.
While, the environment surrounding the bill feels different this Congress, prospects for passage of this legislation in the near term remain low, continued growth of support is key to set up future action on the bill.
Beyond growth of support, we continue to look for opportunities for the bill to “ride” on a larger legislative package. While several robust packages are expected to pass within the year that include tax-titles such as the Farm Bill, there are few with direct connection to infrastructure or muni financing.
We continue to look at a potential bill in 2024 to extend the tax cuts from the Tax Cuts and Jobs Act as an opportunity to hash out problematic portions of the bill, in particular the elimination of tax-exempt advance refundings, as well are having continues conversations with sponsors looking for opportunity beyond this avenue including annual spending bills and year-end tax extenders.
Additional Legislation Expected
In the coming weeks, additional muni focused legislation is expected to be introduced in the House. Rep. Terri Sewell (D-AL) is planning to introduce legislation to raise the bank qualified debt limit from $10 million to $30 million. The language is widely expected to mirror similar legislation from last Congress that would tie the figure to inflation while applying the qualified debt limit on a borrower-by-borrower basis, rather than aggregating all bank qualified bonds issued by a conduit issuer, ensuring easier access capital.
Beyond BQ debt, rumors of a new direct-pay product continue to percolate around Capitol Hill. Yet, granular details such as the impact sequestration would have on the product remain unclear.
The BDA is planning continued outreach to the Hill, as well continued work with our issuer partners in the Public Finance Network to ensure support for munis remains robust on both sides of the aisle.