The White House and Congress should consider several bond-related provisions as part of a broader coronavirus response, the American Public Power Association and more than a dozen other groups said in a March 12 letter. Those provisions should include reinstating tax-exempt advance refunding bonds and increasing the small issuer exception from $10 million to $30 million, the groups said.
The letter was sent to congressional leaders, Secretary of the Treasury Steven Mnuchin and National Economic Council Director Larry Kudlow.
“States and local governments will face massive challenges in responding to, and as a result of, this pandemic,” the letter noted. “We understand there are multiple approaches to providing immediate relief to those affected and longer-term economic stimulus. We also understand that there may be several bills – one addressing immediate needs and a later one focusing on broader economic issues,” APPA and the other groups said.
In drafting these bills, the Public Finance Network (PFN) asked that “you include temporary extension and permanent restoration of proven, financing tools utilized by state and local governments, schools, hospitals, airports and special districts and other public sector entities to provide efficient and low cost financing of critical investments in infrastructure that will move this country forward immediately. We believe these steps would free up scarce resources for states and localities while also stimulating investments needed to keep our economy growing.”
APPA is a member of the PFN, which is a coalition of organizations united to preserve state and local government use of tax-exempt bonds.
The letter notes that state and local governments rely on municipal bonds because they have the capacity to immediately finance critical projects that support the nation’s infrastructure needs while protecting the economy during this crisis. “A number of provisions that were previously included in legislation during crisis have demonstrated their effectiveness; many organizations in the PFN will follow up on those provisions in the near future.”
As for the immediate need, signatories to the letter asked that the stimulus include several elements.
Specifically, the group advocated for H.R. 2772, which would restore advance refunding of tax-exempt bonds.
“Restoring the ability for governments and other qualifying entities to advance refund tax-exempt municipal bonds thereby freeing up billions of dollars governments and nonprofits could spend on other projects. State and local governments and nonprofits understand that preparing for a pandemic requires strengthening the infrastructure network that underpins their communities and institutions,” the letter said.
“We are asking you to restore advance refunding thereby providing debt service savings for taxpayers which can be put to immediate public works purposes. This would be of immense help for planning and budgeting purposes for state and local communities and institutions, such as hospitals who are first line responders during this immediate crisis.”
In addition, the letter mentioned H.R. 3967, which would increase access to capital for small borrowers.
For many thousands of small issuers and governmental and nonprofit borrowers, increasing the bank qualified borrowing limit from $10 million to $30 million, and having it apply at the borrower level so that thousands of small local governments and charities would provide access to capital for immediate project needs, the groups said.
The White House and Congress should also restore and expand the use of direct pay type bonds and end their exposure to sequestration, which would immediately create an attractive investment option globally for thousands of local projects, the letter went on to say.
“While the full impact the COVID-19 virus will have on the economy remains uncertain, a major infrastructure plan could certainly create a stimulating effect in the near term,” APPA and the other groups noted.
“Looking forward, state and local governments and special districts know that preparing for a pandemic requires strengthening the infrastructure network that underpins their communities Therefore funding and financing infrastructure will remain an issue of paramount importance for many years to come. We look forward to working with you on this and other matters of mutual interest.”
House passes coronavirus bill
The House on March 14 passed the Families First Coronavirus Response Act (H.R. 6201) by a vote of 363 to 40. The bill follows an agreement reached March 13 by House Speaker Nancy Pelosi (D-CA) and Mnuchin. The Senate is expected to consider the measure early next week and President Trump has said he will sign the measure.
The bill follows an $8.3 billion supplemental appropriations bill signed into law by the President earlier this month and Speaker Pelosi and Mnuchin have both said a third, broader bill focused on economic stimulus bill will follow. Work on this third bill is expected to begin this week though Speaker Pelosi said that in contrast to the pell-mell drafting and consideration of H.R. 6201, work on this stimulus bill would be done at a more deliberate pace.
Meanwhile, President Trump sent a to the Secretaries of the Departments of Homeland Security, Health and Human Services, and Treasury and to the Federal Emergency Management Agency (FEMA) Administrator alerting them to his decision to declare a national emergency March 13.
The letter notes that the emergency declaration now allows FEMA to provide assistance outlined in sections 502 and 503 of the Stafford Act. In addition, the President notes that the emergency is of such a magnitude that requests by governors for a disaster declaration may be appropriate. As a result, the President wrote that he is encouraging governors and tribal leaders to considering making such a request under the Stafford Act, and that he would give such a requests an expeditious review.
Meanwhile, APPA has begun working with the National Energy and Utility Affordability Coalition (NEUAC) to see whether additional emergency funding for the Low Income Home Energy Assistance Program (LIHEAP) would also be an appropriate response.
The $8.3 billion supplemental spending bill that was recently signed into law refunds any money transferred from LIHEAP by the Trump Administration as part of its coronavirus response.
The bill, H.R. 6074, was signed into law by President Trump on March 6.
APPA is an ex officio member of the NEUAC board.