The probability that the tax exemption on municipal bonds will be eliminated is low, but the cost of elimination would be steep — $5 billion a year for public power. And we are not alone. Beyond hampering the ability to finance projects that enhance the electrical grid, an unprecedented tax on municipal bonds would do irreparable harm to state and local governments’ ability to economically finance a diverse array of infrastructure investments that make commerce possible and keep our communities livable.
As the potential cost is so high, the American Public Power Association is determined to preserve the tax exemption. We continue to seek out allies to aid in the effort. These allies help us identify new threats, create new approaches for our advocacy, and reach new audiences.
The constant drumbeat of our combined efforts sends a clear message about the strength of our coalitions. We are making headway in convincing lawmakers that tax-exempt municipal bonds have a tremendous net benefit to communities.
The Public Finance Network is a long-standing, albeit ad hoc, group of more than 60 associations representing state and local governments and state and local elected officials. This group is largely led by the National Governors Association, the U.S. Conference of Mayors, the National League of Cities, the National Association of Counties, the National Association of State Treasurers, and the Government Finance Officers Association. The group formed in the wake of the Tax Reform Act of 1986, which imposed significant restrictions on tax-exempt financing, and the American Public Power Association has been active with the group since its inception. Members of the network meet regularly with administration officials, Hill staff, and lawmakers on a host of state and local finance issues, including the defense of the tax exemption for municipal bonds.
As a complement to the efforts of the Public Finance Network, in 2012, many of the same associations — plus private sector stakeholders in the municipal bonds debate — formed Municipal Bonds for America. This group includes bond dealers, fixed-income firms, and investment advisers. Our president and CEO Sue Kelly sits on the board of Municipal Bonds for America, and our staff stays involved with its working committees. Our partnership with this group not only supports our own advocacy efforts, it also allows us to ensure the public power utility perspective is infused into the group’s advocacy efforts and resources. In addition to providing a constant voice of support for tax-exempt municipal bonds, MBFA educates policymakers in an annual Hill briefing on bond-related developments and maintains a list of bond-financed projects in key congressional districts on its website.
We recently joined another group: the Infrastructure Working Group formed by the Associated General Contractors of America and the National Association of Manufacturers. This working group brings together a diverse range of voices from the public and private sectors — including end users, construction and design firms, financiers, and labor unions — to collaborate in support of infrastructure. Participation in the group keeps us aware of important developments in policy affecting infrastructure and aligns us with yet another industry that supports the retention of the tax exemption for municipal bonds.
Within our industry, we continue to work closely with state and regional public power associations, the Large Public Power Council, and the Transmission Access Policy Study Group. We are fortunate to have joint action agencies that have long helped in getting local utility voices heard on Capitol Hill.
Even as we join and work with these groups, we continue to rely on our members. Without your voice, we cannot share the real and immediate impact the loss of tax-exempt financing would have on public power’s retail customers. We need your guidance to ensure we are fighting for what is most important to you.