Bonds and Financing

Ditto Writes In Support Of Bond And Tax Credit Provisions In Legislation

In a Sept. 14 letter to House Ways and Means Committee Chairman Richard Neal, D-Mass., Joy Ditto, President and CEO of the American Public Power Association (APPA), applauds the infrastructure financing and energy-related provisions of the tax titles of the Build Back Better Act that are being considered for adoption this week by the committee.

“These provisions will reduce the cost of financing infrastructure investments overall and ensure that all electric utilities, including APPA’s not-for-profit members, can benefit from incentives intended to encourage critical energy investments needed to transition to cleaner generating technologies. This will make these incentives fairer and more effective,” wrote Ditto.

She noted that state and local governments and the enterprises they govern use municipal bonds to finance public infrastructure investments that enable their communities to function and thrive. Tax-exempt municipal bonds have financed $2.3 trillion in new investments in infrastructure over the last decade, including $68 billion in new investments in electric power generation, transmission, and distribution.

In Subtitle F (Infrastructure Financing and Community Development), the Build Back Better Act “includes hugely important provisions to improve tax-exempt financing, including reinstating the ability to issue tax-exempt advance refunding bonds and increasing the small-issuer exception threshold from $10 million to $30 million,” Ditto wrote.

Increasing the small issuer exception to $30 million will make it more attractive for banks to invest in rural and other smaller communities. And in the five years prior to their repeal in 2017, public power utilities refinanced $20 billion in existing debt with tax-exempt advance refunding bonds -- generating interest savings of more than $600 million for the communities they serve, Ditto said.

Likewise, Subtitle G (Green Energy) “takes transformational steps to making energy-related tax provisions more efficient and fairer,” the APPA President and CEO said.

Federal tax expenditures are the primary tool Congress uses to incentivize energy-related investments. “However, such incentives do not work for tax-exempt entities (including public power utilities). That means public power utilities are effectively locked out of owning such facilities – and explains why 80 percent of the nation’s (non-hydropower) renewable energy generating capacity is owned by for-profit, merchant generators,” wrote Ditto.

Subtitle G addresses this inequity by allowing for the direct payment of energy production and investment tax credits and carbon capture tax credits to any entity that owns the project. “This would remove the financial disincentive for public power utilities to own such facilities, which are needed to transition to cleaner generating technologies and to address climate change. That means local projects, under local control creating local jobs. It also would allow the full value of these credits to pay for additional investment or be passed on to our 49 million customers,” Ditto said. 

She thanked Neal for his “continued commitment to helping local communities find and finance local solutions” and said that the changes in bond financing and energy-related tax credits that the Ways and Means Committee is considering this week “will give our communities the best, most flexible tools to address the substantial challenges that lie ahead.”

The committee was expected to complete work on the tax titles of the Build Back Better Act, also known as the budget reconciliation bill, on Wednesday, Sept. 15.