Water, infrastructure groups show support for tax-exempt bond financing

This month, the Government Finance Officers Association spearheaded a letter to Congress noting the value of maintaining access to tax-preferred infrastructure financing options.

Water sector associations, the Association of Metropolitan Water Agencies (AMWA) and the National Association of Clean Water Agencies (NACWA), which represent utility systems, signed the letter, along with others representing underground infrastructure interests including the American Public Works Association and American Society of Civil Engineers.

The letter was directed to House and Senate leadership and explained how tax-exempt municipal bonds are the primary mechanism through which state and local governments raise capital to finance a wide range of essential public projects. The volume of municipal bond issuance for 2023 alone amounted to over $350 billion, the letter highlights.

Some of the policy requests made in the letter include preserving the federal tax exemption on municipal bond interest and restoring the tax exemption for advance refunding bonds that was eliminated at the end of 2017. The letter notes tax-exempt advance refunding bonds allowed state and local governments to effectively refinance their outstanding debt in order to take advantage of more favorable interest rate environments or covenant terms. GFOA found that between 2007 and 2017, there were over 12,000 tax-exempt advance refunding issuances nationwide which generated over $18 billion in savings for tax and ratepayers over the 10-year period.

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