Strengthen Tax-Exempt Bonds
Strengthen Tax-Exempt Bonds
Tax-exempt bonds are the bedrock of public development finance, and they are issued and sold to the investing public to finance the costs of capital projects. The tax-exempt status of certain bonds is a vital feature, as it makes them a more attractive investment option for investors and lowers project borrowing costs. Unfortunately, many tax-exempt bond categories are governed by rules written over 30 years ago. The outdated regulatory code blunts the effectiveness of many tax-exempt bonds, which has negatively impacted several sectors of the economy. To improve the functionality of tax-exempt bonds, CDFA recommends:
Pass the Modernizing Agricultural and Manufacturing Bonds Act
CDFA proposes a set of six reforms to the Internal Revenue Code that would dramatically enhance the usability of small issue manufacturing and first-time farmer bonds. The reforms contained within MAMBA would lower capital access barriers for small manufacturers and first-time farmers by modernizing the ways in which the Internal Revenue Code regulates the issuance of small issue bonds. No substantive changes have been made to the rules governing small issue bonds in 30 years, and the common-sense reforms outlined in MAMBA would enable issuing authorities to better finance the needs of small manufacturers and first-time farmers in the 21st Century economy.
Read H.R. 5422
MAMBA Overview Page
Improve Public Buildings through Public-Private Partnerships
CDFA supports the expansion of qualified exempt facility bonds to include public facilities like schools, hospitals, courts, fire stations, and universities. While the development and maintenance of public facilities have historically been funded by governments through the issuance of GO bonds, the significant, present-day costs associated with public facility projects have forced many cash-strapped governments to forgo regular facility upgrades and improvements. The Public Buildings Renewal Act would expand the exempt facility bond category to include government buildings, enabling cash strapped governments to engage the private sector through public-private partnerships (P3s) and lower upfront project costs and long-term facility maintenance costs.
Read H.R. 1251
Read S. 932
Read the PBBC Summary
Create a Permanent Category of Disaster-area Recovery Bonds (DARBs)
CDFA advocates for the creation of a permanent category of tax-exempt bonds for disaster recovery. In the aftermath of severe weather events and natural disasters, communities around the country often find themselves in dire need of federal assistance to enable recovery and rebuild essential infrastructure. While the federal aid offered through the Stafford Act provides a much-needed source of funds for communities affected by disasters, those funds are rarely available in the immediate onset of a disaster and are often insufficient for comprehensive recovery efforts. DARBs would offer American communities a permanent financing tool that could be accessed immediately after disaster strikes, and that would leverage private investment for a longer-term redevelopment of essential infrastructure.
Read the Full CDFA Proposal
Read the NABL Report on Disaster Recovery Bond Financing
Read the 2019 Policy Agenda