Strengthen Tax-Exempt Bonds
Although H.R. 1, the Tax Cuts and Jobs Act, made several changes to the Internal Revenue Code language governing bond usage, the language governing tax-exempt bonds, and specifically Private Activity Bonds (PABs), was largely unchanged. As a result, the vast majority of PAB categories are still regulated by rules written over 30 years ago. Several PAB categories would benefit from legislative reforms that take into account the advanced state of the American economy, as well as the current challenges state and local governments face in funding public infrastructure improvements and development. Listed below are the legislative initiatives supported by CDFA that would strengthen PABs.
Create a Permanent Category of Disaster-area Recovery Bonds
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. American communities are in need of a permanent financing tool that they can access immediately after disaster strikes, and that can leverage private investment for longer-term redevelopment of essential infrastructure. CDFA advocates for the creation of a permanent tax-exempt bond program for disaster recovery. The bonds would be authorized to finance, in a designated reconstruction zone, the acquisition, construction, reconstruction or renovation of non-residential real property; the construction and rehabilitation of multi-family rental property for low and moderate income individuals; and the repair or reconstruction of damaged public utilities facilities and transportation infrastructure.
Read the Full CDFA Proposal
Read the NABL Report on Disaster Recovery Bond Financing
Improve Public Buildings through Public-Private Partnerships
According to the Performance Based Buildings Coalition (PBBC), America’s public buildings are in a “historic state of disrepair.” Shrinking budgets on the state and local level have led municipal governments to forgo regular maintenance on their public facilities, harming their long-term viability and raising the present cost of facility upgrades. To combat the negative impacts of shrinking budgets, Congressional leaders have introduced the Public Buildings Renewal Act of 2018. H.R. 960 and S. 326 would allow private entities to access tax-exempt PABs for projects involving public facilities, incentivizing private groups to invest in public projects, and lowering the overall costs to state and local governments. CDFA supports the Public Buildings Renewal Act, and will work with legislative partners to ensure the bill becomes law.
Read H.R. 960
Read S. 326
Read the PBBC Summary
Remove Water and Sewer Bonds from Volume Cap
Exempting water and sewer Private Activity Bonds from state volume cap requirements would allow states and municipalities to finance more infrastructure projects through bond issuance than are currently possible. In 2016, $96.96 billion of the $97.36 billion in national volume cap available went toward financing projects other
than water and sewage infrastructure. The demand for bond financing creates a bottleneck with other political priorities using most of the cap. Water projects simply cannot access this resource on a level playing field. Freeing water and sewage infrastructure form volume cap constraints would drastically increase state and local capacity to finance essential water and sewage projects. Legislation to remove these bonds from volume cap restrictions has been introduced in the House as H.R. 3009, the Sustainable Water Infrastructure Act of 2018.
Read H.R. 3009
Read The Bond Buyer's Summary
Read the 2018 Policy Agenda