Defending the Tax Exemption on Municipal Bonds
Adopted at the 83rd Annual Meeting in 2015
WHEREAS, The United States Conference of Mayors is dedicated to ensuring local control and decision making through access to affordable capital; and
WHEREAS, tax-exempt municipal bonds finance infrastructure that touches the daily lives of every American citizen and are the foundation of civilized society - the roads we drive on, schools for our children, affordable housing, water systems that supply safe drinking water, wastewater systems that keep our waterways clean, courthouses, hospitals and clinics to treat the sick, airports and ports that help move products domestically and overseas, and utility plants that power homes and businesses; and
WHEREAS, three-quarters of all infrastructure investments made in the United States are financed by state and local governments and their agencies, largely through tax-exempt municipal bonds; and
WHEREAS, tax-exempt municipal bonds have, for 100 years, been the way that state and local governments affordably access capital markets to meet the infrastructure needs of their citizens; and
WHEREAS, interest on municipal bonds is exempt from Federal taxation under a principle of reciprocal immunity under which the Federal Government is exempt from State and local taxations and local governments are exempt from Federal taxation; and
WHEREAS, savings from affordable financing through tax-exempt bonds allows for greater infrastructure investments and savings passed directly to taxpayers and ratepayers in the form of reduced taxes and fees; and
WHEREAS, keeping infrastructure costs low is critical to job creation and to the infrastructure investments that are the backbone of our economy; and
WHEREAS, the American Society of Civil Engineers has given a grade of D+ for the condition and performance of the nation's infrastructure, and estimates an investment of $3.6 trillion will be needed by 2020; and
WHEREAS, Congress and the Administration have proposed capping, limiting, eliminating or replacing tax-exempt bonds; and
WHEREAS, several studies have concluded convincingly that proposals to limit, eliminate or replace tax-exempt bonds would result in significantly higher borrowing costs for state and local government; and
WHEREAS, increased borrowing costs would translate to increased fees and increased taxation at the local level, or in the failure to meet core infrastructure needs; and
WHEREAS, limiting, eliminating or replacing tax-exempt bonds could shut many small issuers out of the bond market entirely; and
WHEREAS, state and local governments cannot and should not rely exclusively upon federal tax credits, federal reimbursement payments, federal grants and federal loans to finance infrastructure; and
WHEREAS, tax-exempt municipal bonds are the financing tool that maximize local control and local decision making with minimal federal bureaucracy or interference; and
WHEREAS, over the past decade funding for core federal government infrastructure grant programs has been stagnant at best and in many cases has declined precipitously; and
WHEREAS, federal mandates significantly increase state and local government infrastructure costs, with mandates related to the Clean Water Act placing an especially large burden on city governments; and
WHEREAS, in an era of increasing federal mandates and federal budget austerity, capping, limiting or eliminating tax-exempt bonds would essentially signal a divestment in infrastructure; and
WHEREAS, tax credit bonds and direct subsidy bonds are a good complement to traditional tax-exempt municipal bonds but would be a poor substitute due to reliance on a federal subsidy and higher costs for smaller issuers; and
NOW, THEREFORE, BE IT RESOLVED, that The United States Conference of Mayors opposes any proposal to cap, limit, eliminate or replace tax-exempt bonds. --
Projected Cost: Unknown