In a concerted effort to revitalize municipal financing mechanisms, a coalition of lawmakers has reintroduced the Investing in Our Communities Act. Spearheaded by Reps. David Kustoff (R-Tenn.) and Rudy Yakym (R-Ind.), along with Democratic representatives Gwen Moore (D-Wis.) and Jimmy Panetta (D-Calif.), this legislation aims to restore the ability of cities and states to undertake advance refunding of tax-exempt debt. This legislative initiative, though previously presented in prior sessions yet notably unsuccessful, has garnered attention amidst pressing fiscal needs at the local and state levels.
The restoration of advance refunding is crucial because this financial tool previously accounted for approximately 20% of municipal bond activities before the Tax Cuts and Jobs Act of 2017 stripped municipalities of this capacity. In the wake of its removal, communities have been deprived of a vital means to manage debt efficiently, thus hindering economic growth initiatives and ultimately affecting taxpayers.
At the heart of the Investing in Our Communities Act is the understanding that efficient debt management can significantly bolster economic development. Kustoff stressed the importance of this bill, asserting that it will provide state and local governments with “a critical financing tool” that can stimulate job creation and foster taxpayer savings. This legislation does not merely benefit the immediate financial health of municipalities; rather, it has far-reaching implications for communities that rely on public projects for job opportunities and infrastructure improvements.
Advocates for the bill—including a diverse array of municipal market organizations—stress that reinstating this form of refinancing will alleviate borrowing costs and free financial resources. By enabling local governments to refinance existing debts, communities can invest in essential programs and infrastructure that can lead to a more sustainable economic future.
Despite the backing from various stakeholders, including organizations like the National Association of State Treasurers and the American Society of Civil Engineers, the road to passing this legislation is fraught with challenges. As Congress navigates broader tax reforms, there are looming uncertainties regarding the tax-exempt status of municipal bonds. Critics warn that as lawmakers contemplate comprehensive tax reforms, municipal bonds could face new restrictions that jeopardize their viability.
Joining Kustoff and Yakym in the legislative initiative is a notable shift, as Yakym has assumed the role previously held by the now-retired Dutch Ruppersberger. This continuity in political leadership bodes well for advocacy, as sustained efforts are essential to keep momentum in significantly reformative legislation. Advocates must articulate the connection between advanced funding mechanisms and tangible economic outcomes to gain traction in a potentially skeptical Congress.
The response from stakeholders within the municipal finance ecosystem has been overwhelmingly positive. Chris Iacovella, President and CEO of the American Securities Association, lauded the bill, emphasizing its potential to efficiently funnel investments into state and local economies. Additionally, leaders from the Large Public Power Council testified to the bill’s pragmatic approach to managing rising energy demands, projecting savings of approximately $715 million for electric customers over five years if advanced refunding is reinstated.
Moreover, Rep. Terri Sewell (D-Ala.) previously introduced the LIFT Act aiming to facilitate local infrastructure financing tools, echoing the sentiment behind the current proposal. While her earlier attempts have not gained substantial legislative energy, the reintroduction of these financial tools reflects a growing awareness of the fiscal hurdles local governments face in nurturing sustainable growth.
The bipartisan introduction of the Investing in Our Communities Act serves as a rallying point for local and state governments grappling with fiscal constraints. As the legislative process unfolds, it remains imperative for advocates to emphasize not merely the restoration of a financing tool but its broader implications on economic vitality. Crafting a narrative around the direct benefits of advance refunding can be pivotal in convincing legislators of its merits. If successfully passed, this legislation could bolster municipalities’ capacity to invest in urgently needed public projects, serving as a critical lifeblood for communities striving toward economic prosperity.