Tax-Exempt Municipal Bonds have been a key tool for financing municipal investments, including water and wastewater infrastructure, since 1913. In 2016 alone, nearly $38 billion in tax-exempt municipal bonds were issued for water and wastewater projects – supporting crucial investments in maintaining infrastructure, building capacity, meeting regulatory requirements and protecting public health and water quality.
NACWA is working hard to ensure that this exemption is not reduced nor eliminated. The Association recently collaborated with the Association of Metropolitan Water Agencies (AMWA) to estimate the value of tax-exempt municipal bonds to water and wastewater infrastructure nationwide and in each state –updating a 2013 NACWA / AMWA report on the same topic. The new analysis found1:
- Communities nationwide issued nearly $38 billion worth of municipal bonds in 2016 to fund investments in drinking water and wastewater infrastructure.
- Under current laws that exempt municipal bond interest from federal income tax, these issuances are estimated to lead to $63.6 billion worth of debt service costs over 30 years.
- If municipal bond interest were fully taxed, these debt service payments would increase to $79.8 billion – an increase of $16 billion, or 25 percent – significantly increasing costs to ratepayers and constraining further utility investments.
State-specific fact sheets are available for download below, along with a nationwide fact sheet.
1 The analysis was conducted by SJ Advisors, LLC. For simplicity, these estimates were calculated based on the current interest rate environment, and by assuming all bonds were issued for uniform $50 million projects with "AA" credit ratings and 30-year loan maturities. The figures do not include any water infrastructure projects that may have been funded through general obligation bonds.