Preserve Tax-Exempt Municipal Bonds!

Key Water Infrastructure Financing Tool at Risk

tax_exemptTax-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.

Take Action Now!

  • Share your home-state findings with your Members of Congress via email or meeting. Use the resources on the Congressional Toolbox page, which contains fact sheets on NACWA’s legislative advocacy work and other resources to help support and enhance member outreach to Congress.

  • Engage on social media: NACWA is working in collaboration with many other national, state, and municipal associations to advocate on this issue. The hashtag #builtbybonds has been gaining in popularity across infrastructure sectors as a way to highlight bond-built investments. Highlight your local #builtbybonds projects to help ensure that the connection between bonds and clean water infrastructure is front and center. 

What's New

  • NACWA signs "Don't Mess With Our Bonds" letter to Congress in support of preserving tax-exempt municipal bonds- March 29, 2017. 

  • NACWA Members took to the Hill during Water Week 2017 to share their experiences using tax-exempt municipal bonds to finance water and wastewater projects and communicate the importance of preserving financing tools that help make local water projects more affordable.
  • On March 8th, a “Dear Colleague” letter expressing strong support for tax-exempt municipal bonds during Congressional debates on tax reform and infrastructure financing was submitted with a truly remarkable 156 Congressional signatures. The signatories represent a significant showing from both political parties. Strong bipartisan support in Congress is crucial to preserving this critical, long-standing financing tool for State & local governments. The letter is addressed to leadership of the federal tax-writing Committee – House Ways & Means – namely the Committee Chairman Kevin Brady (R-TX) and Ranking Member Richard Neal (D-MA). The letter was organized by the bipartisan Municipal Finance Caucus. Thank you to NACWA members who urged your Representatives to sign this important letter.

  • The 115th Congress and the Trump Administration have both identified comprehensive federal tax reform as a 2017 priority, along with addressing the infrastructure backlog our nation and local communities face. In prior years, some proposals on tax reform and infrastructure investment from Republicans and Democrats have included cutting or eliminating the federal tax-exemption for municipal bonds. Crucially, the exemption has remained in place as a vital tool for municipal entities. Unfortunately, early proposals being floated this year could again eliminate the exemption.

  • In light of these discussions, NACWA is advocating on the Hill and working with other associations to communicate the importance of the municipal bond tax-exemption for water and wastewater infrastructure. Tax-exempt municipal bonds are a critical tool for local entities to address water and wastewater needs. Actions to address infrastructure investment, including increased direct federal spending, could be counterproductive if this widely-used tool is reduced or eliminated.

  • NACWA signs Municipal Bonds for America letter to Congress in support of preserving tax-exempt municipal bonds - February 21, 2017