The role of municipal tax-exempt bonds to fund needed infrastructure investments is at risk as some Congressional leaders propose to eliminate the tax-exempt status of municipal bonds in an effort to reform the tax code and lower corporate tax rates. To help push back against such efforts, NACWA and the Association of Metropolitan Water Agencies (AMWA) collaborated on an analysis of the national and state-by-state investment in tax-exempt municipal bonds for crucial water projects.
In 2016, municipalities issued nearly $38 billion of tax-exempt municipal bonds to finance investments in drinking water and clean water infrastructure. Further, if the tax-exemption were eliminated, the cost of issuing municipal bonds would increase by 25 percent. In fact, more than 10 percent of all tax-exempt municipal bond issuances in a given year finance water and sewer projects. These findings underscore the vital role that tax-exempt municipal bonds play in financing clean water infrastructure and in maintaining rates at affordable levels.
It is critical that NACWA members contact their Members of Congress to urge them to oppose any effort to eliminate tax-exempt municipal bonds. To aid you in this outreach, NACWA is launching a new online resource hub dedicated to tax-exempt municipal bond advocacy. On the webpage, you will find a national fact sheet that highlights the benefits of the municipal bond tax-exemption for water and clean water utilities. The Resource Hub also features factsheets for all 50 states plus D.C., providing data on how utilities would be impacted if the tax-exemption were to be eliminated.
While the municipal bond tax-exemption has been in place since 1913, its continuance is far from guaranteed, particularly this year when many Congressional leaders have high hopes for transformational federal tax code reforms. Given the significant infrastructure investment needs across the country, utilities must play a central role in helping policymakers understand the critical role that tax-exempt municipal bonds play in financing water, wastewater, and stormwater projects.