Finance & Infrastructure

Tax-exempt municipal bonds allow LPPC members to provide electricity, fuel and supplies that keep energy prices stable for their consumers.

 

BUILDING, OPERATING AND INVESTING IN INFRASTRUCTURE from LPPC Power on Vimeo.

 

Principle: RETAIN, RESTORE AND ENHANCE TAX-
EXEMPT FINANCING 
(TEF) TOOLS

Retain, Restore and Enhance Key Public Finance Tools

As the Administration and Congress follow-up on the “Tax Cuts and Jobs Act of 2017,” it is imperative that tax-exempt financing (i.e.,the exclusion of interest on state and municipal bonds from taxable income) continues to be preserved. Any future tax legislation should also restore the ability to issue tax-exempt advance refunding bonds. Advance refunding is an important tool for municipal utilities to lower borrowing costs associated with infrastructure development, which results in lower electric rates in the communities that we serve. Additional financing tools (i.e., direct pay bonds not subject to sequestration) and comparability on energy tax incentives will also be pursued.

 

Principle: UPDATE PRIVATE USE RESTRICTIONS

Eliminate Undue Restrictions on Use of Tax-exempt Financing for Public Power Infrastructure Investment

Restrictions in section 141(b) of the Internal Revenue Code concerning “private use” are outdated. The Treasury Department and Congress should update the tax code and regulations addressing private use restrictions to remove unnecessarily restrictive limitations on the use of tax-exempt financing for public power infrastructure investment. Outdated private use restrictions constrain the manner in which public power systems conduct their operations. As the Administration and Congress address tax issues, LPPC will seek to reduce all counterproductive limitations on public power financing.

 

Principle: ELIGIBILITY FOR INFRASTRUCTURE SUPPORT

Publicly Owned Grid Infrastructure Should Be Covered By Any Federal Infrastructure Investment Program

As federal policies to support infrastructure investment are considered, it is critical they include investment in publicly owned electricity grid facilities. Like publicly owned transportation, water, and wastewater systems, the nation’s electricity infrastructure is essential to the efficient operation of the economy. Federal funding, financing, or incentives for infrastructure should be available to support electric infrastructure investments by public power utilities.

 

Principle: REPEAL MANDATORY SEQUESTRATION FOR BUILD AMERICA BONDS (NEW FOR 2020)

Direct Pay Bonds Can Be An Effective Financing Tool for Public Power, but Must Be Exempt from After-the-Fact Mandatory Sequestration On a Going Forward Basis 

Build America Bonds (“BABs”) are taxable bonds on which the Federal Government reimburses the issuer for a portion of the interest paid. Although BABs were effective in helping finance public infrastructure projects at lower borrowing costs, the ability to issue BABs expired in 2010. In addition, the subsidy payments on existing bonds have been negatively impacted by across-the-board-cuts – sequestration – that went into effect on March 1, 2013. LPPC urges repealing sequestration of payments for existing BABs on a going forward basis and supports the reinstatement of BABs (or other direct pay bond programs) to support infrastructure investment without exposure to future sequestration.

 

Principle: ALLOW FLEXIBILITY IN OPTIMIZING RESOURCE PLANNING

Public Power Utilities Undertake Careful Generation and Transmission Resource Planning to Ensure Reliability, Affordability, and Environmental Stewardship 

States and utilities should have flexibility in resource planning to achieve cost-effective portfolios that meet planning objectives on a “best-fit” basis. This approach will ensure consideration for regional and market differences, resource and infrastructure availability, and the optimal combination of resource attributes and system performance.

 

Principle: STREAMLINE PERMITTING 

Permitting for Energy Infrastructure Should Be Streamlined 

Necessary energy infrastructure development too often runs into bureaucratic obstacles. Federal and state regulators and land agencies should provide for efficient review of applications related to energy infrastructure projects, consistent with the Administration’s priority on energy infrastructure development. Inter-agency coordination in federal permitting is critical, as is effective federal-state collaboration. Such coordination is also critical in relicensing of existing facilities, such as hydroelectric facilities.

TAX EXEMPT FINANCING

LPPC members, like states, municipalities and other local government entities, use municipal bonds to invest in new infrastructure in the most affordable manner for the communities we serve. The interest earned on municipal bonds is currently exempt from federal income tax. In any future tax reform debates, Congress should continue the current federal tax treatment of municipal bonds. It is the primary financing tool of critical infrastructure investments and directly affects the prices that public power consumers pay for electricity, especially small business and low- and fixed-income households.

Every year, public power utilities average $15 billion in new infrastructure investment. This includes investments in power generation, transmission, distribution, reliability, demand control, efficiency and emissions control—which are all needed to deliver safe, affordable and reliable electricity. Over the next five years, LPPC members will issue $14.25 billion in tax-exempt municipal bonds to build and improve critical infrastructure to ensure reliability of the grid.

The U.S. municipal bond market is established and sound. With a robust and comprehensive federal legislative and regulatory system in place, investors and taxpayers are well-protected. LPPC members are significant participants in the municipal bond market; members currently hold $68.47 billion in tax-exempt bonds.

Limiting or eliminating the income tax exemption for interest from municipal bonds would increase borrowing costs for public power and other state and local governments and, as a result, would reduce investments in vital infrastructure across the country and increase the cost of electricity for public power consumers. 

Maintaining the current exclusion for municipal bond interest is essential for infrastructure investment, economic growth, and job creation. They serve the best interests of communities.

DIRECT PAY BONDS

As part of the American Recovery and Reinvestment Act of 2009, Congress provided state and local governments, including public power, with a new kind of financing tool. Build America Bonds (BABs) address the disruption in the municipal bond market that resulted from the financial crisis.

These direct pay bonds were taxable bonds that the federal government reimbursed the issuer for a portion of the interest paid. They have helped state and local governments finance public infrastructure projects at lower borrowing costs. They expired at the end of 2010, and interest subsidy payments on existing were impacted by budget sequestration.

Direct payment bonds can be a useful complement to municipal bonds, and LPPC supports the addition of direct payment bond programs to support infrastructure investment and job creation.

SUPPORTING DOCUMENTS

TESTIMONY

LPPC President John Di Stasio Testimony for Committee Hearing Examing the Evolution of Energy Infrastructure (February 8, 2018)

LETTERS

Municipal Finance Caucus Letter to House Ways and Means Leadership in Support of Municipal Bonds (May 13, 2019)

Joint ASE Letter to Finance, Ways and Means Committees on the Future of Tax Incentives for Energy Efficiency (November 14, 2018)

Joint Protest of APPA, LPPC, NRECA, TAPS Against JEA Petition for Declaratory Order (October 15, 2018)

LPPC Letter to Chairman Powell Urging Treatment of Municipal Securities as High-Quality Liquid Assets (July 24, 2018)

LPPC Request of Co-sponsorship of HR 5003 to Restore Advance Refunding (May 7, 2018)

LPPC Joint Letter to Rep. Brady On Opposition to Provisions in HR 1 (November 7, 2017)

MFBA Coalition Letter to Senate and House Leaders on Tax Reform Legislation (November 3, 2017)

LPPC Joint Letter to Murkowski and Walden Supporting Legislation That Modernizes Hydropower Licensing Process (July 25, 2017)

LPPC Joint Comments to Senate Finance Committee On Reforming IRC (July 17, 2017)

LPPC Joint Letter to Rep. Ryan and Rep. Pelosi, Correcting IRC Nuclear Production Tax Credit (June 19, 2017)

LPPC Letter To SEC Secretary Brent Fields On Proposed Amendments To Municipal Securities Disclosure (May 15, 2017)

LPPC Letter to Ranking Member Levin Urging House Ways and Means Committee to Retain Tax-Exempt Financing for State and Local Governments (April 8, 2016)

LPPC Letter to Chairman Brady Urging House Ways and Means Committee to Retain Tax-Exempt Financing for State and Local Governments (April 8, 2016)

APPA LPPC Commodity Exchange Act Reauthorization Letter to Senate Agricultural Committee (May 1, 2013)

LPPC Joint Letter to President Obama and Speaker Boehner Regarding the Importance of the Income Tax-exempt Financing to Public Infrastructure and Services (December 20, 2012)

LPPC Joint Letter on EE Tax Extenders to Speaker Ryan, Democratic Leader Pelosi, Majority Leader McConnell and Democratic Leader Reid (November 20, 2012)

LPPC Joint letter to Chairman Gensler Regarding Relief from Special Entity de minimis Threshold Swaps Related to Government-Owned Utilities (November 19, 2012)

Letter to Chairman Gensler Regarding Special Entity Sub-threshold (August 1, 2012)

COMMENTS

Joint Comments by LPPC and APPA to FERC in Support of Proposals Contained in NOPR (December 3, 2019)

Joint Comments by APPA, LPPC and NRECA on Proposed Rulemaking for CEII (December 28, 2018)

LPPC Joint Request for Rehearing to FERC on Large Generator Interconnecion Procedures (May 21, 2018)

LPPC Joint Comments To IRS On Proposed Regulations For Political Subdivision (August 7, 2017)

STATEMENTS

APPA LPPC TAPS Joint Statement for Ways & Means Working Groups (April 15, 2013)

PETITIONS

Petition for Rulemaking to Amend CFTC Regulation 1.3 (July 12, 2012)

FACT SHEETS

LPPC 2018 Tax Legislative Priorities (July 17, 2018)

VIDEO

MBFA: Seminar On Tax-Exempt Municipal Bonds w/ Congressman Ruppersberger and Congressman Hultgren (June 7, 2017)