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: RESTORE/ENHANCE ELEMENTS OF TAX-
EXEMPT FINANCING 
(TEF) 

Retain Key Public Finance Tool

As Congress considers follow-up tax legislation to 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 use advanced refunding. Advanced refunding is an important tool for municipal entities 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 with tax-paying project developers will also be pursued.

 

Principle: UPDATING 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Restrictions in section 141(b) of the Internal Revenue Code concerning “private use” are outdated. Congress should update the tax code addressing private use restrictions and the unnecessarily restrictive limitations on the use of tax-exempt financing for public power facility investment. As Congress takes up tax issues in energy or infrastructure legislation, LPPC will seek to reduce 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 Congress and the Administration consider Federal policies to drive reinvestment in the nation’s infrastructure, it is critical to include publicly owned electricity grid facilities in the infrastructure program. Like publicly owned transportation, water, and wastewater systems, the nation’s electricity infrastructure is critical to the efficient operation of the economy and the society. Any Federal funding, financing, or incentive elements of the infrastructure program should be available to support investments by public power utilities.

 

Principle: INTEGRATED RESOURCE PLANNING

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

States and individual utilities should have flexibility in resource planning to achieve portfolios that meet planning objectives on a best-fit basis. Federal policy may, for instance, establish environmental performance requirements, but decisions about what resources to deploy should not be made at the Federal level, and should instead remain with the public power utility.

 

Principle: REGULATORY STREAMLINING

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.

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

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

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)