State and local governments across America could finance critical infrastructure projects under bipartisan legislation sponsored on April 22 by U.S. Sen. Roger Wicker (R-MS) that would create a new class of taxable municipal bonds.
“As our nation looks to invest in public works, now is the right time for Congress to allow state and local governments to seize this opportunity and renew infrastructure across the nation,” said Sen. Wicker.
The American Infrastructure Bonds Act of 2021, S. 1308, which he introduced with six original cosponsors, including U.S. Sens. Roy Blunt (R-MO), Shelley Moore Capito (R-WV), and Michael Bennet (D-CO), would amend the Internal Revenue Code of 1986 to provide a credit to issuers of American infrastructure bonds, according to the text of the bill.
If enacted, S. 1308 would improve upon the model of Build America Bonds (BABs) that were issued after the 2008 financial crisis to attract more investment in public infrastructure, according to a one-page bill summary provided by Sen. Wicker’s office. Similar to BABs, the American Infrastructure Bonds (AIBs) would help local municipalities raise capital for a wide range of infrastructure projects, including roads, bridges, water systems, and broadband internet, according to the summary.
“Empowering local leaders to launch new infrastructure projects is a proven way to support local economic growth,” Sen. Wicker said. “This legislation would improve upon previous efforts to expand investment in the state and local bond market by increasing flexibility for communities and adding assurances for bondholders.”
Under S. 1308, the AIBs would be modeled as a direct-pay taxable bond, with the U.S. Treasury Department paying a percentage of the bond’s interest to the issuing entity to reduce costs for state and local governments. These payments would be issued for projects at 28 percent of the bond’s interest, according to the bill summary.
The bill is supported by numerous organizations, including the National League of Cities, the National Association of Counties, the Government Finance Officers Association, the American Council of Life Insurers, the American Public Gas Association, the American Council on Education, the Securities Industry and Financial Markets Association, and the Bipartisan Policy Center Action, among others.