U.S. Sen. Roger Wicker (R-MS) on July 1 introduced bipartisan legislation that would amend the federal tax code to restore advance refunding bonds, which allow states and local governments to manage bond debt and reduce borrower costs for public projects.
“The coronavirus outbreak has placed enormous pressures on state and local governments,” Sen. Wicker said. “At a time when interest rates are at historic lows, Congress should allow our local governments to seize this opportunity and pass along savings to their communities.”
Sen. Wicker sponsored the Lifting Our Communities through Advance Liquidity for Infrastructure Act, or the LOCAL Infrastructure Act, S. 4129, with seven original cosponsors, including U.S. Sens. Shelley Moore Capito (R-WV), Jerry Moran (R-KS), and Debbie Stabenow (D-MI).
Advance refunding bonds permit state and local governments to refinance outstanding municipal bonds to more favorable borrowing rates or conditions before the end of the initial bond term on a tax-exempt basis. However, the bonds have not been unavailable to state and local governments since 2017, according to Sen. Wicker’s office.
“Restoring advance refunding is a proven way to give our local leaders the ability to manage existing debts, reduce costs and free up additional money for much-needed local infrastructure projects,” said Sen. Wicker.
If enacted, S. 4129 would give states and local governments the ability to use advance refunding to free up cash flow for essential community projects. The federal tax-exempt debt could be refinanced only once, but local communities would be able to take advantage of the lower interest rates to generate additional savings on existing bonds, according to a bill summary provided by Sen. Wicker’s office.
Local governments also could reinvest these savings to fund infrastructure, education, healthcare, or other capital improvement projects.
“The extraordinary strain that the COVID-19 crisis is putting on state and local budgets will last years and make it that much more difficult to fund important infrastructure projects,” said Sen. Stabenow. “That is why I have come together with Senator Wicker to introduce the LOCAL Infrastructure Act, which will make it less expensive for state and local governments to invest in hospitals, roads, schools, and other critical infrastructure.”
S. 4129 is supported by the National League of Cities, the United States Conference of Mayors, the National Association of Counties, the American Public Power Association, the American Public Works Association, the National School Boards Association, and the National Association of Towns and Townships, among many other organizations.