WASHINGTON D.C. – U.S. Senator Shelley Moore Capito (R-W.Va.), along with Senators Roger Wicker (R-Miss.), Debbie Stabenow (D-Mich.), Michael Bennet (D-Colo.), John Barrasso (R-Wyo.), Bob Menendez (D-N.J.), Jerry Moran (R-Kan.), and Tom Carper (D-Del.), today introduced the Lifting Our Communities through Advance Liquidity for Infrastructure (LOCAL Infrastructure) Act. As the United States deals with the economic effects of the COVID-19 pandemic, this legislation would amend the federal tax code to restore state and local governments’ ability to use advance refunding to manage bond debt and reduce borrowing costs for public projects.
“Throughout this pandemic, I’ve heard directly from our local leaders about the challenges they are facing and how Congress can help alleviate these burdens,” Senator Capito said. “One of these challenges is the lost revenue that state, counties, and cities are experiencing because of this emergency, which has caused a strain on their budgets. The LOCAL Infrastructure Act is another tool that provides these local governments the flexibility needed to generate savings. I’m proud to support this legislation and will continue working to deliver commonsense solutions like these to support our local governments during this difficult time.”
BACKGROUND:
The senators’ legislation comes in response to calls from state and local leaders for the federal government to provide additional support to communities as they assess the impact of the coronavirus outbreak on their budgets and begin planning for the future.
Advance refunding would allow 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. This process is very similar to how a homeowner may refinance the mortgage on their property to lock in a lower interest rate.
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. Local governments could reinvest these savings to fund infrastructure, education, health care, or other capital improvement projects.
Advance refunding has saved state and local governments billions of dollars over decades, but has been unavailable to state and local governments since 2017.
Among other organizations, the senators’ legislation is supported by: The National League of Cities, United States Conference of Mayors, National Association of Counties, National Conference of State Legislatures, American Hospital Association, American Public Power Association, American Society of Civil Engineers, American Public Works Association, National School Boards Association, Government Finance Officers Association, and National Association of Bond Lawyers.
Click here to view the full text of the legislation.
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