WASHINGTON, D.C. – U.S. Senator Shelley Moore Capito (R-W.Va.) yesterday joined her colleagues in introducing the Lifting Our Communities through Advance Liquidity for Infrastructure (LOCAL Infrastructure) Act of 2021. The legislation, which was authored by Senators Roger Wicker (R-Miss.) and Debbie Stabenow (D-Mich.), 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. This initiative could provide a boost to local communities across the nation as the U.S. deals with the economic effects of the COVID-19 outbreak.
“Throughout this pandemic, I’ve remained in close contact with our local leaders who have conveyed to me the challenges they are facing and how Congress can help alleviate these burdens,” Senator Capito said. “Among these challenges is the lost revenue that state, counties, and cities are experiencing as a result of the pandemic, 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 once again and will continue working to deliver commonsense solutions like these to support our local governments during this difficult time.”
BACKGROUND:
The 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.
In addition to Senator Capito, original cosponsors of the legislation include: John Barrasso (R-Wyo.), Michael Bennet (D-Colo.), Jim Inhofe (R-Okla.), Tammy Baldwin (D-Wis.), Bob Menendez (D-N.J.), Jerry Moran (R-Kansas), Jeanne Shaheen (D-N.H.), Lisa Murkowski (R-Alaska), Chris Van Hollen (D-Md.), Deb Fischer (R-Neb.), John Boozman (R-Ark), and Jacky Rosen (D-Nev.).
Among other organizations, the 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 read a one-page outline of the legislation.
Click here to view the full text of the legislation.
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