Nov. 6, 2017 — On Nov. 2, House Republicans unveiled a tax reform package which leaves tax-exempt municipal bonds unchanged, but includes a provision to terminate private activity bonds (PAB), which are tax-exempt bonds that allow the private sector to participate in financing public projects, including water and wastewater projects.
Under the Republican proposal, bond issuers such as private water companies would have to pay higher interest rates because those buying the bonds would pay taxes on the earned interest. However, there is a good chance this will not be included in a Senate package.
Meanwhile, WEF and other water sector organizations are relieved that the Republicans chose to maintain the tax-exempt status for municipal-issued bonds for water and infrastructure projects. City and county governments issue municipal bonds as a primary source of financing with at least 70 percent of publicly owned water utilities relying on municipal bonds for water infrastructure financing.
The bill did though include a provision that would forbid local governments from refinancing their debt before 10 years after issuance. Although municipal bond rates remain historically low, if rates increase in the future, this provision may prevent a local agency from refinancing its debt to a lower rate.
Click here to write your members of Congress to ensure tax-exempt status is maintained for municipal issued bonds.
