FOR IMMEDIATE RELEASE
February 13, 2012
Contact: Lawrence Pacheco
Washington D.C. — President Obama released his FY2013 budget, which includes a proposed cap of 28 percent on the value of tax preferences, including tax-exempt interest for municipal bonds. Brian H. Moeck, chairman of the Large Public Power Council (LPPC), released the following statement in response:
Make no mistake, the president’s proposal to eliminate the tax exemption for interest on municipal bonds is a significant threat to state and local governments and other municipal entities, including publicly owned utilities, all across the country.
Although this proposal is intended to limit the amount of exemptions higher-income taxpayers can claim, it is in reality a new tax on the bonds that finance our nation’s critical public infrastructure. Moreover, this provision would be applied retroactively to bonds already issued—an unprecedented and unfair effective date for issuers of municipal bonds that creates uncertainty in the market and could increase borrowing costs long before the legislation is even considered.
Tax-exempt financing has been a vital tool for all state and local governments, especially for public power utilities. Our only access to the capital markets to finance infrastructure projects is through the municipal bond market. The president’s proposal strikes at the heart of our not-for-profit model for providing affordable and reliable power to millions of households throughout the country. Any proposal that hamstrings the municipal bond market will undoubtedly result in additional financing costs for municipalities, and these additional costs will invariably be passed onto local citizens in the form of higher rates for basic services.
LPPC is urging Congress to resoundingly reject proposals to limit or eliminate tax-exempt financing. As publicly owned utilities, we, like other municipal entities, are struggling to provide affordable and reliable services to our customers in a tough economy. Proposals such as the president’s will only increase the already heavy economic burden on working families.