Congress will go into recess soon. While they are in their home districts, local government associations recommend that cities and counties let their members know how municipal bonds and Community Development Block Grants have benefited the community.

Congressmen C.A. Dutch Ruppersberger (MD) and Randy Hultgren (IL) met with the “Don’t Mess with our Bonds Coaltion” on July 30 and emphasized how important it was for local governments to organize field trips to show their representatives the projects that have been financed with municipal bonds.  As Congressman Ruppersberger put it, “Do we believe in ourselves enough to invest in the future?”

The Congressmen sent a letter to the House leadership urging  preservation of the tax-exempt status of municipal bonds.  It was signed by 69 Republicans and 69 Democrats of the House of Representatives,

Last week, ICMA and numerous state and local government organizations signed a letter urging the Senate Finance Committee to preserve the federal tax exemption on municipal bond interest. The letter reminds the Senate that state and local governments provide three-quarters of the total investment in infrastructure in the United States, and tax-exempt bonds are the primary financing tools that more than 50,000 government entities and authorities rely on to satisfy these infrastructure needs. Over the past 10 years, the tax exemption has enabled state and local governments to finance more than $1.65 trillion in infrastructure investment. For more information on the importance of the tax-exempt status of municipal bonds, check out the two reports issued this year:

• Protecting Bonds to Save Infrastructure and Jobs

• National Association of Counties: Municipal Bonds Build America.

The President and members of Congress often cite the Simpson-Bowles Commission and/or the Domenici-Rivlin Commission as the basis for capping or eliminating the tax-exempt status of municipal bonds.  However, Alice Rivlin has stated that neither commission addressed the consequences for state and local governments should the tax exemption be curtailed. Current budget proposals include:

• Senate FY2014 Budget Resolution: Suggested the possibility of a cap being placed on tax expenditures, which could include interest earned on municipal bonds.
• President’s FY2014 Budget Proposal: Proposes a 28 percent cap on the value of certain tax benefits, including interest earned on new and outstanding state and local tax-exempt bonds.

Current discussion on the Hill about CDBG funding includes the Senate debate on the FY2014 Transportation, Housing and Urban Development (T-HUD) Appropriations bill, S. 1243. The Senate T-HUD Appropriations bill includes $3.15 billion for the Community Development Block Grant (CDBG) program. For the current fiscal year CDBG is funded at $3.07 billion. The Senate bill’s modest increases would help to strengthen the local community and economic development.

However, Senator Tom Coburn (R-Okla.) has filed an amendment, SA 1758, to reduce funding for CDBG from $3.15 billion to $2.79 billion. 

The House Appropriations Committee funded CDBG at $1.6 billion for FY2014 – a $1.47 billion cut.