No immediate fiscal impact.
The Board of Supervisors’ Federal Legislative Platform currently includes several items concerning tax-exempt municipal bonds. Most notably, the Board has taken a position supporting generally the preservation of municipal bonds. Recently, the Tax Cuts and Jobs Act of 2017 (the “Tax Bill”) discontinued authorization for state and local governments to issue “advance refunding” bonds, which previously allowed jurisdictions to refinance current debt at reduced interest rates. This was, in part, due to the belief that such authorization essentially allowed for “double dipping” by state and local entities. This was bolstered by reports from the Joint Committee on Taxation (the “JCT”) that advance refundings were projected to be a tax expenditure to the federal government of $17.3 billion over the ten-year period 2018-2027. In Contra Costa County, advance and current refunding bonds have been used to refund existing bonds resulting in significant cost savings locally. As noted in the chart below, over the past 15 years, the County has realized $23.3 million in net present value (NPV) savings amounting to approximately $2.1 million per year. This would not have been possible, in part, but for advance refunding bonds.
On February 13, 2018, members of the bi-partisan House Municipal Finance Caucus, Co-Chaired by Representatives Hultgren and Ruppersberger introduced H.R. 5003 (Attachment A) with the goal of reinstating advance refunding bonds. Currently, the bill has bipartisan support of ten (10) co-sponsors and has been referral to the House Ways and Means Committee.
Subsequently, on Monday, May 7, 2018, several national organizations representing public-sector entities that issue tax-exempt debt to finance infrastructure projects, including the National Association of Counties (NACo), the National League of Cities and the U.S. Conference of Mayors, joined in a letter (Attachment B) to members of Congress offering support for H.R. 5003. The letter outlines the importance of advance refunding bonds as a tool in the municipal bond market and calls on members of Congress to sign on as co-sponsors to the bill.
On Monday, May 14, 2018, the Legislation Committee approved recommendation of a "Support" position on H.R. 5003. Today's action would adopt a "Support" position, authorize the Chair to send letters to each of the four House members representing Contra Costa County requesting each to cosponsor H.R. 5003 and amend the County's Federal Platform to support the reinstatement of advance refunding bonds.
The Board will not have an official position on H.R. 5003.