Finance & Infrastructure

LPPC members seek out and utilize financial tools that allow them to provide electricity, fuel and supplies that keep energy prices at stable, customer-friendly levels. 

 

BUILDING, OPERATING AND INVESTING IN INFRASTRUCTURE from LPPC Power on Vimeo.

 

Principle: TAX EXEMPT FINANCING (TEF)

Retain Key Public Finance Tool

Tax-exempt financing must be preserved because it is a vital and effective tool that enables public power to invest in the critical, public purpose electric infrastructure necessary to deliver reliable and affordable electricity to our customers.

 

Principle: COMPARABLE TAX INCENTIVES

LPPC supports the use of direct pay bonds, tradable tax credits or equivalent mechanisms to support access to federal tax incentives for all technologies currently covered or covered in the future. Comparable incentives provide tax-exempt issuers the ability to monetize incentives for new infrastructure on an equivalent basis with private developers and investor-owned utilities ensuring that the benefits of federal tax incentives accrue to the consumers in the form of lower electric prices.

TAX EXEMPT FINANCING

LPPC members, like states, municipalities and other local government entities, use municipal bonds to invest in new infrastructure in the most affordable manner for the communities we serve. The interest earned on municipal bonds is currently exempt from federal income tax. As Congress debates tax reform, it should consider carefully the effect that changing the federal tax treatment of municipal bonds would have on critical infrastructure investments and the price that public power customers pay for electricity, especially small business and low- and fixed-income households.

Every year, public power utilities average $15 billion in new infrastructure investment. This includes investments in power generation, transmission, distribution, reliability, demand control, efficiency and emissions control—which are all needed to deliver safe, affordable and reliable electricity. Over the next five years, LPPC members will issue $14.25 billion in tax-exempt municipal bonds to build and improve critical infrastructure to ensure reliability of the grid.

The U.S. municipal bond market is established and sound. With a robust and comprehensive federal legislative and regulatory system in place, investors and taxpayers are well-protected. LPPC members are significant participants in the municipal bond market; members currently hold $68.47 billion in tax-exempt bonds.

Calls to tax municipal bonds to pay for federal income tax rate cuts, deficit reduction or new federal spending are on the rise. Limiting or eliminating the income tax exemption for interest from municipal bonds would increase borrowing costs for public power and other state and local governments and, as a result, would reduce investments in vital infrastructure across the country and increase the cost of electricity for public power customers. Ultimately, a disproportionate share of this burden will be shouldered by those who can least afford it.

Maintaining the current exclusion for municipal bond interest is essential for infrastructure investment, economic growth, and job creation. They serve the best interests of communities.

DIRECT PAY BONDS

As part of the American Recovery and Reinvestment Act of 2009, Congress provided state and local governments, including public power, with a new kind of financing tool. Build America Bonds (BABs) address the disruption in the municipal bond market that resulted from the financial crisis.

BABs are taxable bonds on which the federal government reimbursed the issuer for a portion of the interest paid. They have helped state and local governments finance public infrastructure projects at lower borrowing costs. BABs expired at the end of 2010, and interest subsidy payments on existing bonds have been impacted by across-the-board budget cuts that went into effect on March 1, 2013.

Direct payment bonds can be a useful complement to municipal bonds and LPPC supports the reinstatement of the BABs or other direct payment bond programs to support infrastructure investment and job creation. However, LPPC opposes suggestions that tax-exempt bonds be eliminated and replaced with direct payment bonds.

In 2013, the Obama administration proposed an expansion of the direct payment bond market. LPPC looks forward to working with policy makers to ensure that financial tools and regulations are best suited to serve our customers and keep prices low.

SUPPORTING DOCUMENTS

LETTERS

LPPC Joint Letter to Murkowski and Walden Supporting Legislation That Modernizes Hydropower Licensing Process (July 25, 2017)

LPPC Joint Comments to Senate Finance Committee On Reforming IRC (July 17, 2017)

LPPC Joint Letter to Rep. Ryan and Rep. Pelosi, Correcting IRC Nuclear Production Tax Credit (June 19, 2017)

LPPC Letter To SEC Secretary Brent Fields On Proposed Amendments To Municipal Securities Disclosure (May 15, 2017)

LPPC Letter to Ranking Member Levin Urging House Ways and Means Committee to Retain Tax-Exempt Financing for State and Local Governments (April 8, 2016)

LPPC Letter to Chairman Brady Urging House Ways and Means Committee to Retain Tax-Exempt Financing for State and Local Governments (April 8, 2016)

APPA LPPC Commodity Exchange Act Reauthorization Letter to Senate Agricultural Committee (May 1, 2013)

LPPC Joint Letter to President Obama and Speaker Boehner Regarding the Importance of the Income Tax-exempt Financing to Public Infrastructure and Services (December 20, 2012)

LPPC Joint Letter on EE Tax Extenders to Speaker Ryan, Democratic Leader Pelosi, Majority Leader McConnell and Democratic Leader Reid (November 20, 2012)

LPPC Joint letter to Chairman Gensler Regarding Relief from Special Entity de minimis Threshold Swaps Related to Government-Owned Utilities (November 19, 2012)

Letter to Chairman Gensler Regarding Special Entity Sub-threshold (August 1, 2012)

COMMENTS

LPPC Joint Comments To IRS On Proposed Regulations For Political Subdivision (August 7, 2017)

STATEMENTS

APPA LPPC TAPS Joint Statement for Ways & Means Working Groups (April 15, 2013)

PETITIONS

Petition for Rulemaking to Amend CFTC Regulation 1.3 (July 12, 2012)

VIDEO

MBFA: Seminar On Tax-Exempt Municipal Bonds w/ Congressman Ruppersberger and Congressman Hultgren (June 7, 2017)