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.
Principle: RESTORE/ENHANCE ELEMENTS OF TAX-
EXEMPT FINANCING (TEF)
Retain Key Public Finance Tool
As Congress considers follow-up tax legislation to the “Tax Cuts and Jobs Act of 2017,” it is imperative that tax-exempt financing (i.e., the exclusion of interest on state and municipal bonds from taxable income) continues to be preserved. Any cleanup tax legislation should also restore the ability to use private activity bonds and advanced refunding. Advanced refunding is an important tool for municipal entities to lower borrowing costs associated with infrastructure development, which results in lower electric rates in the communities that we serve. Additional financing tools (i.e., direct pay bonds not subject to sequestration) and comparability on energy tax incentives with tax-paying project developers will also be pursued.
Seek to protect tax-exempt financing, and restore ability to engage in advanced refunding
Principle: UPDATING PRIVATE USE RESTRICTIONS
Eliminate Undue Restrictions on Use of Tax-exempt Financing for Public Power Infrastructure Investment
Restrictions in section 141(b) of the Internal Revenue Code concerning “private use” are outdated. Congress should update the tax code addressing private use restrictions and remove these unnecessarily restrictive limitations on the use of tax-exempt financing for public power facility investment. As Congress takes up tax issues in tax, energy or infrastructure legislation, LPPC will seek to reduce counterproductive limitations on public power financing.
Look for opportunities to update private use restrictions in the tax code as clean up legislation is considered to deal with other technical fixes
Principle: ELIGIBILITY FOR INFRASTRUCTURE SUPPORT
Publicly Owned Grid Infrastructure Should Be Covered By Any Federal Infrastructure Investment Program
As Congress and the Administration consider Federal policies to drive reinvestment in the nation’s infrastructure, it is critical to include publicly owned electricity grid facilities in the infrastructure program. Like publicly owned transportation, water, and wastewater systems, the nation’s electricity infrastructure is critical to the efficient operation of the economy and the society. Any Federal funding, financing, or incentive elements of the infrastructure program should be available to support investments by public power utilities.
Educate Congress and the Administration on the importance of publicly owned electricity grid infrastructure, and advocate for eligibility in any Federal program.
Principle: INTEGRATED RESOURCE PLANNING
Public Power Utilities Undertake Careful Generation and Transmission Resource Planning To Ensure Reliability, Affordability and Environmental Stewardship
States and individual utilities should have flexibility in resource planning to achieve portfolios that meet planning objectives on a best-fit basis. Federal policy may, for instance, establish environmental performance requirements, but decisions about what resources to deploy should not be made at the Federal level, and should instead remain with the public power utility.
Educate policy makers and regulators on the importance of respecting regional differences and choices on power supply resources. This is an issue of local control and governance.
Principle: REGULATORY STREAMLINING
Permitting for Energy Infrastructure Should Be Streamlined
Necessary energy infrastructure development too often runs into bureaucratic obstacles. Federal and state regulators and land agencies should provide for efficient review of applications related to energy infrastructure projects, consistent with the Administration’s priority on energy infrastructure development.
Educate and engage with policy makers and regulators regarding the complexity and time associated with project review, siting and licensing.
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. In any future tax reform debates Congress should continue the current federal tax treatment of municipal bonds. It is the primary financing tool of critical infrastructure investments and directly affects the prices 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.
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.
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.