June 9, 2023 | Cole Arreola-Karr
The National Special Districts Coalition (NSDC) is calling on Congress to pass pending legislation to restore local governments’ ability to leverage advance refunding of bonds.
The Coalition signaled general support for legislation to restore the policy in a letter to the House Ways and Means Committee and Senate Finance Committee. Specifically, NSDC calls for the advancement of H.R. 1837 (Kustoff), the Investing in Our Communities Act, and S. 1453 (Wicker), the Lifting Our Communities through Advance Liquidity for Infrastructure Act (LOCAL Infrastructure Act), which has been referred to their respective House and Senate committees. Local governments lost the ability to leverage the policy in 2017 when it was repealed with the Tax Cuts and Jobs Act.
Advance refunding was a once-common municipal finance practice allowing local governments to issue a new bond to pay down costs of a previously issue bond, usually after an interest rates decrease, to mitigate higher costs of debt service and interest rates over the life of the bond. This is similar to how homeowners may refinance a mortgage.
“[…] advance refundings permit special districts to utilize the savings to reinvest in critical infrastructure to enhance the quality of lives of the communities they serve,” the letter reads. “Further, by reintroducing advance refundings, special districts would be provided with the flexibility to further their stewardship of local tax dollars or revenues by returning the debt service savings to the taxpayers or rate payers of their community or leverage the savings or restructuring capabilities of advance refundings to train, develop, maintain, and provide an essential workforce necessary to operate facilities […] to the millions of Americans that rely on the essential services provided by their special district for their daily lives, well-being, and safety.”
For more information on NSDC’s position on advance refundings or to learn how to get involved with NSDC’s advocacy on district finance issues, contact Cole Arreola-Karr, NSDC Federal Advocacy Director.