January 31, 2025

RE: Protecting Tax-Exempt Municipal Bonds

Dear Senators and Representatives,

On behalf of the Public Finance Network (PFN), we want to welcome you to the 119th Congress. For more than a century, states, local governments, and nonprofits have financed infrastructure and community improvement projects using tax-exempt municipal bonds. This infrastructure makes possible nearly every aspect of daily life and is critical in building and maintaining a strong economy for every citizen and business in the country.

For the following reasons we believe in protecting and bolstering the tax-exempt municipal bond market:

• Tax-exempt municipal bonds are an incredibly efficient financing tool. Market data from 2023 shows tax-exempt municipal bonds reduced state and local borrowing costs by 210 basis points; e.g. from 6.1% to 4%. Elimination of the tax-exemption would correspondingly raise borrowing costs over $823 billion, a cost that would be passed on to American residents and businesses and amounts to an over $6,500 tax and rate increase for every American household and business.¹
• State and local governments bear 90% of the annual value of public-sector construction put in place – most of which is financed with tax-exempt municipal bonds, resulting in a 10-year volume of issuance in excess of $4 trillion.² While these include some of the nation’s largest infrastructure projects, the majority fund routine, but critical investments made by small towns and rural communities, with 61,914 projects costing less than $10 million financed by tax-exempt bonds in the last decade alone. These investments make our communities livable and commerce possible.³
• Municipal bonds are a dependable fixed-income investment for a specific investor base – those 65 and older. In exchange for the interest being exempt from federal tax, investors agree to receive a lower rate of return – a 210 basis point savings to state and local governments as noted above. But investors also benefit from an extremely well understood, well regulated, and dependable fixed-income financial investment. With a default rate of less than 0.1%, nearly 60 percent of tax-exempt bond interest earned by individuals goes to those age 65 and older.⁴

Finally, we would like to reiterate that all the undersigned organizations are here to serve as resources for you and your team.

We look forward to working with you.

• Government Finance Officers Association
• Airports Council International – North America
• American Hospital Association
• American Planning Association
• American Public Gas Association
• American Public Power Association
• American Public Transportation Association
• American Public Works Association
• American Securities Association
• American Society of Civil Engineers, Eleanor Lamb
• American Water Works Association, Nate Norris
• Association of Metropolitan Water Agencies, Dan Hartnett
• Association of Public and Land Grant Universities, Craig Lindwarm
• Association of School Business Officials International
• Bond Dealers of America, Brett Bolton
• Council of Development Finance Agencies
• Education Finance Council, Gail daMota
• International City/County Management Association
• Large Public Power Council
• National Alliance for Public Charter Schools
• National Association of Bond Lawyers
• National Association of Clean Water Agencies
• National Association of College and University Business Officers
• National Association of Counties
• National Assoc. of Health and Educational Facilities Finance Authorities
• National Association of Municipal Advisors
• National Association of Regional Councils
• National Association of State Auditors, Comptrollers and Treasurers
• National Association of State Treasurers
• National Association of Towns and Townships
• National Community Development Association
• National Conference of State Legislatures
• National Council of State Housing Agencies
• National League of Cities
• National Special Districts Association
• Securities Industry and Financial Markets Association
• The Council of State Governments
• The United States Conference of Mayors

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Footnotes

1. Protecting Bonds to Build Infrastructure and Create Jobs ↩︎
2. U.S. Census Bureau, Construction Spending, December 2, 2024 ↩︎
3. LSEG (January 17th, 2025). “Municipal v Corporate Bond Issue Size (2014-2023).” (LSEG Workspace) ↩︎
4. Understanding Financing Options Used for Public Infrastructure: A Primer ↩︎