Congresswoman Terri Sewell (D-AL) first introduced in the 117th the Local Infrastructure Financing Tools (LIFT) Act that includes – among other bond provisions – an increase to the small issuer exception to $30M and permanently pegs future increases to inflation.  We’re happy to report she has reintroduced the bill in the 118th with the same title,  now under H.R. 8396. This just continues to build on previous momentum when a similar provision was included in the House-passed versions of the Build Back Better Act in 2021,  the Moving Forward Act in 2020, and the Municipal Bond Market Support Act of 2019.  

By making the proposed changes more tax-exempt bonds can be deemed as “bank qualified,” allowing borrowers that issue less than $30 million per calendar year to forego traditional underwriting processes. These changes would expand access to resources for many public-serving infrastructure projects and services including schools, hospitals, roads, and more.  

- Since bank-qualified bonds were created in 1986, the program’s $10 million cap has not kept pace with inflation or the cost of labor, land, and materials associated with most public infrastructure projects. 

- Increasing the cap to $30 million modernizes the program and allows smaller governments to issue more bank-qualified bonds, resulting in significant cost savings.  

- Allowing small issuers to sell these bonds directly to banks reduces debt-issuance costs for governments by an estimated 25-40 basis points. This is because smaller, less-frequent issuers do not have to pay higher yields to investors due to investor unfamiliarity with the issuer’s jurisdiction and transaction costs associated with traditional bond sales. 

- Urge your Representatives to support and cosponsor H.R.8396, and to call on House leadership to advance this vital initiative. In conjunction, urge your Senators to introduce companion legislation. 

Click here for GFOA’s Bank Qualified Debt Overview page. 

In the 118th, we continue to see strong bipartisan support to restore tax-exempt advance refunding. Both chambers have their respective bills and GFOA is working to grow the number of cosponsors for each. In the Senate, S. 1453 (LOCAL Infrastructure Act) is led by Sens. Debbie Stabenow (D-MI) and Roger Wicker (R-MS). In the House, H.R. 1837 (Investing in Our Communities Act) is led by Reps. David Kustoff (R-TN-8) and Dutch Ruppersberger (D-MD-2). A provision to restore tax-exempt advance refunding is also included in the previously mentioned LIFT Act from Congresswoman Sewell. 

Like the progress of the small issuer exception, the reinstatement of tax-exempt advance refunding had bipartisan bills in the 117th and was included in the House-passed versions of the Build Back Better Act in 2021, as well as the Moving Forward Act in 2020. This success is attributable to the substantial support and progress the issue witnessed in the last three Sessions of Congress. 

- The 2017 Tax Cuts and Jobs Act (TCJA) repealed this critical cost-savings tool for state and local governments and has limited the options to refinance debt, which could free up capital and be put to immediate public works purposes.  

- Having the option to refinance debt is a valuable financial management tool, especially since interest rates will certainly fluctuate over the lifetime of outstanding governmental bonds (which in many cases is 30 years). Without tax-exempt advance refunding bonds, state and local governments will pay more in interest, a cost ultimately passed on to state and local taxpayers. 

- Urge your Senators/Representatives to cosponsor these important bills and to call on the leadership of their respective chamber to include this in any must-pass legislation. 

The FLC has produced multiple research and advocacy materials to inform Congress of the impact the loss of advance refunding has had on public finance officers and the communities they serve.  

Click here for GFOA’s Advance Refunding Overview page. 

Special District Grant Accessibility Act 

Together with a broader coalition, GFOA is tracking H.R. 7525, the Special District Grant Accessibility Act. More than 35,000 special districts altogether provide a range of critical infrastructure and essential community services across all 50 states and several U.S. Territories, but federal law lacks a single, consistent definition of what a special district is. 

The inconsistency in how special districts are defined can impact their eligibility for federally funded local government programs. In short, this creates more hardship for special districts to access local government resources. Further, inconsistent references to “special district” creates hurdles for the Census Bureau to accurately count special districts as a geographic unit of government. This leads to an inadequate federal view of how vital special districts are as part of the local government landscape in America. 

Finally – without federal recognition of population figures, many special districts face hardship to certify population figures and obtain federally-recognized household data, which is useful to include in grant and finance applications. 

To fix the above problems, the bill primarily does two things. First, it establishes a formal definition of “special district.” Second, it requires the Office of Management and Budget (OMB) to issue guidance clarifying how a federal agency recognizes a special district as a unit of local government to be eligible for federal financial assistance. Under the proposal, OMB must issue guidance within 180 days of enactment, and federal agencies will have one year from the date guidance is issued to implement. 

The Special District Grant Accessibility Act was passed by the House in a strong bipartisan vote, and recently the bill was voted out of the Senate Homeland Security and Governmental Affairs Committee with bipartisan support. The measure awaits a vote by the full Senate.  We will keep monitoring its progress and report out as the timing on floor action becomes certain.  

FEMA Loan Interest Payment Relief Act 

Following a disaster, line workers, locally-elected officials and emergency managers are first on the scene and play a key role in coordinating recovery and rebuilding efforts. As the frequency, severity, and cost of disasters continues to increase, we have learned that even the most well-resourced communities may not have the funds needed to adequately respond to a disaster. Therefore, impacted communities are often forced to take out large loans or lines of credit to cover the immediate costs of recovery to return their communities and residents’ lives back to normal as quickly as possible. 

Communities can expect an eventual reimbursement offered through the Federal Emergency Management Agency (FEMA)’s Public Assistance (PA) program, however this process can often be arduous and time consuming, with final payments sometimes not made until years after the fact. Thus, borrowing to cover these recovery costs until reimbursement is made could result in years of accumulating interest, all of which must be paid by local residents. Even a low rate of interest can place a huge financial burden on distressed communities because the loan amounts are often hundreds of millions of dollars.  

H.R. 2672 and S. 1180, the FEMA Loan Interest Payment Relief Act would mitigate this additional burden by requiring FEMA to reduce the cost of loans taken out while the PA process is completed. Specifically, FEMA would reimburse local governments and cooperative electric utilities for interest expenses of loans used to fund activities for which they receive assistance under the PA program. This bill is currently scheduled for markup by the House Transportation and Infrastructure Committee in mid-September. This issue is important to many GFOA members, and we encourage you to check the committee's website to see if your Representative is on the committee. If so, feel free to contact them to support this measure before the markup.