Fiscal Note
This resolution urges Congress to maintain the tax exemption for interest received by investors in the City's debt. The City issues approximately $100 million to $150 million of tax-exempt municipal debt annually. Repealing the federal tax exemption on municipal debt will increase interest costs to the City to finance critical capital investments, such as for street reconstruction, stormwater management, sewer infrastructure, facilities, vehicles and equipment. Higher interest costs could result in higher taxes and fees for residents. Studies have estimated that the cost of repealing the tax exemption for municipal bond interest could increase taxes and fees for every household nationally by over $6,500.
Title
Declaring support for the preservation of the federal tax exemption for municipal bond interest.
Body
WHEREAS, the tax-exempt municipal bond market is a widely used source of capital for states, local governments, tribes, territories, and non-profit borrowers that finances a tremendous share of the nation's public infrastructure; and
WHEREAS, state and local governments finance about three-quarters of the public infrastructure in the United States and use tax-exempt bonds to do so, with the federal government providing only about one-quarter of the investment; and
WHEREAS, federal tax exemption for municipal bonds, dating back to the 1800s and incorporated into the modern tax code in 1913, has been crucial for state and local governments to affordably finance critical infrastructure projects; and
WHEREAS, tax-exempt bonds offer borrowers to achieve a multiplier effect of 2.11, meaning that for every dollar, borrowers achieve $2.11 in borrowing cost savings thereby demonstrating the efficiency and effectiveness of this exemption in facilitating infrastructure investment; and
WHEREAS, tax-exempt bonds provide for essential infrastructure projects, such as roads, bridges, utilities, broadband, water and sewer systems, and hospitals, which are vital to the health and well-being of our community such that without such bonds, the cost of borrowing would be $823.92 billion more over 10 years, thereby causing an estimated increase in taxes and fees of over $6,500 per household nationally that would place an undue burden on taxpayers; and
WHEREAS, The House Ways and Means Committee is considering eliminating municipal bond tax exemption as part of budget reconciliation and tax reform efforts; and
WHEREAS, Repealing the exemption in reconciliation legislation currently before Congress would also jeopardize Private Activity Bonds (PABs), including Mortgage Revenue Bonds (MRBs), which are essential for financing affordable housing projects that rely on the Low-Income Housing Tax Credits (LIHTCs). Losing the exemption would make it significantly harder to build or preserve housing for low- and moderate-income families-deepening the nation’s housing crisis. Repeal of PABs would also impact public infrastructure projects that qualify as private activity bonds.
NOW, THEREFORE, BE IT RESOLVED, that the Mayor and Common Council of the City of Madison find and determine that tax-exempt municipal bonds are an essential tool for cities across Wisconsin and the United States of America, and provide an opportunity for economic development, infrastructure improvement, and increase safety; and
NOW, THEREFORE, BE IT FURTHER RESOLVED that the Mayor and Common Council of the City of Madison hereby encourage the Wisconsin Congressional Delegation to assist the City of Madison, and all local governments in Wisconsin, by preserving the tax-exempt status of municipal bonds and supporting and ensuring the protection of the federal tax exemption of municipal bonds.
NOW, THEREFORE, BE IT FINALLY RESOLVED, that copies of this Resolution shall be furnished to all members of the Wisconsin Congressional Delegation.