May 10 2023
WASHINGTON – U.S. Senator John Boozman (R-AR) joined Senators Roger Wicker (R-MS) and Debbie Stabenow (D-MI) in introducing the Lifting Our Communities through Advance Liquidity for Infrastructure (LOCAL Infrastructure) Act, legislation to amend the federal tax code to restore state and local governments’ ability to use advance refunding to manage bond debt and reduce borrowing costs for public projects.
“Communities that want to improve on or build needed infrastructure to ensure access to vital resources and enhance quality of life understand the need to make every investment count. Our bill helps them stretch their dollars further so they can make these upgrades and provide desired services that help create economic opportunity and increase longevity,” Boozman said.
“State and local governments often have to issue bonds to pay for important local infrastructure, but sky-high inflation has pushed borrowing costs through the roof,” Wicker said. “The LOCAL Infrastructure Act would provide relief by allowing municipalities to take advantage of lower interest rates as they become available, resulting in significant savings for these communities.”
“Local communities in Michigan and across the country are now making some of the most significant investments in roads, bridges, water infrastructure, and high speed internet because of our work at the federal level to make a once-in a-generation investment in America’s infrastructure. This bill lowers costs and gives local governments more flexibility through our federal tax code to invest in hospitals, roads, schools, and other critical infrastructure," Stabenow said.
Advance refunding is an accounting practice that allows state and local governments to refinance outstanding municipal bonds to more favorable borrowing rates or conditions before the end of the initial bond term. This process is very similar to how a homeowner may refinance the mortgage on their property to lock in a lower interest rate. The LOCAL Infrastructure Act would restore municipalities’ ability to advance refund bonds on a on a tax-exempt basis.
The federal tax-exempt debt could be refinanced only once, but local communities would be able to take advantage of the lower interest rates to generate additional savings on existing bonds. Local governments could reinvest these savings to fund infrastructure, education, health care or other capital improvement projects.
Advance refunding has saved state and local governments billions of dollars over decades, but has been unavailable to state and local governments since 2017.In addition Boozman, Wicker and Stabenow, Senators Mike Braun (R-IN), Katie Britt (R-AL), John Barrasso (R-WY), Cynthia Lummis (R-WY), Jeanne Shaheen (D-NH), Dianne Feinstein (D-CA), Chris Van Hollen (D-MD), Kyrsten Sinema (I-AZ), Amy Klobuchar (D-MN), Richard Blumenthal (D-CT), Maggie Hassan (D-NH), Tammy Baldwin (D-WI), Bob Menendez (D-NJ) and Michael Bennet (D-CO) also cosponsored the legislation.