Utility groups defend municipal bonds

Every year, on average, public power utilities make $15 billion in new investments financed with municipal bonds. This includes investments in power generation, distribution, reliability, etc.

Mar 19th, 2013

As the House Ways and Means Committee considers tax reform, the American Public Power Association (APPA), the Large Public Power Council and the Transmission Access Policy Study Group urged the body to think carefully about the effect changing the federal tax treatment of municipal bonds would have on critical infrastructure investments and the price that public power customers pay for electricity.

Every year, on average, public power utilities make $15 billion in new investments financed with municipal bonds. This includes investments in power generation, distribution, reliability, demand control, efficiency, and emissions control: all needed to deliver safe, affordable and reliable electricity.

A variety of proposals to alter the federal tax treatment of municipal bonds are being discussed in Washington. All would increase borrowing costs for public power providers large and small, according to a recent report prepared for APPA.

Critics raise a variety of inaccurate, overstated or antiquated arguments for taxing municipal bonds. All ignore the market reality that such a tax would simply raise federal revenue on the backs of state and local residents, particularly on the low-income households and small businesses who could least afford it, and reduce local infrastructure investments.

There is a longstanding and comprehensive federal legislative and regulatory system in place to regulate the tax-exempt bond market to ensure that municipal bonds are used for legitimate governmental purposes. Maintaining the tax-exempt status of municipal bonds is essential to help our national economy grow, create jobs and best serve the interests of every community.

Based in Washington, D.C., APPA is the national service organization for the nation's more than 2,000 community- and state-owned not-for-profit electric utilities serving 47 million customers.

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