The Washington Weekly – Munis Considered in Stimulus Debate

As the Biden Administration works to close its second full week in office, both of which have included a flurry of executive actions and little legislative progress, a deal on additional stimulus seems imminent, but questions remain on its size and scope.

President Biden touted bipartisanship in his 2020 presidential run, and he still appears to want to remain on that path.  However, House and Senate Democratic Leadership have become restless and are charting a course to use the partisan tactic of budget reconciliation, ensuring the massive spending package can pass on a simple majority vote which passed the Senate early this morning after 15 hours of debate and a tie-breaking vote by VP Harris.

Earlier this week a group of GOP Senators met with President Biden and VP Harris to discuss their initial offering and present a trimmed back $600 million dollar plan.  Of note, the GOP does not contain any aid for state and local governments, while the Biden plan offers more than $350 billion in unencumbered aid.

Yesterday, Senator Roger Wicker (R-MS) introduced amendments to the stimulus package that would restore tax-exempt advance refundings and create a new direct-pay bond program exempt from sequestration.  Senate Republicans offered well over 700 amendments and only a portion was considered. While these provisions were not amongst those voted on, it is a step in the right direction for continued consideration of this Congress.

More on this below.

Muni Watch:

Bond Amendments Added Late to Stimulus Vote-o-Rama-Infrastructure Next?

After initial talks of combining infrastructure and stimulus into one robust package to kick off the 117th Congress, Congressional Democrats opted to address stimulus first, tabling infrastructure talks for now.  As noted above, two muni amendments were added to the stimulus budget reconciliation  “vote-o-rama”.  

The amendments would restore tax-exempt advance refundings and create a new direct-pay bond program exempt from sequestration known as American Infrastructure Bonds.  Wicker introduced the same provisions last Congress.

While this is a step in the right direction, little support on the Hill has been shown for the inclusion of these provisions in stimulus, with a focus on inclusion in a future infrastructure package.  The BDA continues to press for inclusion into any spending package.

Of paramount importance to the timing of the next robust spending bill will be the decision of Congress and the Administration on the usage of the budget reconciliation process or not. The budget reconciliation can be used once a budget year and has to follow precise parliamentarian guidelines.  Some do believe however that it can be used twice this year- one bill for FY 2021 and another for FY 2022.

While infrastructure remains a bipartisan issue, much like within the stimulus debate, there is much disagreement in the overall price-tag. If Congressional and Administration Leaders are unable to strike a bipartisan deal on stimulus and use reconciliation, infrastructure will likely be pushed into late 2021.

The BDA continues to work with our partners on Capitol Hill and in the Public Finance Network (PFN) to ensure that municipal bond provisions are well placed and considered as Congress works on additional 2021 measures such as infrastructure and public works.

This includes:

  • Restore the ability of state and local governments to save taxpayer dollars and generate additional funds for infrastructure and other key initiatives by restoring tax-exempt Advanced Refundings (ARs);
  • Expand the use of tax-exempt Private Activity Bonds (PABs)
  • Raise the Bank Qualified Debt limit from $10 million to $30 million and tie to inflation
  • Create a direct pay bond similar to the former Build America Bond (BAB) program exempt from sequestration;
  • Expand the utilization of green bonds for state and local governments to invest in resilient infrastructure.

BDA Announces Newly Formed MBFA Council

Last week, the BDA relaunched the Municipal Bonds for America Council, a municipal bond buy-side / sell-side advocacy group to continue and strengthen municipal lobbying here in DC.

MBFA is committed to advancing proposals that improve the municipal securities market while protecting the interests of taxpayers, investors, and state and local governments.  By combining the expertise of the MBFA’s municipal market leadership working together and in concert with issuers and State and local groups further strengthens the municipal markets efforts to advance the municipal bond in the context of infrastructure.

MBFA is led by an Advisory Board of recognized municipal market leadership, past and present, with deep knowledge and experience in the industry and in Washington, DC and the MBFA is in the process of creating a Steering Committee to further direct advocacy direction.

More details to follow soon.

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