Public gas systems are owned by the local government, which means they cannot turn to shareholders when they need capital. Instead, state and local governments often rely on tax-exempt municipal bonds to finance public infrastructure projects.
Unfortunately, the Tax Cuts and Jobs Act of 2017 drove up the cost of borrowing for municipal bond issuers by eliminating the tax exemption for advance refunding bonds. Advance refunding bonds provided an important cost savings for states and localities by allowing them to effectively refinance their debt by issuing new bonds to pay off existing ones when interest rates are low. APGA supports legislation to reinstate the tax exemption for advance refunding.
APGA also supports legislation to create a new class of taxable, direct-pay bonds (similar to the now defunct Build America Bond program) that could provide states and localities with additional access to capital. APGA believes Congress should give their state and local government partners the municipal finance tools they need to be effective partners in the modernization of American infrastructure.