Opinion: U.S. House Tax Reform Bill Eliminates Private Activity Bonds

Toby Rittner.
Council of Development Finance Agencies (CDFA).

The House Ways & Means Committee recently introduced the Tax Cuts and Jobs Act in the United States House of Representatives. The bill would eliminate all Private Activity Bonds, a move that would prove devastating to development finance efforts nationally.

Private Activity Bonds are a crucial financing tool that spurs local economic development, private sector investment and job creation. Private Activity Bonds have been in existence since 1914, and in their 103-year history they’ve assisted in financing our nation’s most important public facilities and infrastructure, including affordable and low-income housing, hospitals, schools, highways, bridges, railways, water and sewage facilities, energy facilities and countless others. State and local governments have established thousands of issuing authorities to directly work on these crucial projects that expand taxes, production, development, revenue, markets, and employment

By eliminating Private Activity Bonds, the ability of communities around the country to finance these projects will also be eliminated. Industry experts estimate that interest rates for borrowers would increase by 1.5 – 2.5 percent. if Private Activity Bonds are eliminated. Conservatively, such a rise in interest rates would cause the cost of borrowing for state and local governments to increase by as much as 25-35 percent.

To be clear, the elimination of Private Activity Bonds is bad policy and will cripple economic, infrastructure, and community development. On behalf of thousands of communities and the entire economic development finance industry, we call on members of Congress to reject any tax reform provisions that curtail or eliminate Private Activity Bonds.

In just one day, over 200 organizations nationwide have signed on to reject the elimination of Private Activity Bonds as this support letter demonstrates. Private Activity Bonds are a staple of economic development efforts nationally, and our cities and states would be dramatically and disastrously impacted by their loss. We stand ready and engaged to preserve Private Activity Bonds.

National Call: The Council of Development Finance Agencies (CDFA) will be hosting a national call on Tuesday, November 7 at 1 p.m. Eastern Time to discuss the tax reform bill, as well as a strategy for preserving private activity bonds. Anyone interested in learning more about this important issue or sharing their perspective is encouraged to participate.  To accommodate everyone, we’ll be hosting the call on GoToWebinar.  Click HERE to register for the call.

CDFA Letter: CDFA is asking for your support in our efforts to remove this provision from the bill. CDFA will be sending letters to House and Senate leaders highlighting the importance of private activity bonds, and we ask for your support by signing on to our efforts. Click HERE to sign-on to the letter.

Private Activity Bond (PAB) Project Examples: CDFA is gathering examples of projects funded by PABs and asking they be sent via e-mail to the attention of Tim Fisher, CDFA Legislative & Federal Affairs Coordinator. The following information should be included:

• Project Name
• Location (city or county)
• Issuer Name
• Bond Amount
• Underwriter
• Bond Counsel
• Jobs Created/Supported
• Short description about why PABs were used and what they financed.