As the debate over tax reform heated up last week in Congress, the GCA wrote to and contacted all the members of the New York Congressional Delegation about the concerns the industry had with elements of H.R. 1, the Tax Cuts and Jobs Act. A number of provisions could impact the ability of our state and local governments to finance and construct road, bridge, transit and other infrastructure projects going forward. While the bill maintains the tax-exempt status of municipal bonds, which are fundamental to state and local government capital programs, there are four related issues that give us great concern:
- Repealing the Use of Private Activity Bonds (PABs)– Such an action seems counterintuitive to the type of private investment often identified as the cornerstone of the administration’s anticipated “Infrastructure Initiative” that would leverage $800 billion of private investments in road, bridge, water and airport improvements. Eliminating the private sector’s ability to use PABs for such projects would likely discourage the use of thoughtful public-private partnerships. It would likely impact heavy civil construction and, in turn, the region’s ability to support a growing economy by addressing its aging and inadequate infrastructure.
- Advance Refunding Bonds– Also proposed for elimination are advance refunding bonds, which issuers in the U.S. municipal bond market use to take advantage of lower interest rates before outstanding bonds can be called. These bonds are used by both the NYSDOT and the MTA, among other City and State governmental bonding entities, saving them millions of dollars that ultimately help fund their capital programs.
- Eliminating or Limiting the Deductibility of State and Local Taxes– While others may comment on how the elimination or limitation of the deductibility of State and Local taxes will impact individual New York tax payers, our issue is more global, and one not discussed in the current tax bill debate. Such an action will dramatically hurt the ability of New York State and its hundreds of local governments to raise money to either build infrastructure projects directly, match federal dollars, or leverage private dollars.
- Highway Trust Fund (HTF) Solvency– while tax treatments such as the three aforementioned items indirectly impact the ability to fund key infrastructure projects, direct federal funding for such projects is also at risk. Multi-billion dollar shortfalls in the HTF have been patched on a piecemeal basis through annual appropriations and budget gimmicks and the prospects for the HTF beyond 2020 are dire. Tax reform has long been heralded as a proper forum to solve this lingering problem. Ignoring this one-time opportunity to provide a predictable and reliable revenue stream for the HTF as part of H.R. 1 will only further hamper needed infrastructure investments.
The GCA will continue to press these issues with our elected officials as markup in the House Ways & Means Committee advances this week and as the matter is further discussed in the Senate.