Houston City Controller Ronald Green will participate in a press briefing at the National Press Club in Washington D.C., Weds., Feb. 27, to discuss the Federal across-the-board budget cuts scheduled to go in effect Friday, March 1. The briefing is co-sponsored by the National League of Cities, the National Association of Counties, U.S. Conference of mayors and the Government Finance Officers Association. The briefing will have special emphasis on the disastrous effects cities would experience if municipal bonds are taxed in the future. The briefing will begin at 11:30 a.m. EST.
“Tax exempt municipal bonds have been a mainstay for cities for a century,” says Controller Green. “Three quarters of all public infrastructure built by states and cities is financed by these bonds, so in a very real way the bonds contribute to job growth as well as sales and property tax revenue while keeping homeowners safe from escalating taxes. Eliminating the exemption on these bonds would be devastating to many cities that are already in a financial crisis.”
In Washington DC, there has been discussion about eliminating the tax exemption on “muni” bonds or limiting the exemption to fewer investors as one tool to ease the growing Federal deficit.
“Talk of eliminating the tax exemption on municipal bonds is more about politics-on both sides-than economics,” says Green. “No one can argue about how cities, counties and states have utilized municipal bonds to great effect to finance their capital projects such as roads and highways, water projects, schools, libraries, fire stations and, while doing this, saving from 25 to 30 percent on interest costs with tax exempt ‘muni’ bonds. The yield from taxable bonds-if that was the only option for municipalities-would pale in comparison to the cost it would be to citizens in terms of property or sales taxes to fund infrastructure projects. Or, the alternative, simply to postpone needed projects.”
Additionally, Green points out, limiting any tax exemption could cause the market to become quite fragile, even bringing losses and withdrawals that would be felt for years to come.
“We’ve invited Controller Green to be at the press briefing because he has considerable experience in municipal finance,” says Lars Etzkorn, Federal Relations Program Director for NLC. “He understands both the nuances of the bond market and the many budget challenges U.S. cities are facing.” Joining Green will be city and county officials from several states.