Efforts Fail In Panel to Save Munis
WASHINGTON – House Ways and Means Committee Republicans on Wednesday voted 24 to 16 along party lines against amendments by two Democrats to save advance refundings and private activity bonds from being terminated after this year.
Some Republican lawmakers, however, publicly pledged to work with Democrats to try to save these bonds in tax reform legislation going forward.
“This is a program that is supported by a lot of Republicans,” said Rep. Pat Tiberi, R-Ohio, of PABs. “It’s public-private partnerships. It’s housing that’s needed. And I, too, am disappointed that it’s not in this bill.”
Tiberi acknowledged it would be a blow to affordable multifamily housing but added that the low-income housing tax credit is left intact in the tax bill.
However, Rep. Suzan Del Bene, D-Wash., said almost half of its use would be eliminated if tax-exempt PABs are terminated.
Tiberi and other Republicans on the panel who have been supporters of PABs defended the legislation proposed by Chairman Kevin Brady, R-Texas, which would terminate these bonds after 2017.
“At the end of the day the chairman has a really tough job, a balancing act that would be the equivalent of someone on a circus wire,” Tiberi said.
He also said Republicans are trying to eliminate PAB abuses.
“These bonds have been used for golf courses,” Tiberi said. “I don’t think anybody on this dais thinks that is an appropriate use,” also listing office buildings as another example of an abuse.
But PAB supporters took issue with his remarks about abuses.
“The tax code currently explicitly prohibits private activity bonds from being used for golf courses and office buildings with no governmental tenants,” said Tim Fisher, legislative and federal affairs coordinator for the Council of Development Finance Agencies. Those financings were prohibited 31 years ago by the 1986 Tax Reform Act, he said.
Rep. Sander Levin, D-Mich., objected to what he said is an imbalance in the bill, which lowers the corporate tax rate to 20% from 35%.
“How do you end abuse by eliminating the provision?” he asked. “How does that work? How do you do that?”
Another Democrat, Rep. Bill Pascrell from New Jersey, said he has worked with two Republicans on the committee – Reps. Tom Reed of New York and Patrick Meehan of Pennsylvania – on cosponsoring legislation to allow the use of PABs for water infrastructure.
“What happened? Have you abandoned ship?” Pascrell asked. “With constraints on local budgets, private activity bonds are the best method of pumping billions of dollars of private capital into public infrastructure projects while shifting the economic risk away from municipalities and towards the private sector.”
Pascrell said PABs are used for airports, schools, assisted living facilities, colleges and not-for-profit healthcare facilities.
DelBene, who proposed the amendment to maintain PABs and increase the availability of the low-income housing tax credit by 50%, said there is a housing affordability crisis in the Puget Sound region she represents.
“We have people living on our streets,” she said, citing a 64.5% jump in the median home price in the last five years.
According to the Washington State Housing Finance Commission, 2,088 affordable apartments that would house over 4,000 people in six counties across my state that are currently planned for the next two years would not be built without private activity bonds,” she said. Those prospective renters earn less than 60% of the median income in the region.
“Private activity bonds have helped build more than 76,000 apartments across the state of Washington and provide over 46,000 home loans for first time home buyers,” DelBene said.
The advance refunding amendment was proposed by Rep. Terri Sewell, D-Ala., who earlier in the week described herself as “a former or a recovering bond lawyer.”
“I can attest to the fact that through tax exempt bonds we have built hospitals and schools and roads and bridges,” Sewell said, noting they have been used for investments in “historically low income communities.”
Sewell said Children’s Hospital in Birmingham is an example of the benefits of an advance refunding that was done in 2015 at a lower interest rate after originally financing the project “in 2009 when we were going through a really tough economic time.” ◽