Let’s Be Frank, Municipal Bonds Built This Country

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From the construction of schools and hospitals to water treatment facilities and roads, municipal bonds provide the means for more than 42,000 state and local governments to finance infrastructure projects.

This is a guest post by NLC President and Cleveland Councilmember Matt Zone.

They’re not as exciting as autonomous vehicles, they don’t carry the glamour of a smart city innovation, and while they’re a critical part of infrastructure, they don’t get the same attention that high-speed rail or broadband development might. Municipal bonds aren’t exciting except to the local leaders who need them to build infrastructure — but they should be.

Municipal bonds play a major role in building this country. They are the primary way state and local governments finance the public infrastructure that supports everyday life. And now, as America’s infrastructure is receiving a nearly failing grade from the American Society of Civil Engineers, Washington must preserve the tools that help city leaders build so much of America’s infrastructure and America’s economy along with it.

From the construction of schools and hospitals to water treatment facilities and roads, municipal bonds provide the means for more than 42,000 state and local governments to finance infrastructure projects. The tax-exempt status of municipal bonds saves taxpayers an average of 25 to 30 percent on the interest that comes with building and maintaining these vital pillars of everyday life.

In Cleveland, we’re using municipal bonds to transform our city’s schools and make an investment in the future of Cleveland’s children. Since 2001, a joint effort of the Cleveland Metropolitan School District and the Ohio School Facilities Commission has used bonds to renovate more than 40 schools. And in 2014, voters overwhelmingly approved a $200 million bond issue that will allow the school district to build 20 to 22 more schools, and remodel others. All of this is made possible by bonds which have a minimal tax burden on our citizens. Tax-exempt municipal bonds stretch the level of resources local communities have to invest in themselves.

Municipal bonds have been a key tool for making local investments since the original tax code was enacted in in 1913. The bonds support vital investments in infrastructure, public safety and education, encourage economic growth, and provide local governments with the financial flexibility to meet residents’ needs. Eliminating or capping these bonds could lead to an increase in marginal tax rates or shrink disposable income, potentially harming the broader U.S. economy.

Democrats and Republicans alike agree that American infrastructure needs significant investment now. We agree further that, with a $3.6 trillion infrastructure gap, this investment is critical to our country’s future economic growth. Now, all three levels of government must work together to protect the tax-exempt status of municipal bonds and save our nation’s infrastructure. That’s why I’m in Washington, D.C., this week: to protect my city’s investment in our future and protect the future of American cities across this country.

This blog is part of a series celebrating Infrastructure Week 2017. For more information about NLC’s role in this year’s coalition, visit nlc.org/InfrastructureWeek.

Featured image from Getty Images.

About the author: Matt Zone is the 2017 president of the National League of Cities (NLC). He serves as a city councilmember in Cleveland, Ohio, representing Ward 15, which includes the Detroit-Shoreway neighborhood where he and generations of his family grew up.