HomeMy WebLinkAboutResolution 037-2013 Resolution No. 37-13
A Resolution in Support of the Preservation of
Tax-Exempt Financing
Whereas, tax-exempt municipal bonds are the primary means by which state and local
governments finance three quarters of the critical infrastructure of our nation, including roads,
bridges, hospitals, schools, and utility systems; and
Whereas, through the tax exemption,the federal government continues to provide critical
support for the federal, state and local partnership that develops and maintains essential
infrastructure, which it cannot practically replicate by other means; and
Whereas,the municipal tax exemption has enabled state and local governments to finance
more than $1.65 trillion in infrastructure investment over the last decade; and
Whereas, this tax exemption is part of a more than century-long system of reciprocal immunity
under which owners of federal bonds are, in turn, not required to pay state and local income
tax on the interest they receive from federal bonds; and
Whereas, municipalities benefit from this tax exemption through substantial savings on the
interest cost of borrowed money; and
Whereas,tax exempt bonds benefit state and local governments who need the support of
investors to finance critical infrastructure,taxpayers across the country who depend on this
infrastructure for reliable transportation systems, schools, public health facilities, energy, clean
water and affordable housing, the federal government, who gets quite a bargain on their
partnership with state and local government to provide the nation's infrastructure through the
exemption; and investors who buy bonds for many reasons, including the safe nature of these
financial products; and
Whereas, municipal bonds are the second safest investment, aside from U.S. Treasuries, with
state and local governments having nearly a zero default rate; and
Whereas, 72.4 percent of the total outstanding muni debt is held by individual investors, either
directly or through mutual funds and money market funds (Source - 2010 Thomson Reuters);
and
Whereas, Congress and the President have proposed legislation to reduce or repeal the tax
exemption on municipal bonds; and
Whereas,these proposals to reduce or repeal the tax exemption would have severely
detrimental impacts on national infrastructure development and the municipal market, raising
costs for state and local borrowers and creating uncertainty for investors; and
Whereas, if the proposal to cap the exemption on municipal bonds at 28 percent had been in
place over the last 10 years it would have cost state and local governments an additional $173
billion in interest costs; and
Whereas, total repeal of the exemption over the last decade would have cost state and local
governments over$495 billion in additional interest costs; and
Whereas, the municipal tax exemption has a long history of success, having been maintained
through two world wars and the Great Depression, as well as the recent Great Recession, and it
continues to finance the majority of our nation's infrastructure needs for state and local
governments of all sizes when no other source exists to do so.
Now,Therefore, Be It Resolved that the City of Brookings opposes any efforts by Congress and
the White House to reduce or repeal the federal tax exemption on interest earned from
municipal bonds; and
Be It Further Resolved that we oppose any action that would reduce or repeal the exemption
on tax-exempt bond interest, and affirm that there should be no legislative action to apply any
changes retroactively to current outstanding bonds; and
Be It Further Resolved that a copy of this resolution shall be sent to our Congressional
Representatives and key members of the Administration.
Passed and approved this 23rd day of April, 2013.
CITY OF BROOKINGS
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Tim Reed, Mayor
141flarrrnes, City Clerk