Rebuilding America Starts with Infrastructure
One clear winner has emerged from the 2022 elections. Once again, the voters showed bipartisan support for infrastructure investment that will improve their quality of life and drive economic development and more importantly, they showed that they trust states and local governments to deliver those projects.
Citizens nationwide voted on nearly $66 billion in bond referendums for projects centered on protecting the environment, improving communities’ ability to withstand severe weather, and repairing and upgrading roads, schools, public safety, and parks. The message was unmistakable: More than 90% of the financing was approved, often with well over 50% of support.
Combined with the more than $500 billion of additional federal grants from the Infrastructure Investment and Jobs Act (IIJA), the election results are a green light for transformational improvements across our country.
America’s unique approach to financing infrastructure will be key to turning that vision into reality. According to the Census Department, we rely on states and local governments to be the principal infrastructure builders in the United States - responsible for 90% of all public construction spending annually.
Over the years, Congress has recognized that local communities know best how to identify and meet their local priorities, and a bipartisan electorate has and continues to support this approach.
They couldn’t do it without tax-exempt municipal bonds, which provide flexible, low-cost capital financing to tens of thousands of borrowers, dwarfing the more than 6,000 publicly traded companies on the NYSE and Nasdaq and representing large and small communities across America.
The municipal bond market is one of the broadest and deepest capital markets in the world, and it is a market financed by the public for the public to meet public sector needs. U.S. investors hold more than 70% of the $4.1 trillion in outstanding municipal bonds, either directly or through mutual funds.
Federal support for infrastructure works best when it magnifies those strengths, rather than seeking to replace them. The tax-exemption for municipal bond interest does that by attracting investor attention to bonds for governmental issuers, which represent more than 80% of the market. By maintaining the tax-exemption, Congress will reduce or eliminate the need for more expensive and potentially riskier Federal guarantees for infrastructure bonds.
Congress should also consider adopting tax-law changes included in the proposed LIFT Act, which would make municipal bond investing more economically attractive for community banks and give issuers greater flexibility to generate savings by refinancing existing debt.
In many communities, voters endorsed capital plans that promised specific projects at specific prices, and it’s clear that local leaders are focused on delivering on these programs. The strong bipartisan support for infrastructure improvements – from blue states like New York to red states like Texas – points to a spirit of optimism and confidence that projects should be undertaken, and success can be achieved.
And the municipal market is ready. A marketplace dating back over 200 years that delivered landmark projects like the Erie Canal and the Golden Gate Bridge stands poised to take on a new leadership role supporting landmark projects – from new tunnels under the Hudson River to the rollout of broadband technology to underserved communities.
Successfully ramping up U.S. infrastructure investment will require vibrant partnerships. The states and local governments that build and pay for crucial projects can accomplish even more with support from the federal government and the municipal market. Together, we can create the engine for an exciting new era of growth, jobs, and prosperity.
Sean W. McCarthy is the CEO and co-founder of Build America Mutual (BAM), which is an enterprise partner of the National League of Cities that has guaranteed more than $115 billion of municipal bonds for essential infrastructure nationwide.
