HomeMy WebLinkAboutResolution 4435 in support of the Preservation of Tax-Exempt Financing COMMISSION RESOLUTION NO. 4435
A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF BOZEMAN,
MONTANA, 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
Page I of 3
Resolution.No. 4435, Support of the Preservation of Tax-Exempt Financing
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 municipal 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;
Page 2 of 3
Resolution No, 4435, Support of the Preservation of Tax-Exempt Financing
NOW, THEREFORE, BE IT RESOLVED that the City of Bozeman 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.
Effective Date.
PASSED AND APPROVED by the City Commission of the City of Bozeman, Montana,
at a regular session thereof held on the 15""' day of April, 2013.
4
�EAN A.-BECKER
Mayor
APPROVED AS TO FORM:
G SULLIV
C Attorney
Page 3 of 3