Voters Know: Bonds are Key to Transformative Infrastructure


  • Build America Mutual
December 19, 2022 - (2 min read)

The Federal Infrastructure Investment and Jobs Act has captured headlines as a generational investment in America’s economic backbone. But this year’s election results show that it’s only the start: Voters are also looking to cities, states, and other local governments to deliver projects that can truly transform their communities and quality of life.

This November’s ballots included nearly $66 billion in bond referendums for projects centered on protecting the environment, improving communities’ resilience in the face of severe weather, and repairing and upgrading roads, schools, public safety, and parks. More than 90% of the financing was approved, often with well over 50% of support.

Municipal bond investors are lining up to help city leaders turn that vision into reality. The market has already financed more than $290 billion of “new-money” investment in 2022 (for borrowers ranging from the largest cities and states to special purpose library and fire districts) and has ample capacity for more: U.S. retail investors hold more than 70% of the $4.1 trillion in outstanding municipal bonds, either directly or through mutual funds, and their appetite has been growing in recent months.

It’s important to all NLC members that Congress understand that Federal support for infrastructure works best when it builds on that successful foundation. I made that point in a recent column aimed at D.C. policymakers, and BAM will continue to advocate for low-cost, flexible financing tools for our municipal issuer members.

Maintaining the ta-exemption for municipal bond interest is the linchpin of those efforts: By attracting investor attention to bonds for essential public purposes, the tax-exemption eliminates the need for more expensive and potentially riskier Federal guarantees for infrastructure bonds. Beyond that, Congress should also consider adopting tax-law changes that would make municipal bond investing more economically attractive for community banks and give cities greater flexibility to generate savings by refinancing existing debt.

Successfully ramping up U.S. infrastructure investment will require vibrant partnerships – with the states and local governments that build and pay for crucial projects receiving 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.

About the Author:

Seán W. McCarthy is the CEO and co-founder of Build America Mutual (BAM)