September 2013 - Parks & Recreation - 26

ADVOCACY

are willing to use the bonds to pay for a
wide array of projects, including conservation and recreation projects. For
instance, in 2012, voters approved numerous bond referendums throughout
the country that will provide nearly
$800 million for conservation projects
(https://tpl.quickbase.com/db/bbqn
a2qct?a=dbpage&pageID=10). This
doesn't include referendums or recreation projects.
If the interest tax exemption is
completely eliminated, investors will
have less of an incentive to buy municipal bonds, thereby significantly
decreasing demand for these securities. If investors do invest, they will
seek a greater return on their investment through increased interest as
compensation for the taxes they will
have to pay. If the tax exclusion for
municipal-bond interest had been
eliminated in the past decade, it
would have cost local governments
$495 billion and stalled thousands
of essential infrastructure projects,
including park and recreation projects. Capping the interest exemption
on existing and future bonds would
yield the same result, since investors
will be exposed to risk that did not
exist when they initially invested in
the municipal bonds. Either way, the
result is fewer projects and increased
state and local taxes to pay for the
increased borrowing costs associated
with the must-have projects funded
with municipal bonds.
Congressional Action
There has not been an overhaul of the
tax code since 1986, and while Congress may have only talked about reform for a number of years, efforts to
rewrite the code are already underway,
and votes on legislation are already
planned. Prior to leaving for the August recess, House Ways and Means
24

Parks & Recreation

Committee Chairman Dave Camp (RMI) announced plans to mark up legislation in October. Chairman Camp's
timing for the mark-up is no coincidence, as Congress will need to take
action to increase our nation's debt
limit, with action likely in November.
If Congress fails to pass legislation raising the debt limit, then our government
shuts down. Because this is " mustpass " legislation, both parties regularly
attempt to use it as a vehicle to advance
other agenda items. Due to the political divide that currently exists within
Congress, tax-reform legislation will
be extremely difficult to pass. For this
reason, Chairman Camp has not ruled
out possibly trying to link tax reform to
debt-limit legislation.
In early July, 138 bipartisan members of the House of Representatives
signed a letter urging Speaker John
Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA) to oppose
the president's budget proposal to
cap the interest exemption. The number of co-signers on this letter equates
to about a third of total House members, strong support for maintaining
the exemption in its current form.
However, it is not majority support,
and the elimination or capping of the
exemption is still an option that is being seriously considered.
This is especially true in the Senate. In June, Senate Finance Committee Chair Max Baucus (D-MT)
and Ranking Member Orrin Hatch
(R-UT) declared that they will start
the drafting process with a blank slate
and asked senators to formally submit
proposals for what expenditures and
exemptions should be included in a
reformed tax code. So, senators will
have to convince Chairman Baucus
and Ranking Member Hatch to add
the municipal-bond exclusion (or any
other exclusion or deduction) back

| S E P T E M B E R 2 0 1 3 | W W W. N R PA . O R G

into the tax code. What's alarming
about this approach is that in February the Senate passed a nonbinding
resolution suggesting a cap for the municipal-bond interest tax exemptions.
There is ongoing debate about
whether a tax overhaul package is possible before the end of 2014, which is
the end of the 113th Congress. Chairman Baucus has announced that he
will not run for re-election, so many
see tax reform as the legacy he wants
to leave. Others cite the cold shoulder
Senate Majority Leader Harry Reid
(D-NV) gave the blank-slate proposal
as an indication that leadership is not
behind an overhaul. On the House
side, Chairman Camp is considering a
run for the Senate in 2014, which could
mean that he doesn't expect a major reform package to make its way through
his committee and Congress. Considering that Chairman Camp is one of
the biggest tax-reform advocates on
Capitol Hill, however, it seems unlikely
that he wouldn't keep trying to at least
move the ball forward. In any case, municipal bonds are an important means
of financing conservation and park and
recreation projects, so we cannot afford
to wait and see what happens when we
already know elimination or a cap are
among the possibilities. NRPA sent a
letter to Chairman Baucus and Ranking Member Hatch in July, urging them
to include the municipal-bond interest
tax exemption in its current form. Your
members of Congress in the House
and Senate now need to hear from you
on this issue. Please tell them to continue to invest in public infrastructure
through the municipal-bond interest
tax exemption in its current form.
Stacey Pine is NRPA's Vice President of
Government Affairs (spine@nrpa.org). Leslie
Mozingo of The Ferguson Group
contributed to this article.
September 2013 - Parks & Recreation

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