Chair’s 3 Minutes: Congress must maintain tax-exempt status of municipal bonds

This is one of those times when those of us who work in the county building are made keenly aware of the impact of decisions made 4,700 miles away in the U.S. Capitol.

The new fiscal year started on July 1, with a County Council-approved budget that provides for fiscally sound investments in Maui County’s people and places over the next 12 months. But we could be forced off course because the county faces a threat to local jobs and infrastructural improvements.

The tax-exempt status of municipal bonds is under attack in Congress.

Tax-exempt municipal bonds are vital in local community building. Muni bonds, as they’re often known, fund projects such as the development and maintenance of roads and bridges, water and sewer systems and public buildings.

In the county’s fiscal year 2014 budget, most of the capital improvements throughout all community plan areas are funded by muni bonds. Some specific projects include improvements for the Wailuku Gymnasium, Kahului Community Center and Mitchell Pauole Community Center on Molokai, as well as the construction of Maui Bus stops and shelters.

The National Association of Counties, in cooperation with other local government organizations, has published a report at on muni bonds’ significance.

Council Member Riki Hokama, NACo’s 2nd vice president, has introduced a resolution urging President Obama and Congress to preserve muni bonds’ tax-exempt status.

Council Member Hokama’s resolution notes that “state and local governments have historically saved up to 2 percentage points on their borrowing through the use of tax-exempt municipal bonds.” The NACo report estimates that investment in local infrastructure would have cost governments in Hawaii an additional $495 billion of interest expense in the last decade had muni bonds not been tax-exempt.

A few weeks ago at the Hawaii State Association of Counties annual conference on Kauai, I and other elected officials were briefed by NACo President Chris Rodgers on the latest congressional initiatives on muni bonds. NACo is leading an effort against the elimination or limiting of muni bonds’ tax-exempt status, and counties need to join the cause by communicating with their congressional delegation.

President Rodgers emphasized tax-exempt muni bonds are the country’s most important source of financing, as detailed in the online report. In Maui County, we have high scores with bond-rating agencies, and we want to maintain our hard-earned reputation of being fiscally sound.

Keeping muni bonds tax-exempt would help ensure decision-making and project selection largely remain at the local level, where the community can best determine what needs are the greatest and how resources can most prudently be allocated. This ensures ongoing financial stability for the county government.

Last Monday, a council committee recommended adoption of the resolution in support of retaining muni bonds’ tax-exempt status. If the full council accepts the recommendation at its July 25 meeting, the resolution will be sent to the White House, U.S. Sens. Mazie Hirono and Brian Schatz and Reps. Colleen Hanabusa and Tulsi Gabbard. Participate in the debate on Twitter and Facebook by following the #munibonds hashtag.

A hui hou.

* Gladys C. Baisa is chairwoman of the Maui County Council and holds the Pukalani-Kula-Ulupalakua area residency seat. “Chair’s 3 Minutes” is a weekly column to explain the latest news on county legislative matters.