SIFMA Submits Testimony on Funding America’s Infrastructure

Washington, D.C., May 18, 2021 – SIFMA today submitted testimony for the record of the Senate Finance Committee hearing “Funding and Financing Options to Bolster American Infrastructure.”

In its testimony, SIFMA expresses its strong support for “increased investment in this country’s infrastructure, which will help spur job creation and economic growth. To that end, we believe it is critical to support the great work states and localities do in building and maintaining our infrastructure. A partnership among federal, state, and local governments and private investors will ease the burden on the cash-strapped federal government by leveraging our capital markets to create expanded financing options. We believe that this partnership is especially important during this difficult fiscal environment as states and local governments seek to lower their costs and also finance much-needed infrastructure such as schools, roads, and hospitals.”

To address the critical need to close the infrastructure financing gap and rebuild our nation’s infrastructure, SIFMA outlines five key incentives, including: 1) preserving the tax exemption for interest earned by investors on state and local bonds; 2) reinstating the tax exemption on the advance refunding of municipal bonds; 3) expanding private activity bonds (PABs); 4) reinstating a direct pay bond program; and 5) expanding the small issuer exception so that states and municipalities have a variety of additional tools to finance their local projects. It is important to note that all of these priorities were included in some form in H.R. 2, the Moving Forward Act, which SIFMA publicly supports.

State and local governments bear responsibility for financing and building a significant portion of the nation’s public infrastructure, the bulk of which are financed using tax-exempt bonds, wherein the interest earned by investors is generally exempt from federal income tax. As a result, the state or local government pays a significantly lower interest rate to investors than other borrowers in the capital markets.  Preserving this tax exemption is crucial.

Advance refundings provided states and localities with an important tool for refinancing outstanding debt at lower rates and have generated many billions of dollars of interest savings over decades, freeing up borrowing capacity for new investments in infrastructure and other important public projects, and, in turn, boosting local economies with the creation of new jobs and more affordable public services.  SIFMA supports the reinstatement of this important tool.

State and local governments are permitted under the tax code to issue bonds on behalf of private borrowers for a limited list of public purposes, including infrastructure. However, these bonds come with significant restrictions such as volume limitations and, for some purposes, the application of the individual Alternative Minimum Tax, which raises the cost of financing.  SIFMA believes state and local governments should be able to issue tax-exempt bonds for infrastructure projects with private participation in the same manner that they issue bonds for purely public projects.  SIFMA also supports increasing the volume cap for private activity bonds, particularly by increasing the volume cap for PABs, pursuing efforts to create a National Reallocation Pool so that unused volume cap can be redistributed among states, and expanding the permissible uses for PABs to activities such as rural broadband, amongst others.

In 2009 and 2010, the federal government authorized a direct payment “Build America Bond” program whereby states and localities could choose to issue bonds with taxable interest instead of tax-exempt interest and receive a partial reimbursement for their interest expense in the form of a refundable tax credit, which generated new investment in public infrastructure in all 50 states. During the time in 2009 and 2010 that direct pay bonds were authorized, state and local governments financed more than $150 billion of infrastructure investments using this tool. SIFMA supports the authorization of a new direct payment bond program by Congress on a permanent basis as a supplement to, not a replacement for, tax-exempt bonds so long as the program ensures reimbursements to borrowers will not be affected by budget sequesters.

Expanding the small issuer exception for tax-exempt bonds would support infrastructure investment in small and rural communities that may have difficulty accessing the capital markets.  Under current law, small issuers can issue up to $10 million or less in bonds per calendar year to be sold directly to local banks at a cost savings for local taxpayers. This $10 million limit was set in 1986 under the Tax Reform Act of 1986. This limit was briefly raised in 2009 as part of the American Recovery and Reinvestment Act of 2009.  SIFMA supports increasing the annual limit for the small issuer exception.


SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate for legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit