Cities group worried about funding in Obama infrastructure plan

The National League of Cities has expressed concern that President Obama’s renewed call for infrastructure spending could put the current tax exemption for municipal bonds in danger.

Clarence Anthony, the group’s executive director, said in a Wednesday statement that the league supports the White House’s broader goal of repairing the nation’s bridges and roads.

But Anthony wasn’t as positive about the administration’s push for an infrastructure bank, or its idea of modeling a new America Fast Forward bond program after the Build America Bonds that paved the way for billions of dollars of stimulus-related projects.

“A poorly funded bank would be no substitute for municipal bonds,” Anthony said in his statement. “If infrastructure investments are to encourage job creation, there must be a robust municipal bond market.”

The exemption for municipal bonds survived the debate over the “fiscal cliff,” but advocates remain concerned that the tax break will be on the block in future negotiations.

Advocates say the current municipal bond set-up helps cash-strapped localities fund much-needed projects. 

But Democrats are looking to raise more revenue from higher earners in current and future fiscal talks, and some on the right have said the municipal bond exemption helps lead to more government spending. 

Backers of the municipal bond exemption have long been wary of the Build America Bonds, which were a popular part of the stimulus package and are now a template for a new Obama proposal.

Build America Bonds were more of a direct subsidy, and lead to problems that a tax exemption doesn’t present, supporters of the current municipal break say. 

“Build America Bonds was, and remains, no substitute for municipal bonds,” Anthony said. 

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