Sample op-ed in support of tax-exempt financing during Public Power Week 2013
[Name of utility] will be celebrating Public Power Week during the week of October 6-12, along with
the 67 municipal electric systems in the Missouri Public Utility Alliance. Public Power Week is an annual
national celebration to recognize the contribution that not-for-profit, community-owned electric utilities
make to the economy of their town and their customers’ well-being by providing clean, reliable, safe,
and affordable power.
[Name of utility] and other public power utilities throughout the country issue bonds to finance the
construction projects necessary to meet these goals: substations, transmission and distribution lines,
smart grid equipment, [optional insert example of project funded by bond issuance]. These projects
make sure that the lights turn on when you flip the switch.
We are concerned, however, about the added cost to you of making such investments if Congress and
the White House decide to tax these bonds to pay for federal spending, deficit reduction, or a cut to
federal income tax rates. Such a tax would hurt all current bondholders and our community when
investors demand a higher interest rate on newly issued bonds to compensate for the new tax. [Name of
utility] is not eligible for tax incentives available to private entities. So, when faced with higher
borrowing costs, [Name of utility] has two options – either raise electric rates on our customers or forgo
system improvements that could imperil reliability.. We don’t think that you, our owners, would accept
either option.
ADDITIONAL MATERIAL FOR LONGER OP-ED
Some argue that the exclusion for municipal bonds unfairly benefits wealthy investors. In fact, half of all
bond interest is paid to households with incomes less than $250,000 – and three-quarters of bond
interest is paid to households with income of less than $1 million. Also, while the tax exclusion provides
an incentive to invest in municipal bonds – and keeps borrowing costs low for [Name of utility] – a
default rate approaching zero and predictable, steady payments make them an important investment
tool for fixed-income households. Nearly three-fifths of bond interest is paid to investors age 65 or
older.
Others argue that to reduce the federal deficit or to pay for lower federal income tax rates, everyone
needs to make sacrifices. This ignores the huge cuts to federal grants to state and local governments
already made as a result of the 2011 budget agreement – this year alone the debate in Congress is
whether to cut funding for federal energy and water programs by $6 billion or “just” $2 billion. Also, the
current exclusion for municipal bonds is part of a balance of power between the federal government
and state and local governments – interest on state and local debt is exempt from federal tax and
interest on federal debt is exempt from state and local tax. So far no one talking about taxing municipal
bonds as part of “shared sacrifice” is talking about allowing state and local governments to tax the
interest on federal bonds.
[END ADDITIONAL MATERIALS]
As a result, we believe the best course for [Name of utility’s] customers, and our community is to leave
the current exclusion, first created over a hundred years ago, for municipal bond interest in place, and
we urge you to take the time to contact the White House, your Senators and your representative in
Congress to share your concerns about how this change in taxes could raise your electric rate.