Submission for the Record by the Securities Industry and Financial Markets Association

Senate Finance Committee

“Funding and Financing Options to Bolster American Infrastructure”

May 18, 2021

Chairman Wyden, Ranking Member Crapo:

We applaud your leadership of the Senate Finance Committee. Your direction in making infrastructure investment, including municipal bond financing, a priority for the committee is timely and prudent during these challenging times. We thank you for convening this important hearing and our members stand ready to continue their supporting role as the economy recovers.

Introduction

The Securities Industry and Financial Markets Association (“SIFMA”)^[1] and its member firms[2] strongly support 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.

At SIFMA, we believe it is critical to close the infrastructure financing gap by restoring and creating additional vehicles to assist in resolving these needs. We hope that you agree that increased investment in our infrastructure has a critical role to play as our nation will continue to grapple with the economic impact of the COVID-19 pandemic for years to come. Further, the provisions outlined in this testimony will facilitate the more efficient leveraging of our capital markets for the benefit all Americans.

After decades of underinvestment, the U.S. faces an extraordinary infrastructure deficit. In their most recent report card, The American Society of Civil Engineers (ASCE) estimates a $2.59 trillion investment gap over 10 years between what we are currently projected to spend on infrastructure and what must be spent to fully address the deficiencies in our aging infrastructure. They also estimate that by 2039, a continued underinvestment in our nation’s infrastructure at current rates will cost $10 trillion in GDP, more than 3 million in American jobs, and $2.4 trillion in exports over the next 30 years. With existing federal infrastructure programs failing to meet current demand, the U.S. is continuing the troubling trend of underinvestment in this area and risks substantially adding to the financial burdens of state and local governments. This will only lead to further delays of investment in and maintenance of critical public projects, including highways, bridges, hospitals, airports, schools, water, and sewer systems.

Specifically, SIFMA strongly supports providing incentives to rebuild our nation’s infrastructure 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.

[1] 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 http://www.sifma.org.

[2] In 2020, SIFMA members underwrote over 90% of the volume of new issues of municipal securities.