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Tax-Exempt Bonds

Talking Points and Other Considerations

NACUBO suggests that business officers consider this background information and the talking points below in preparation for external communications about the value of tax-exempt bond financing to colleges and universities.

CONSIDERATIONS

  • Illustrate local impact. Communications are more effective when you can demonstrate how these issues impact your community. Data and anecdotes about how bond-financed projects benefit your students, faculty, staff, and stakeholders illustrates how federal policy changes made on Capitol Hill can affect lives in your states and local communities.
  • Recognize the responsibility lawmakers (and their staff) have for driving federal tax policy.
  • Help them understand how those policies help you fulfill your commitment to supporting students and your institutional community.
  • Familiarize them with the role that tax-exempt bond financing plays in both creating and improving the infrastructure that supports students, faculty, and the university mission.
  • Explain that savings from the role of tax-exempt bond financing enables institutions to use endowment payouts and other revenue to provide scholarships, fund other important college and university programs, and ultimately helps keep tuition rates down.
  • Emphasize the importance of campus improvements in engaging and building relationships with your institution's surrounding community.

PROPOSED POLICIES 

  • On the campaign trail, President Donald Trump expressed a desire to limit a portion of the tax exemption of municipal bonds. His later tax proposals did not mention the municipal tax exemption, which has led to mixed signals about what is truly at risk in forthcoming tax reform measures.
  • A 2014 draft tax reform bill introduced by then- Ways and Means Chairman Dave Camp (R-MI) would have repealed the tax-exemption for any new 501(c)3 bonds.
  • Altering the tax treatment of municipal bonds could result in significant revenue for the federal government. As reform efforts go forward on issues of tax, health care, infrastructure and immigration, NACUBO will monitor proposed policies closely to identify any that would include the elimination of tax-exempt bonds or otherwise alter access to capital.

TALKING POINTS

  • Our institution has utilized tax-exempt bond financing to complete [insert specific projects]. 
    • Discuss specific buildings by name, particularly those that might be familiar to alumni, community members, or lawmakers. Well-known venues are good examples to offer, especially if your audience has a known connection to the building.
    • Discuss how the project meets campus needs-created  classrooms and, research facilities, improved and expanded on existing computer labs, eased student overcrowding in dorms, etc.)
  • Had the institution financed [insert specific project] with taxable bonds, the institution would have paid an interest rate of approximately XXX%. Instead, using tax-exempt bond financing, the institution is paying an interest rate of XXX%. Over the [XXX-year] duration of the bond, this represents a savings of XXX$. At our institution, this savings is equivalent to [XXX  scholarships/funded fellowships/faculty funding/research efforts].                                                                                                    
  • When the cost of borrowing goes up, as it would if tax-exempt bond financing were eliminated, pressure is put on other institutional funding streams that may have otherwise been used to meet other campus needs such as scholarships, student services, faculty salaries, community partnerships, or other priorities. 

EXAMPLE

The Physical Sciences Complex at the University of Maryland, College Park is just one of hundreds of examples of a higher education facility supported by municipal bonds. The complex is one of the nation's finest university research facilities in the physical sciences and supports major collaborative efforts with nearby federal agencies, including the National Institute of Standards and Technology, the NASA Goddard Space Flight Center, and the National Institutes of Health.

This 160,000- square-foot, state-of-the-art research facility, completed in 2013, houses laboratories and research facilities. The State of Maryland committed to fund-through tax-exempt bonds-the initial part of the complex and the uUniversity also raised capital from private sources to complete the facility. The total project cost was estimated to be more than $126 million.

The modern research facilities at the Physical Sciences Complex enable the university to attract high- caliber researchers and promote growth in sponsored research. Some research results may be developed quickly into innovative products and solutions while other projects might be decades from public or commercial use. Hand-in-hand with the discovery of new knowledge, university researchers and their activities also educate students who will become the next generation's scientists, engineers, teachers, and leaders in government and industry.

Contact

Liz Clark
Director, Federal Affairs
202.861.2553
E-mail