With the possible elimination of tax exemptions for state and local debt in the tax reform bill being pushed through Congress, states that rely on debt refinancing are scrambling to borrow before the end of the year. Any investor or stakeholder in industry tied to a government tax break or subsidy should consider this a wake up call. What the government can give with the stroke of a pen, it can also take away with the stroke of a pen. Ethanol mandates, electric vehicle subsidies, renewable energy programs, R&D tax deductions, and on and on. If your business, or a business you invest in relies heavily on a government handout or preference, consider that a risk in your calculations. Heather Gillers explains at the Wall Street Journal how states and municipalities are scrambling to borrow before the new rules kick in:
The expected change in policy is already prompting cities and states to fast-track their advance refunding offerings before the end of the year. One underway is from the state of Wisconsin, which last week circulated preliminary advanced refunding documents for $375 million of transportation revenue bonds.
“We just want to get ahead of the possible large amount of supply that could hit the muni market in December,” said the state’s capital finance director David Erdman, who had originally expected to refinance the debt in 2018 or 2019.
New York’s Metropolitan Transportation Authority sold $2 billion in transportation revenue bonds Monday and Tuesday partly to get ahead of any potential change in tax policy said spokesman Aaron Donovan.
Read more here.
E.J. Smith - Your Survival Guy
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