5.4. ERMUSR 03-20-2007 - Laserfiche WebLink

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~ w ~~~ -/1- . . ^ ~ American Public Power Association ^ FEBRUARY 2007 °~ Tax-Exempt., Financing and Public Power ,. As units of state and local government, public power utilities are authorized to issue tax- exempt bonds to construct and improve the infrastructure necessary to pro~lde electricity and other essential ser~~ces, such as advanced communication services. Electricity is the oxygen of the nation's economy; crucial to its continued health. Continued access to, and flexibility in the use of, tax-exempt bonds is essential to enable public power utilities to continue to provide these ser~rices, and to do so in acost-effective manner. Tax-exempt municipal bonds are the basic tool used by stales, cities, counties, towns, school districts and other governmental entities to fund the capital improvements necessarv to provide needed facilities and ser~~ices. The ability to sell debt with interest exempt from federal income taxes has been a significant benefit to state and local government borrowers, including public power utilities, in providing essential public facilities and ser~iccs. The nation's public power utilities are units. of state and local government created to pro~dde essential ser~aces subject to local control. "They have financed their electric utility infrastructure- generation, transmission and distribution facilities-just as local governments have financed other municipal activities: through the issuance of tax-exempt bonds. Public power utilities have over ?~80 billion in outstanding tax-exempt bonds. These bonds must be paid back over time (depending on the specific parameters of the bond issuance) and the issuers must remain creditworthy All three of the major credit rating agencies -Standard and Poor's, :~Ioody's, and ritch -say that the outlook for the public power sector is stable and its credit rating is strong. For example, in~anuary 2007, Fitch said that its average public power system rating is "A" for wholesale systems and "A+ for retail systems. r Traditionally, our federalist system of government has respected the right of state and local governments to pursue activities that are in the public interest and the interest of the citizens they serve. Congress has promoted and protected the right of government to issue municipal bonds for "government-ovmed and operated projects and acti~~ities." .Public power systems are just that -governmentally owned and operated systems similar to other local infrastructure projects such as water systems, prisons, libraries, schools, hospitals, and transportation lines. AI'PA urges Congress to continue to enable public power utilities to finance electricity infrastructure and other essential ser~~ces, such as advanced communications ser~~ices, with tax-exempt bonds. In addition, APPA believes that Congress should improve the use of this financing tool by: 1 Providing adequate flexibility in the ability of public power utilities to partner with private entities in the financing and use of certain facilities. Congress should repeal the special wwW.APPAnet.Org continued 17