OCEAN CITY – The city is looking into passing a resolution opposing efforts made by Congress to limit or eliminate the federal tax exemption on interest earned from municipal bonds.
At the conclusion of a discussion regarding building a new headquarters for the Ocean City Beach Patrol that involves taking $165,000 from fund balance to initiate a building design, to be reimbursed through a bond issue later this year, Councilman Brent Ashley offered a suggestion to support the preservation of tax-exempt financing.
“Mayor, as I’m sure you are aware, Congress is considering ways to reduce the federal deficit,” Ashley said. “One option Congress is evaluating would reduce or eliminate the exemption on municipal bond interest for investors that purchase municipal bonds.”
Ashley explained the exemption, which has been in effect since the first federal income tax was enacted in 1913, has generated trillions of dollars in investments in public infrastructure and has saved taxpayers hundreds of billions in interest cost. State and local governments save on average two percentage points on their borrowing cost to finance investments in public infrastructure projects, he said.
“The US Conference of Mayors, the National League of Cities, as well as over 30 other municipal government agencies and numerous government bodies oppose any changes to the municipal bond tax exemption statues,” Ashley said. “Many have sent resolutions to Congress expressing their opposition.”
Ashley took the time to prepare a resolution, which is a composite of resolutions that other municipal governments entities have sent to Congress.
“I would ask you to review the information and if you agree, to issue a resolution at next Monday’s regular council meeting so that we can forward it to our Congressional representatives,” Ashley said on Tuesday afternoon.
The outcome of reducing or eliminating the tax exemption on municipal bond interest would be higher borrowing costs for state and local governments, less in infrastructure and fewer jobs, according to Ashley.
Mayor Rick Meehan said he would ask the city solicitor to take a look at the resolution, saying, “Very forward thinking, thank you.”