LOCAL Infrastructure Act Reinstates Advance Refunding Bonds to Lower Costs for Community Projects

This bill, called the LOCAL Infrastructure Act, essentially hits the rewind button on a specific financial rule change made back in 2017. It brings back something called 'advance refunding bonds' for state and local governments. In plain English, this lets your city, county, or state refinance their existing debt – like loans they took out for big projects – before the original due date, usually to lock in a lower interest rate.

Think Refinancing, But for City Hall

So, what are advance refunding bonds? Imagine your town issued bonds years ago to build a new high school, maybe at a 5% interest rate. If interest rates have dropped significantly since then, advance refunding allows the town to issue new bonds at, say, 3.5%, and use that money to set aside funds that will pay off the old 5% bonds when they eventually come due (often placing the funds in escrow). It's similar to refinancing your mortgage to get a better rate and lower your payments. The key difference here is the 'advance' part – they can do this more than 90 days before the original bonds can be paid off, which gives them more flexibility to catch favorable market conditions.

Potential Savings for Roads, Schools, and Maybe Your Wallet

The main point here is potential cost savings for local governments. Lower interest payments on debt free up money. That extra cash could theoretically go towards fixing potholes, upgrading water systems, hiring more teachers, investing in parks, or potentially even easing pressure on local property taxes. By allowing governments to be more proactive in managing their debt when rates are low, this tool can make taxpayer dollars stretch further on essential infrastructure and services. The actual impact, of course, depends on how and when governments choose to use this option.

Rolling Back a 2017 Rule Change

This isn't a brand-new idea; it's the reinstatement of a practice that was common until the Tax Cuts and Jobs Act (Public Law 115-97) eliminated the tax-exempt status for these specific types of bonds in 2017. Section 2 of the LOCAL Infrastructure Act directly repeals that 2017 change, effectively putting the old rules for advance refunding back in place as if the 2017 amendment never happened. It's a technical change to the tax code, but one aimed at restoring a financial management tool for state and local governments.