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The Association of Metropolitan Water Agencies (AMWA) urges Congress to place no limitations on the ability of water systems to use tax-exempt bonds to finance water infrastructure projects. This authority to finance essential governmental services on a tax-exempt basis is vital to the ability of metropolitan water agencies to continue to provide high quality, safe and reliable supplies of drinking water at a price that is affordable to ratepayers.

When considering future tax policy changes,Congress must keep in mind that any new tax revenue collected by limiting or eliminating tax-exempt interest earned on municipal bonds would be offset by increased interest costs that would be borne by local water system ratepayers. Limiting or eliminating the exemption would therefore represent a de-facto tax hike on local communities, while encumbering public water agencies’ efforts to raise needed capital to address water supply needs.


  1. Tax-exempt bonds are typically the most significant source of capital financing to meet the needs of water suppliers.
  2. Taxing municipal bond interest would dramatically increase nationwide water and wastewater infrastructure financing costs – effectively imposing a new tax on municipalities and utility ratepayers.
  3. Restriction or elimination of tax-exempt interest would seriously erode the ability of AMWA member agencies to meet existing and anticipated needs, including any new drinking water quality standards.
  4. Restriction or elimination of such tax-exempt interest would constitute a fundamental departure by the federal government and could threaten the ability of state and local governments to finance basic governmental facilities and services.
  5. Restrictive arbitrage provisions unnecessarily increase the costs of project financing.