2017 Federal Outlook

1. 2017 Federal Outlook Emily Brock Director, Federal Liaison

2. GFOA? In Washington D.C.? • Congressional Advocacy • Executive Advocacy • Amicus Briefs to the SCOTUS • National Governors Association The United States Conference of Mayors • National Association of State Treasurers National Conference of State Legislatures • National Association of Counties National League of Cities • International City/County Management Association Council of State Governments • International Municipal Lawyers Association National Association of State Auditors, Comptrollers and Treasurers • American Public Power Association National Association of Local Housing Finance Authorities • National Council of State Housing Agencies National Assn of Health & Educational Facilities Finance Authorities • National Association of State Retirement AdministratorsAmerican Hospital Association • Council of Infrastructure Financing Authorities Airports Council International - North America • Large Public Power Association National Association of Towns and Townships • American Public Transportation Association American Public Works Association • American Society of Civil Engineers American Water Works Association • International Public Mgt Assn for Human Resources National Association for County Community and Economic Development • National Association of Regional Councils National Community Development Association….

3. Agenda The HOT TOPICS and timing Legislative Update Preservation of the Exemption on Municipal Bond Interest Preservation of the Deductibility of State and Local Taxes Combatting Federal Preemption Regulatory Update Advocacy, Continued

4. Meanwhile, Inside the Beltway We have got to do something to fix healthcare! Overhaul the outdated tax code! We need solutions for our crumbling infrastructure! Too many rules, too many rules! Pension liabilities are out of control! State and local taxes are too high!

5. ACA Repeal & Replace Update • Reconciliation – the only way to get it done! • Senate “Better Care Reconciliation Act” released July 13 • Will be brought to the floor mid-week this week • May head back over to the House by the end of July • CBO and “scoring” • Leadership is balancing complex competing interests including: • A pay-for • Medicaid dollars for indigent healthcare

6. What is the Process/Timing for Tax Reform? And why is SALT/Muni Bonds vulnerable? Fixing and building new public infrastructure – and how to pay for it – tax writers are already drafting legislation that could have a significant impact on state and local government finance. Who is involved in tax reform? What is safe? What isn’t safe? Does it have to be “revenue neutral”? What about the House Municipal Finance Caucus? How on Earth are they going to pass a bill? What is GFOA doing to educate Congress?

7. Our Number One: Munis BUILD Infra • 75% - infrastructure financing cost that falls squarely on the shoulders on state and local governments • $2.8 Trillion – American Society of Civil Engineers estimates that states and localities will have to pick up the funding gap in infrastructure over the next 4 years. • $3.8 Trillion – roughly the amount of LT TEBs that have been issued over the past 10 years • $714 Billion – the 10-year savings to state and local governments from the exemption • 50,000 – roughly the amount of all sizes and shapes of st/loc/political subdivisions that have access to the capital markets thanks to the municipal bond • 2nd– municipal securities are considered 2nd only to treasuries in risk level as an investment instrument

8. Our Other Number One: Preserve SALT • If SALT were repealed, almost 30% of taxpayers, including individuals in every state and in all income brackets, would be adversely impacted. • In 2014 that included over 43 million tax units representing well over 100 million Americans. • Additionally, more than 50% of the total amount of the SALT deduction went to taxpayers with adjusted gross incomes (AGI) under $200,000.

9. What is the SALT Impact in North Carolina? • On average, 29% taxpayers in North Carolina itemize and claim the SALT deduction • Each taxpaying unit claims on average $2,629 • In NC-2, 31% taxpayers claim $1.7B • Eliminating SALT would increase taxpayers burden by $431M – Double taxation on NC taxpayers

10. A Historical Partnership • Both the municipal bond interest exclusion and the deductibility of state and local taxes have been a fundamental part of the federal tax code since 1913

11. Our Final Number One: Combatting Preemption • Preemption of State and local government taxing authority • Wireless industry • Rental car industry • Online travel companies • Etc…………. • Reduces State and local tax revenues that pay for • Education • Health care • Public safety HAD ENOUGH? • Etc…………… Pass a resolution!

12. Resolutions Urging Action on Marketplace Fairness Legislation • Consumer failure to pay online sales and use taxes as a result of federal inaction on this issue annually results in the loss of billions of dollars per year in taxes owed to state and local governments on remote sales. • Your direct outreach to your member of Congress is critical to advancing this legislation • Sample Resolution • Sample op-Ed

13. GFOA Advocates for Continuing Disclosure • GFOA will continue to promote quality and timely disclosure of financial information on bonds outstanding per CDA and SEC Rule 15c2-12 • On March 15, the SEC authorized a proposal that will revisit 15c2-12 to add financial obligations: • (15) Incurrence of a financial obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the obligated person, any of which affect security holders, if material; and • (16) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the obligated person, any of which reflect financial difficulties. •  (f) * * * • (11) The term financial obligation means a (i) debt obligation, (ii) lease, (iii) guarantee, (iv) derivative instrument, or (v) monetary obligation resulting from a judicial, administrative, or arbitration proceeding. The term financial obligation shall not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board consistent with this rule.

14. GFOA Advocates Continuing Disclosure Understanding Your Continuing Disclosure Responsibilities – arms government debt issuers with a fundamental understanding of their continuing disclosure responsibilities that accompany public debt transactions. Using Technology for Disclosure –provides recommendations to issuers about how to use issuer websites and the MSRB’s Electronic Municipal Market Access (EMMA) platform to share required and voluntary financial information with investors. Maintaining an Investor Relations Program –provides guidance to issuers on key components to include in an investor relations program. Debt Management Policy–recommends that state and local governments adopt comprehensive written debt management policies, and this best practice introduces finance officers to the core elements that comprise a working debt management policy. Small Government/New Issuer-Debt Issuance Checklist: Considerations When Issuing Bonds Disclosures of Pension Funding Obligations in Official Statements

15. Advocacy Continued, 2017 GO LOCAL!!! • Explain what all of this means to you, your jurisdiction, your locality • Describe the effects eliminating the SALT Deduction on your jurisdiction and call your member of Congress! • Promote the infrastructure in your jurisdiction and ! (#builtbybonds) • Pass a resolution urging Congress to act on the Marketplace Fairness Act! • Illustrate to the SEC your jurisdiction’s good disclosure work!