Oak Harbor council backs federal tax exemption for municipal bonds
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Summary
The Oak Harbor City Council unanimously approved Resolution 25-06 urging Washington’s congressional delegation to preserve the federal tax exemption for municipal bonds, citing higher borrowing costs and impacts to local infrastructure funding if the exemption is eliminated.
The Oak Harbor City Council on March 4 unanimously approved Resolution 25-06 urging the Washington congressional delegation to preserve the federal tax exemption for municipal bonds.
Deputy City Administrator and Finance Director David Goldman told the council that Congress is considering changes to tax law through budget reconciliation that could eliminate the tax-exempt status of municipal bonds. Goldman said tax-exempt municipal bonds let local governments borrow at lower interest rates to finance long-term projects such as roads, water treatment plants, police and fire facilities, and that removing the exemption would raise borrowing costs and make projects more expensive.
Goldman presented examples and national research showing higher interest costs if the exemption were removed. Using a hypothetical $10 million, 30-year bond, Goldman said a tax-exempt 30-year rate of about 3.89% would rise to roughly 5.99% if bonds became taxable — increasing annual debt service from about $567,723 to about $721,855 and pushing total interest paid from roughly $7 million to about $11.7 million over the life of the bond. He told the council that the National League of Cities lists preservation of the exemption as a top priority and that elimination would disproportionately affect small and rural communities.
Councilmember Stuckey made the motion to approve Resolution 25-06; Councilmember Wiesner seconded. Mayor Pro Tem called for the vote and the motion passed unanimously.
The resolution directs the city to send a letter to the Washington congressional delegation expressing support for preserving the tax-exempt status of municipal bonds and includes a prepared letter with hyperlinks and background materials, according to council discussion.
Goldman confirmed there was no public comment on the resolution. Council discussion was limited to appreciation for the staff briefing and the packet materials; no amendments or changes to the resolution were proposed.
Council members and staff indicated the city will transmit the adopted letter of support to its federal representatives.
