The Impact of Tax Reform on the Municipal Market

30 Jan

White Papers

The Impact of Tax Reform on the Municipal Market

  • While private activity bonds have been spared, the 2017 Tax Cuts and Jobs
    Act (the “Act”) will still impact tax-exempt markets
  • The decrease in the corporate tax rate will reduce demand for tax-exempt
    bonds
  • The decrease in supply due to the loss of advance refunding bonds will be
    offset by the reduced demand
  • Publicly issued and direct placement debt will be impacted differently due to the primary participants in each market
  • Direct Purchase Bonds, a product used by many borrowers, will be directly
    impacted the most, becoming more expensive and putting their continued
    use in question
  • For borrowers who rely on variable rate debt, alternatives do and will exist if direct placements become uneconomical
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