EAST GRAND FORKS – The East Grand Forks City Council has approved a letter urging Rep. Michelle Fischbach to support keeping municipal bonds exempt from federal taxes.
A budget proposal in the United States House of Representatives would, if it becomes law, would mean that cities, counties and other entities that take bonds for projects would likely have higher costs of borrowing. The letter signed Tuesday by the council is being considered by local jurisdictions across Minnesota’s 7th Congressional District, which Fischbach, a Republican, has represented since 2020.
The League of Minnesota Cities has been coordinating the effort and reached out to East Grand Forks city leadership, asking to sign on to the letter. According to the draft letter provided, 85% of the 363 local governments in the district have some form of active municipal bond on their books. If taxes had to be paid on the interest investors received on the bonds, costs would go up, and the availability of bonds would likely change.
“Eliminating the tax exemption would disproportionately burden these small communities, likely forcing difficult choices between raising taxes or cutting services,” The letter states. “Preserving the tax-exempt status of municipal bonds is essential for maintaining affordable financing options for local governments, ensuring continued investment in infrastructure and protecting taxpayers from increased costs.”
Municipal bonds are a very common way for cities to fund projects ranging from street repairs to facility improvements. Since cities can’t typically receive loans like businesses or individuals can, they sell bonds to investors. Those bonds work much the same way a loan would work, with a period of payment and interest rates, but instead of
a bank leveraging its assets, its investors.
While East Grand Forks doesn’t have many bonds on its books right now, the city is looking at taking out around $14 million in bonds to pay for repairs and improvements at the Civic Center and VFW Memorial arenas. Those bonds would be paid out from
the 1%, 20-year sales tax that residents approved in November.
According to a report from the
Urban-Brookings Tax Policy Center, Congress has estimated that $250 billion
could be gained in revenue over 10 years if these bonds became taxable. However, the change could trigger a sell-off in the municipal bond market, pushing costs of financing higher and therefore increasing costs locally to do road and infrastructure improvements.
In other news, the council:
- Recognized the retirement of city mechanic Ron Bubendorf. Bubendorf has worked for the city for over 48 years and has worked under six different mayor. The mayor and council congratulated him on his retirement and said that his expertise and mentorship will be sorely missed.
- Approved giving East Grand Forks students between kindergarten and eighth grade a free, one-day pass to the city pool this summer. East Grand Forks Parks and Recreation estimated that 1,800 passes would be given out and could be a good way to encourage more people to visit the pool.
- Approved entering into an agreement with Grand Forks for the rehabilitation of the Point Bridge. The rehabilitation will occur later this year and costs will be split in half. Since
plans have not been finalized, cost estimates have not been given.
Voigt covers government in Grand Forks and East Grand Forks.