D.C. shake-ups and urban cash: connecting the dots in finance.

TLDR:

• The article discusses several key developments in municipal finance, particularly those happening in Washington D.C.
• The bond market is facing the possibility of three consecutive negative total return years, despite the expectation that the Federal Open Market Committee would increase rates.
• The U.S. Government Accountability Office ruling gives Congress the power to review the U.S. Department of Transportation’s multimodal discretionary grant funding opportunity.
• The idea of replacing the federal gas tax with a per-mile user fee is being explored as a way to reform the Highway Trust Fund.
• A new bill called the Stop EV Freeloading Act aims to tax electric vehicle owners to support the Highway Trust Fund.
• House polarization in Congress may result in lower government investment in state and city projects and higher borrowing costs.

The article highlights several key developments in municipal finance that are taking place in Washington D.C. One significant concern for the bond market is the prospect of three consecutive negative total return years, despite the belief that the Federal Open Market Committee would increase rates. The U.S. Government Accountability Office ruling now allows Congress to review the U.S. Department of Transportation’s multimodal discretionary grant funding opportunity. The decision is supported by Texas Senator Ted Cruz, who believes that grant funding should be allocated according to the law, rather than favoring certain projects and constituencies.

Another development in municipal finance is the exploration of replacing the federal gas tax with a per-mile user fee as a way to reform the Highway Trust Fund. The delay in implementing this alternative may result in a lack of sufficient information to assess its feasibility by the time the next transportation reauthorization bill is due in October 2026. In addition, a new bill called the Stop EV Freeloading Act aims to tax electric vehicle owners, ensuring that they contribute to the cost of using the nation’s highways.

The article also discusses the impact of House polarization on the bond market. With political dysfunction and ongoing conflict in government, there are concerns about the impact on the industry. This is likely to lead to lower government investment in state and city projects, higher borrowing costs, and more debates over legislation related to the muni market. Overall, these developments in Washington D.C. have important implications for municipal finance.