AgdaPkt 2013-05-20 Closed Cancelled and Special

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aT6.1.H. - Page 4 1017 Middlefield Road Redwood City, California 94063 Telephone: (650)780-7070 Fax: (650)366-2447 E-mail: mail@redwoodcity.org May 20, 2013 President Barack Obama The White House 1600 Pennsylvania Avenue, NW Washington, DC 20500 RE: Preservation of the Municipal Bond Tax Exemption Dear President Obama: On behalf of the City of Redwood City, I am writing to share our concerns with provisions included in the White House's FY 2014 budget proposal that seek to end the long-standing tax exempt status of municipal bond interest. The tax exemption has been a successful cornerstone of state and local infrastructure development for over 100 years, and is responsible for financing a majority of the nation's infrastructure. In the City of Redwood City, the tax exemption on municipal bonds has contributed to the advancement and completion of a great number of critical infrastructure projects including the $76,940,000 Recycled Water Project. Prior to the Recycled Water Project, the City of Redwood City was entirely reliant on one source of potable water—San Francisco's Hetch Hetchy regional water system —and had, over a period of years, purchased water in excess of the amount San Francisco was obligated to deliver to the City. The Recycled Water Project provided tertiary treated non-potable, recycled waste water to customers for landscape irrigation and industrial uses, and artificial surfaces at athletic fields, thereby reducing the reliance on the regional water system. This type of project could not be completed with the infrastructure financing replacement tools proposed by the White House, such as America Fast Forward bond program or its Build America Bonds predecessor, which rely on unpredictable federal funding mechanisms to return subsidies to investors. By contrast, the federal tax exemption maintains a long history of reliability for investors, ensuring dependable returns, and consistently meeting our nation's infrastructure investment needs since the country's income tax code was promulgated in 1913. Through the tax-exemption, the federal government continues to provide critical support for the federal, state and local partnership that develops and maintains essential infrastructure, which it cannot practically replicate by other means. Proposals to reduce or repeal the tax exemption would have severely detrimental impacts on national infrastructure development and the municipal bond market, raising costs for state and local borrowers and creating uncertainty for investors. For example, it is estimated that if the proposal to cap the Page 1 of 2