Elimination of private activity bonds would have differing negative credit effects

Source: Moody’s, Sector Comment, December 17, 2017
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The proposed elimination of private activity bonds (PABs) as part of US tax reform would be credit negative for the public housing, healthcare, higher education, charter schools and infrastructure sectors. However, the severity of the impact would vary. Elimination of taxexempt PABs is included in the tax reform bill that passed the US House of Representatives on November 16, but it is not in the US Senate bill that passed December 2. The two bills are currently undergoing reconciliation in a congressional conference committee. The size of the PABs market is difficult to determine due to municipal bond classifications, but indications are the bonds accounted for approximately 25% to 35% of the $459 billion in municipal bonds sold in 2016. Substantial authorized PAB capacity currently exists, as the volume cap capacity of $97.4 billion at the end of 2016 was the largest ending volume cap capacity recorded since 2005…..