Congressman’s Interest in Munis Comes from Experience
BY NAOMI JAGODA
MAR 16, 2015 1:14pm ET
WASHINGTON – Rep. Randy Hultgren, R-Ill. got a first-hand look at how municipal bonds can be beneficial when he visited Freedman Seating Company in Chicago.
The company has been in business for more than 100 years. It originally made cushions for carriages and is now one of the largest manufacturers of seating for commercial vehicles such as busses.
FSC has done several new-money bond financings during the last 17 years and has used the bond proceeds to purchase and renovate property in a blighted area in Chicago’s west side, as well as to purchase equipment for the facilities, said its president, Craig Freedman.
The bonds allowed FSC to purchase over half a million square feet of manufacturing space and over $10 million of equipment and facilities. When the company did its first bond deal in 1998, it had fewer than 200 employees, Freedman said. Now it has more than three times that, about 750.
Hultgren, whose district includes some Chicago suburbs and is not far from FSC, said the company is “very impressive, but they absolutely would not have been able to hire as many people as they have or produce as much product as they produce but for access to manufacturing bonds.”
He visited the company in September, not long after he introduced the Modernizing American Manufacturing Bonds Act. The bill would increase the maximum size of an industrial development bond issue and would expand the types of projects that could be financed with IDBs.
“We’re certainly supportive of what congressman Hultgren has put forth in the bill,” Freedman said.
And that’s not all Hultgren has done on the muni bond front since joining Congress in 2011. The 49-year-old has been one of the most vocal supporters of municipal bonds in the House and a leading co-sponsor of legislation on bank-qualified bonds. He serves on the House Financial Services Committee, which has jurisdiction over munis and other securities.
In an interview with The Bond Buyer from his Capitol Hill office, Hultgren said he has developed an appreciation for bonds as a result of his past experiences in both the public and private sectors. He has held local and state government positions and has also worked for an investment advisory firm.
“The early public service work and then also … my career work has sparked an interest in bonds and their value,” he said.
Hultgren’s first publicly elected post was on the board of DuPage County, Ill., where he served from 1994 to 1998. During this time, he saw how “we, as the county or townships within the county, could get things done so much more effectively and efficiently and transparently and accountably than even [the] state government or federal government.”
County board members were also on the forest preserve commission, which was involved in bond-financed projects for land acquisition.
Hultgren then served in the Illinois General Assembly, first in the state House from 1999 to 2007 and then in the state Senate from 2007 to 2011. The state had several infrastructure programs that were bond-financed, and state legislators could work with local governments to help them fund projects, he said.
“I’ve been a strong supporter of infrastructure and making sure that we’ve got safe roads, safe bridges, that we’re able to move people safely to and from work and school,” Hultgren said.
In the state House, Hultgren was in the minority, and in the state Senate, he was in a minority so small that it could not block legislation the majority wanted to move. As a result, he learned that it is important to build bipartisan support for legislation. He took this lesson with him to the U.S. Congress.
“That has really been the focus we’ve taken with any new bills that we’ve had, is getting good, strong Democratic co-sponsors, people … we’re not going to agree with every day, but that we can work together on important issues,” he said.
Hultgren has also learned from his time in state and local government “to be realistic, that it takes some time to get things done.”
“Ultimately, we want to work towards good laws, good strategy, good plans,” and achieving that takes time, he said.
His time in Congress has reaffirmed his belief that “the best things happen locally, and the very best happen when we can work together at different levels of government — federal, state, local government — working together ultimately to serve people.”
For part of the time he was in the state Senate, Hultgren also was employed part-time as vice president at Performance Trust Investment Advisors in Chicago. He worked to find investors for bond funds created by the firm, which is now called PT Asset Management. Hultgren said he got interested in the value of bonds in people’s portfolios and the predictability and security they provide to investors.
Munis are important to Hultgren’s constituents, he said, because with interest rates very low right now, it’s hard for people, especially retirees, to find investments with returns that are high enough to live on, but not too risky.
And people tend to invest in bonds issued in their state, “so there is an accountability on the side of the person purchasing the bond also being able to follow the progress or the need for the project that’s being done,” Hultgren said.
“I think people benefit, because good work gets done and it gets done pretty quickly,” he said.
Michael Decker, managing director and co-head of municipal securities for the Securities Industry and Financial Markets Association, said Hultgren’s state and local government and financial services background gives him a unique perspective on muni issues.
“We love working with him,” Decker said. “He’s a great representative of his district and a strong bond supporter.”
Hultgren said he hopes to reintroduce the bills on IDBs and bank-qualified bonds in the current Congress “as soon as possible and as makes sense to increase likelihood of success. His office is trying to get support for the legislation in the Senate and is trying to figure out when the bills have the best chance of being considered by a House committee and ultimately by members on the House floor.
The bill on IDBs would increase the maximum size of an industrial development bond issue to $30 million from $10 million. It would also allow facilities that produce intangible property, such as software, and facilities that are functionally related to and subordinate to the production of property, such as warehouses, to be financed with IDB proceeds.