Rep. Daniel B. Maffei, D-N.Y., has introduced a bill that would allow businesses to use more tax-exempt bonds in empowerment zones and permit some of those bonds to be federally guaranteed.
The Small and Medium Urban Regions Growth and Empowerment, or Act, or SURGE, would relax some restrictions on the types of projects that can be bond financed within these areas. Empowerment zones are specially designated, distressed urban communities where bonds and other tax incentives can be used to attract private businesses as well as economic development.
Abigail Gardner, a spokesman for Maffei, said yesterday that the congressman decided to introduce the bill after hearing of businesses struggling to take advantage of the bond financing in his home district of Syracuse, which has been designated an empowerment zone.
Although several large cities with dense populations have been able to issue bonds within such zones, the less dense population of the Syracuse area in upstate New York makes it difficult for businesses to meet all the rules for doing so.
One of the tougher requirements for the city is that at least 35% of a business's employees must reside in the area because a lot of workers live outside the city, she said. So far, none of the $130 million in bonding authority allotted to the Syracuse zone has been used.
"It's a great idea, and it's worked so much better for other cities," Gardner said. "It was really difficult for employers [in Syracuse] to be able to take advantage, especially of the bond part, where it required 35% of its employees live in the area.
Maffei's bill would address the issue by requiring businesses to meet that 35% limit initially, but permit them to retain access to tax-exempt bond financing if they drop below that percentage in the future.
Furthermore, the bill would allow bonds issued in empowerment zones to be federally guaranteed as long as 95% or more of the proceeds are used by a small employer within the zone. Under federal law, most tax-exempt bonds cannot receive a federal guarantee and remain tax-exempt.
The federal guarantee provision would also apply to qualified gulf opportunity zone bonds and recovery zone facility bonds that are issued to finance small employer projects within empowerment zones.
The SURGE bill would increase the bond limit for small cities in empowerment zones to the level of larger cities - $230 million instead of $130 million.
Gardner said Maffei's bill is a "wish list" of everything he would like to change about the empowerment zone program to help Syracuse businesses, and that he hopes to discuss these ideas with members of the House Ways and Means Committee, which has jurisdiction over the bill. He is not a member of that panel, but sits on the House Financial Services Committee.
"I think he's just interested in working with as many people as possible to make as much of it as possible a reality," she said.
The empowerment zone program is currently slated to expire at the end of the calendar year, but other bills are pending that would extend it. Ways and Means Committee member Rep. Artur Davis, D-Ala., has introduced a bill that would extend the program through 2015, and companion legislation is pending before the Senate Finance Committee.
