WASHINGTON - The Senate late yesterday voted 61 to 36 to approve a procedural motion to limit debate on a $829 billion compromise economic stimulus bill that would revise two key muni bond provisions.
The approval of the motion paves the way for the Senate to vote on the compromise bill as soon as this afternoon, setting the stage for a conference to resolve the differences between the House and Senate versions of the legislation. Congressional leaders want to send a final bill to President Obama before President's Day recess begins at the end of the week.
The procedural vote marked the conclusion of days of partisan debate among the lawmakers over how to modify the measures approved by the Senate Finance and Appropriations Committees to obtain enough Republican votes to guarantee approval by the full Senate.
As a result of the negotiations led by two moderate senators, Susan Collins, R-Maine, and Ben Nelson, D-Neb., changes were made to the tax provisions for recovery zone bonds and the taxable bond option program.
One amendment would cut the amount of recovery zone bonds that could be issued in 2009 and 2010 to $15 billion from $25 billion. The bonds would be issued for economic development programs in areas hit hard by unemployment.
State and local governments could only issue up to $10 billion in private-activity exempt facility bonds and $5 billion of economic development taxable, tax-credit bonds, compared to the earlier proposed respective amounts of $15 billion and $10 billion that were approved by both the finance committee and the House. The lower amounts would save $2 billion in expected revenue losses, according to committee chairman Max Baucus, D-Mont.
The other amendment would limit the amount of time tax-exempt issuers could take advantage of the proposed taxable-bond option program that critics have warned could undermine the tax-exempt bond market. Dubbed the Build America Bonds provision in the Senate, this provision would allow issuers of governmental bonds to issue taxable debt during 2009 and 2010 to finance capital expenditures in exchange for either a direct cash subsidy from the federal government or a tax credit given to investors.
The provision the Senate Finance Committee had approved would have made the program available until 2012, and the House version would make the tax credit option permanent after 2010.
The revised provision would provide an additional incentive in the form of a higher tax credit to small issuers who may be reluctant to attempt deals in the taxable market. It would provide a 40% tax subsidy or credit to small issuers, or those that issue $30 million of bonds or less per year. Other issuers would receive a 35% credit or subsidy, as is proposed for all issuers in the House bill. The revisions would save $2 billion in expected revenue losses.
The bond-related spending proposals approved by the Senate Appropriations Committee last month survived the negotiations in the full Senate.
Highway construction would receive $27 billion, the first half of which states would have to obligate within 180 days; mass transit would get $8.4 billion; about $5.5 billion of transportation spending would be available through competitive grants to state and local governments; and the airport improvement program that provides construction grants would get $1.3 billion.
A total of about $6 billion for state revolving funds for water and sewer projects - funds that are used to back bonds - would be given to states with a provision allowing them to offer "negative-interest loans" and complete forgiveness of loan principal for projects. The provision would allow states to effectively grant the money to localities for their projects, sources said.
An amendment may be put forward by Sen. Claire McCaskill, D-Mo., either before the Senate vote or during the conference that would add "grants" to the qualifying categories of financial assistance that could be provided from SRF funding, said Rick Farrell, executive director of the Council of Infrastructure Financing Authorities.
"I'm assuming what comes out of conference will have all three terms in there," he said.
Meanwhile, Nevada Gov. Jim Gibbons, a Republican, sent a letter last week to President Obama, House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, also of Nevada, requesting the addition of an energy transmission-related private-activity bond provision in the stimulus. Gibbons asked for a tax code change that would allow a state-run nonprofit corporation to issue tax-exempt private-activity bonds for the construction of power transmission lines.
"Especially during this time of turmoil in the capital markets," utilities should be able "to enter into long-term, market-rate transmission service contracts with public and private purchasers," Gibbons said in the letter.
A spokesperson for Reid could not be reached for comment by press time.
The American Public Power Association has not requested the PAB provision for transmission lines, but "we are glad it's being talked about," said spokesman Nicholas Braden.