WASHINGTON — Three muni market groups have joined forces with the Council of Development Finance Agencies and sent Congress draft legislation that would create special Hurricane Sandy Recovery Bonds to help businesses and residents in the Mid-Atlantic region still reeling from storm-related destruction.
The National Association of Bond Lawyers, the Bond Dealers of America and the National Development Council in addition to the CDFA proposed that Congress allow federal bonding authority and other federal benefits to individuals, families and businesses in areas affected by Hurricane Sandy, or the "Reconstruction Zone."
The group's proposal model's the Gulf Opportunity Zone Act of 2005, which was created by Congress after Hurricane Katrina in 2005.
Economic damages inflicted by Superstorm Sandy could reach $50 billion, according to estimates. The groups did not specify a specific amount of assistance required due to the large geographic scope of the devastation and high density of the affected populations.
"Using the GO Zone Act as a guide, legislation relating to Hurricane Sandy (the Hurricane Sandy Act) should be enacted as soon as possible," the groups wrote in a letter to lawmakers last week.
Some of the proposal highlights include: authorization for New Jersey, Connecticut and New York and other affected areas to issue private activity bonds for the rehabilitation and construction of nonresidential buildings and qualified residential rental projects.
These states should also have qualified mortgage financing of up to $150,000 to finance a home improvement mortgage for residences in the "Reconstruction Zone."
"Hurricane Sandy occurred in the context of a nascent recovery from the deepest recession since the Great Depression," the groups wrote. "Measures in addition to those in the GO Zone Act or otherwise identified should be considered to assure that the effects of Hurricane Sandy do not reverse the present forward momentum of the economy and the slowly improving budgets of state and local governments."
The bonds will be subject to a special state by state cap and would not be subject to the state unified private activity bond cap. Interest on the bonds would not be subject to the alternative minimum tax, according to the proposal.
PABs are issued by state and local issuers to provide low-cost financing for the projects of nonprofit organizations or companies that serve a public purpose. They include housing, manufacturing, student loan, airport, solid waste, highway, high-speed rail and other tax-exempt bonds.
PAB issuance is limited and subject to state volume caps based on a formula published by the Internal Revenue Service. In 2012 state volume caps were $95 per capita or $284.56 million, whichever is greater.
The legislation also would permit a second tax-exempt advance refunding for governmental and qualified 501(c)(3) bonds outstanding on the date of Hurricane Sandy.
Additionally, exempt facility PABs which under tax law can't be advance refunded and were issued for governmentally-owned airports, docks, and wharves located in the Reconstruction Zone, would be permitted one tax-exempt advance refunding.
The Sandy proposal also would increase the housing credit dollar amount for low income housing located in the Reconstruction Zone.