GOP House Takeover Puts Munis on the Spot

WASHINGTON — Market participants hoping Congress will extend the Build America Bond program and other expiring muni provisions before the end of the year can’t count on incoming House Ways and Means Committee chairman Rep. Dave Camp for support.

BAB and other muni provisions enacted by the American Recovery and Reinvestment Act are scheduled to expire at the end of the year and efforts to extend them have stalled in Congress.

But Camp, a Michigan Republican who is expected take over the helm of the committee when the new GOP majority is sworn into the House in January, criticized the BAB program earlier this year. During a debate on a bill that would extend BABs for two years, he said the new bonds are merely a spending program for state and local governments that does not create jobs as successfully as the private sector.

“The vast majority of the spending in the bill — a whopping $25.6 billion over 11 years — goes to state and local governments through various 'infrastructure incentives.’ These include a substantial increase in spending on the Build America Bonds program, a heavily subsidized spending program providing direct payments to state and local governments that issue these bonds,” Camp said in July. “But small governments are not small businesses, and they do not create the kind of private-sector jobs we need.”

Several Republicans in both the House and Senate have complained that the BAB program creates high fees for Wall Street underwriters, rewards issuers with poor credit by giving them higher subsidy payments, and uses money collected from taxpayers nationwide to subsidize debt issued primarily by cash-strapped states like California.

Camp’s home state has issued $2.6 billion of BABs — 1.7% of the $149.8 billion issued thus far since the program was created in 2009, according to data from Thomson Reuters. The current chairman of the taxwriting committee, Sander Levin, a Democrat who also is from Michigan, has been a strong proponent of the BAB program.

But before Camp takes the gavel, market participants are pinning their hopes on Congress passing legislation to extend BABs and other expiring or expired tax-law provisions during the coming lame-duck session.

Congress is expected to return to work on Nov. 15 but close out the session in December. Market participants are hoping the extenders package — which would include extensions of BABs and other temporary municipal bond provisions — could be attached to a larger tax bill that would extend all or a portion of President George Bush’s 2001 tax cuts.

“To me, that would be the best-case scenario,” said Charles Samuels, a lawyer with Mintz Levin Cohn Ferris Glovsky & Popeo PC and counsel to the National Association of Health and Educational Facilities Finance Authorities.

“It’s hard to put it off until Congress comes back in January,” said William Daly, senior vice president of government relations for the Bond Dealers of America.

But there has been little momentum on such a package thus far. A bill sponsored by Senate Finance Committee Max Baucus, D-Mont., failed to clear several procedural votes in the Senate, and a bill introduced in the House by Levin that leaders had intended to fast-track is still awaiting a vote.

Democrats lost five members from the House taxwriting committee this election cycle. However, only two — Reps. Earl Pomeroy of North Dakota and Bob Etheridge of North Carolina — were voted out of office. Pomeroy is chair of the Social Security subcommittee.

Reps. Kendrick Meeks of Florida and Artur Davis of Alabama vacated their seats to run for higher office but failed to be elected. Rep. John Tanner of Tennessee retired.

On the Republican side, two committee members, Reps. John Linder of Georgia and Ginny Brown-Waite of Florida, retired.

The Senate Finance Committee experienced the loss of two members, one on each side of the aisle. Sen. Blanche Lincoln, D-Ark., lost her bid for re-election, while Sen. Jim Bunning, R-Ky., retired.

The other two Democratic committee members up for re-election — Charles Schumer of New York and Ron Wyden of Oregon — both won their races.

The committee’s ranking minority member, Charles Grassley, R-Iowa, an opponent of BABs. also was reelected.

Wyden had introduced a tax reform bill last year that would eliminate tax-exempt bonds, replacing them with tax-credit bonds that would provide investors with a tax credit equal to 25% of interest costs.

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