WASHINGTON - A Texas lawmaker has once again introduced legislation that would allow the North American Development Bank to guarantee tax-exempt bonds.
Rep. Charles Gonzalez, D-Tex., introduced a bill last month that would amend the tax code to clarify that the San Antonio-based NADBank - which was created under the North American Free Trade Agreement to address environmental issues in the U.S.-Mexico border region - could guarantee tax-exempt deals without endangering the tax-exempt status of the bonds.
The bill has been referred to the House Ways and Means Committee, but is identical to separate bills introduced in 2005 by Gonzalez and Sen. Kay Bailey Hutchison, R-Tex., that failed to advance beyond either Ways and Means or the Senate Finance Committee. Hutchison has not yet reintroduced her bill.
The tax code currently prohibits federal guarantees of tax-exempt bonds, except for those issued for housing. The logic underlying the ban is that a federal guarantee of debt already exempted from federal taxes would constitute a double-dip of federal benefits.
When Hutchison introduced her bill two years ago, she said it would lower interest rates on bonds backed by the bank by enhancing their credit ratings, which would in turn make many projects more affordable to smaller border communities.
"This will give our border communities an important new tool to use as they address their infrastructure and environmental needs," she said.
In the past, NADBank has bought issuers' bonds in order to provide a market and permit issuers to begin new construction projects, mostly for water and sewer systems.
The bank focuses its resources on issues such as potable water supply, wastewater treatment, and municipal solid-waste management, as well as other areas with tangible health or environment benefits, such as air quality, clean energy, and hazardous waste, according to the bank's Web site. It currently offers both loan and grant programs to local governments along the U.S.-Mexico border to help finance projects.
Neither Gonzalez's staff nor NADBank officials returned calls for comment on the bill.