WASHINGTON -- The Rebuild America Coalition yesterday spelled out the details of five proposals for easing tax law curbs on municipal bonds to finance infrastructure and launched a grass-roots oampaign to persuade Congress to approve the proposals this year.
"We want to go to the Congress, we want to get there soon," said Maynard Jackson, the mayor of Atlanta and chairman of the coalition. "We believe we have a window of opportunity" to get the proposals enacted, because Congress wants to pass legislation this year to create jobs and foster economic development, he added.
Mayor Jackson first announced the coalition was developing public finance proposals last November, when he testified before Congress. Among the five proposals, the coalition's top priority is to ease tax code restrictions that discourage bond financing for public-private infrastructure partnerships.
Bonds issued for that purpose should be classified as governmental bonds and should be exempt from the 10% private-use test and private-activity volume cap limits, the coalition says in a report released yesterday.
Bond issues eligible for that designation should finance only essential services, such as wasterwater treatment, toll roads, and airport facilities, the coalition says. They also should be subject to several conditions, including approval by the governmental entity in which the services are provided and minimum equity contributions by the private entities involved.
The proposal is similar to one advocated by the Environmental Protection Agency's Environmental Financial Advisory Board. In a report released last year, the board suggests reclassifying private-activity bonds as governmental if used to finace federally mandated environmental facilities.
The coalition, which unveiled its proposals during a meeting here of the U.S. Conference of Mayors, includes more than 50 public and private organizations interested in fostering infrastructure improvements. They include the National League of Cities, the National Association of Counties, the Association of Local Housing Finance Agencies, and the Public Securities Association.
Although an 18-member task force was responsible for developing the public finance proposals, Mayor Jackson said the prime mover behind them was a single task force member: Richard B. Geltman, vice president for intergovernmental relations for the Public Securities Association. Mr. Gelthman, in turn, credited five Wall Street investment bankers with doing the bulk of the work involved in coming up with the proposals.
In addition to expanding public-private partnerships, the coalition listed four other proposals, in order of importance.
* Creating a "tax-exempt municipal savings bond" that would be sold in small denominations to allow the average citizen to invest in infrastructure. To allow issuers to built up funds over time from such sales, the coalition proposes easing arbitrage rebate requirements. For example, the coalition would expand the exemption from the rebate requirement that applies to issuers who spend proceeds from a bond sale within six months.
* Easing limits on bank deductibility. Under current law, a bank may deduct 80% of the costs of purchasing and carrying tax-exempt bonds only if the debt is purchased from an issuer who expects to issue no more than $10 million of governmental bonds annually. The coalition suggests raising that limit to between $20 million and $25 million.
* Expanding the uses of bond-financed state revolving loan funds. States currently use the funds to finance wastwater treatment projects, and the coalition proposes states also be allowed to set up funds for such purposes as treatment of hazardous waste and solid waste and for increasing the safety of the drinking water supply.
* Creating a Federal infrastructure Bond Bank to provide credit enhancement for state and local infrastructure bonds and to make a market for such debt by purchasing it. To carry out its activities, the bank would be capitalized by selling debt that would have federal guarantees. The coalition sees the bank selling $5 billion in securities a year for five years for a total capitalization of $25 billion.
Mayor Jackson said the coalition would work on a grass-roots campaign to get more local officials involved in spreading their message to Congress. The coalition wants to fight both for its proposals and for reauthorization of federal programs related to water and solid waste disposal, the mayor said. He also asked organizations interested in joining or remaining with the coalition to make a contribution to the group of at least $1,000 each.
