Muni Groups Laud Levin for Bond-Boosting Bill

WASHINGTON — Twenty-four municipal market groups have signed a letter praising House Ways and Means Committee chairman Sander Levin for introducing legislation to extend several temporary muni bond provisions, and calling for continued support of municipal issuers during tough economic times.

The two-page letter was sent to the Michigan Democrat Friday, one day after he introduced HR 5893 — the Investing in American Jobs and Closing Tax Loopholes Act.

The bill, which House Democrats hope to pass sometime this week, would extend several expiring bond provisions, including the Build America Bonds program and the expanded small-issuer limit for bank-qualified debt.

Those provisions have made it easier and more affordable for state and local governments to access the capital markets, which in turn allows them to provide “essential infrastructure for their communities and create jobs,” the muni groups said in the letter.

“Delaying or cancelling the initiatives that will be supported by the provisions in HR 5893 will contribute to the nation’s current economic challenges,” they added.

The groups signing on to the letter include the American Public Power Association, the Council of Development Finance Agencies, the Council of Federal Home Loan Banks, the United States Conference of Mayors, the Mortgage Bankers Association, the National Association of Health and Educational Facilities Finance Authorities, the International City/County Management Association, and the Regional Bond Dealers Association.

Under Levin’s bill, the BAB program would be extended two years, through the end of 2012. But it would gradually reduce the subsidy rate for BABs from the current 35% level to 32% for bonds sold in 2011 and 30% for those sold in 2012.

The Levin measure also would extend by one year, through 2011, the greater small-issuer exemption for bank-qualified bonds.

The 2009 American Recovery and Reinvestment Act modified the tax law to allow banks to deduct 80% of the costs of buying and carrying tax-exempt debt sold by borrowers whose annual issuance is no greater than $30 million, up from the previous $10 million limit. It also allowed for the $30 million limit to be applied to individual borrowers participating in conduit deals, rather than at the conduit-issuer level.

The Levin bill would extend for one year the programs for recovery zone economic development bonds and recovery zone facility bonds and would allocate an additional $10 billion and $15 billion, respectively, to the two programs. The bond authority would be allocated using a new formula that would guarantee each locality receives a minimum allocation equal at least to its share of national unemployment as of December 2009.

The bill would extend for one year, through 2011, the exemption from the alternative minimum tax for all private-activity bonds, including those issued to refund debt sold after 2003. It also would exempt water and sewer exempt-facility bonds from state volume caps for PABs, and allow Federal Home Loan Banks to guarantee tax-exempt bonds through 2011.

FHLBs earned the ability to guarantee tax-exempt debt as part of the housing rescue bill enacted in the summer of 2008, but that provision is scheduled to expire at the end of the year.

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