Rule changes proposed by the Internal Revenue Service that would ease public approval requirements for projects financed with private-activity bonds could leave local governments out of the loop, the National Association of Counties warned in a recent letter sent to the agency.

The proposed regulations "preempt the local decision-making process and do not ensure that the most directly affected public constituencies will receive reasonable public notice and an opportunity for a public hearing," NACo told the IRS in a comment letter on the proposals.

NACo's concern stems from the fact that the regulations permit states serving as conduit issuers of private-activity bonds to hold a single public hearing at the state capitol that would cover all of the bond-financed projects. The group argued that conducting hearings this way could limit the participation of affected citizens and "may require significant travel time and cost by those individuals who wish to attend."

Instead, the group recommended the IRS clarify that hearings be conducted by the local elected body with jurisdiction over where the facilities will be physically located. NACo also said that if a state issuer announces the hearing on its Web site, it should give advance notice to local officials of the affected area to organize a hearing, and the project should not be permitted to proceed unless those officials approve it after the hearing.

The Government Finance Officers Association also weighed in on the proposed rule changes, expressing appreciation for the update but requesting several clarifications.

The rules should clarify that governments that develop Web sites in the future can announce TEFRA public hearings on those sites, GFOA said. The rules currently state that governments who maintain regularly updated Web sites now can announce the hearings there.

GFOA also recommended that the rules specifically state that the announcement should be posted on the sites of the issuer as well as the governmental entity with jurisdiction over the area where the project would be located.

Furthermore, the group requested that the IRS clarify how specific issuers must be about which newspapers they use to announce the hearings.

"For instance, may a statewide newspaper be used or does a notice have to appear in a newspaper (even if it is not published daily) published in each jurisdiction where a project is proposed?" the letter said. "This type of clarification is needed so that issuers are certain to be compliant with the rules and not face a possible audit due to the vagueness of the regulation."

In addition to the two governmental groups, several more labor and community organizations submitted letters to the IRS, complaining that the proposed changes would make it more difficult for the public to learn about the projects and reduce the opportunities of groups or individuals to express support or opposition to them.

The organizations, which included the Service Employees International Union, requested the IRS withdraw the proposed changes. The proposal to reduce to seven from 14 the number of days an issuer must announce a hearing before it is held would thwart the public's ability to weigh in on the projects, it said.

Other groups that submitted critical letters include: the Pratt Center for Community Development, UNITE HERE, and Good Jobs First-Illinois.

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