Agenda - Council - 12/20/1983 - Laserfiche WebLink

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0f The Honorable Thomas G. Gamec ~:~ '~)V~ ~] Mayor ' City of Ramsey ~,_ 15153 Nowthen Boulevard, N W RamseS, MN 55303 Dear Ma~or Gamec: Because of your ~nterest in legislation affectin~ tax-exempt bonds, I wanted to the status of such at the end of the First brin~ up-to-date ~ou OB legislation Session of the Ogth Con,ress. As part of the not as yet enacted Tax Reform hct of 1~83, the House Ways and Means Committee approved legislation which is ~enerall~ designed to restrict the total volume of tax-exempt bonds that could be issued in any ~iven state, without further restrictin~ the use of the proceeds of such bonds. Generally, states would be allowed to issue bonds up to a ceilin~ determined b~ multipl~in~ the number of people in the state b~ $150. This $150 "per capita cap" would be divided between state and local units of'government. States whose current bond activity exceeds $150 per capita would be given two years to reduce their private purpose bond issuances to the cap levels. The cap would be further reduced in 1986 to $100 per capita, to reflect the elimination of small issue IDB's. Single family mortgage bonds (which currently have their own cap), and multi-family housing revenue ]DB's (under a Ways and ~eans Cool,tee approved amendment), would be exempt from ~he restric~ons in %he Other provisions have also been ~nc]uded ~n ~he Ways and ~eans Co~ittee hmiUn9 %he arbRraGe which may be earned on a bond issue, and ]imiUng the pracUce of selling portions of a project as a means of avoiding ~he $10 m~Hion small ~ssue hmitat~on. A volume cap on private purpose ~ax-exemp~ bonds was not my first'choice as a means of res[ric~qG[hei~_~se. The Ways and ~eans Co~i[%ee, however, lek wa~ve~mp~Ian~-'i~-%]ow %he future Growth of ~he use of ~e bonds due explosion of Growth which has occurred in ~he use of ~ax-exemp% bonds in recent Now nearly everybody uses %hem for nearly every~ing. Tax-exempt bonds years. Gene~]}y'~shou~d be ~he fin3ndng vehicle of ]as~ resort. ]n ~ime of short supply cred~[;-.~r.~hiGh in[er~s~"~a~es, however, they are often the only Game in town. The'~b~]] at%~m])%s~%o re~nforce this point, and a~%emp%s [o discourage ~he percepUon ~ha[ .~axLexem~-is are-designed [o be a f~rs~ choice as a means of f~nanc~nG purpose pro]e(ts.-~n ~ehoos~ng a cap rather than ~mposinG further extremelY.~ severe res~c~ons..~n~ %he depreciation of %ax-exemp~ proper~y, the Co~ittee a%%e~p~ed de%~]op-~n eq~itab~e and un~form system for hm]t~nG ~he rap~d Growth of [a~-exempt bcnds~-~[[hou% specif~aJ]y..te]hng states for which pro~ec[s they could or (ould not iss}~ bonds. '.'" ~