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

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I ii I I I I I I I I I I I I I I I I BIL~ FR£NZEL 207 ;'25.2871 ¢5ongrtss of tl £ nitrb tate ousr ot enre entatiur ; The ttonorable Thomas G. Mayor City of Ramsey 15:153 Nowthen Boulevard, Ramsey, MN 55303 Dear Mayor Gamec: 6 ~2-8E, 1-460L, Because of your interest in legislation affecting tax-exempt bonds, I wanted to brincj you up-to-date on the status of such legislation at the end of the First Session of the 98th Congress. As part of the not as yet enacted Tax Reform Act of 1983, the House Ways and Means Committee approved legislation which is generally designed to restrict the total volume of tax-exempt bonds that could be issued in any given state, without further restricting the use of the proceeds of such bonds. Generally, states would be allowed to issue bonds up to a ceiling determined by multiplying the number of people in the state by $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 revenue bonds (which currently have their own cap), and multi-family housing IDB's (under a Ways and Means Committee approved amendment), would be exempt from the restrictions in the bill. Other provisions have also been included in the Ways and Means Committee bill limiting the arbitrage which may be earned on a bond issue, and limiting the practice of selling portions of a project as a means of avoiding the $10 million small issue limitation. A volume cap on private purpose tax-exempt bonds was not my first choice as a means of restricting their u_se. The Ways and Means Committee, however, felt it was~.very'impoWI~fit"~5'-s]~'~$ the future growth of the use of the bonds due to the explosion of growth which his occurred in the use of tax-exempt bonds in recent years. Now nearly everybody uses them for nearly everything. Tax-exempt bonds genemllT;should be the ~.n. ancing vehicle of last resort. In time of short supply of c~..t-j.~l~,~.igh"inlere-St' ,rates, however, they are often the only game in town. Th~"biil attempts ~o reinforce this point, and attempts to discourage the perception that tax-exempts are designed to be a first choice as a means of financing private purpose proiects. In c-hoosing a cap rather than imposing further extremely severe restrictions., in the depreciation of tax-exempt property, the Committee attempted to deVelop'an equitable and uniform system for limitinq the rapid growth of tax-exempt bonds~ Without specifically telling states for- which projects they could or could not ..., ,...