Laserfiche WebLink
leaBue of <br /> <br />minnesota cities <br /> <br />MUNICIPAL BOND INTEREST LEGISLATION <br /> <br />The Senate passed and included in its omnibus tax bill an amended version of SoFo 2201 <br />(Stumpf). The Senate provisions included raising the interest rate ceiling for munici- <br />pal general obligation and revenue bonds to a maximum of 12%. The bill also eliminated <br />the so called "sunrise" which would have established a 9% Ceiling on municipal industrial <br />revenue bonds beginning on July 1, 1981. The Senate did not change the July 1, 1981 <br />so-called "sunset" provision which, as of that date, returns the interest ceiling on <br />general obligation and revenue bonds to 7%. <br /> <br />The legislation is now before the House and Senate conferees who are considering the <br />two omnibus tax bills. <br /> <br />The House version of this legislation contains the same interest rate ceiling of 12% <br />but has a more extensive "sunrise" and "sunset" provision. The House bill returns the <br />interest rate on municipal revenue and general obligation bonds to 7% on July 1, 1982 <br />and uses the same time to begin a 9% ceiling on municipal industrial revenue bonds. <br /> <br />There appears to be little likelihood that we will be able to eliminate the "sunrise" <br />and "sunset" provisions which are contained in both bills~. We have, however, asked <br />the conferees that they substitute a study of the bond market durina the interim <br />instead of mandating a return to the 7% rate or establishin§ a 9% rate for IDR!s. The <br />League staff, however, is not confident tha~ the conferees will accept this proposition. <br /> <br />We are also asking the conferees to let the market determine the interest rate rather <br />than establish the 12% ceiling. This seems indicated in view of the continued <br />escalation of the tax-exempt market and the real prospect that 12% will cause some <br />cities to be unable to issue revenue bonds very soon and, possibly, shut down the <br />general obligation market for some cities. <br /> <br />The conferees are as follows: House: Sieben, Pehler, Eken, Casserly, Schreiber. <br />Senate: McCutcheon, Hanson, Sillers, Johnson~ Peterson. <br /> <br />IF YOU liAVF A MEMBER OF THE CONFERENCE COMMITTEE PLEASE CONTACT THEM AND RE-EMPHASIZE <br />THE LEAGUE'S POSITION ON MUNICIPAL BONDS. ASK THEM IF THEY WOULDN'T CONSIDER REQUIRING <br />A STUDY OF THE MUNICIPAL BOND MARKET RATHER THAN MANDATING A RETURN TO THE 7% RATE AND <br />IiiSTALLI~G A 9% RATE FOR MUNICIPAL INDUSTRIAL REVENUE BONDS. ALSO, URGE THEM AS A <br />!.:Zi~iMU?! TO APPROVE AN OPEN END PROVISION SO THAT CITIES MAY SELL THEIR BONDS IF THEY <br />ilUST, BEYOND THE 12% RATE. <br /> <br />DS:rmm <br />3/26/80 <br /> <br />[~00 hanover building, 480 cedar street, saint paul, minnesota 55101 <br /> <br /> (OVER) <br />[812] 2~2-2881 <br /> <br /> <br />