Ef­forts Fail In Panel to Save Mu­nis

The Bond Buyer - - Front Page - By Brian Tu­multy

WASH­ING­TON – House Ways and Means Com­mit­tee Repub­li­cans on Wed­nes­day voted 24 to 16 along party lines against amend­ments by two Democrats to save ad­vance re­fund­ings and pri­vate ac­tiv­ity bonds from be­ing ter­mi­nated af­ter this year.

Some Repub­li­can law­mak­ers, how­ever, pub­licly pledged to work with Democrats to try to save these bonds in tax re­form leg­is­la­tion go­ing for­ward.

“This is a pro­gram that is sup­ported by a lot of Repub­li­cans,” said Rep. Pat Tiberi, R-Ohio, of PABs. “It’s pub­lic-pri­vate part­ner­ships. It’s hous­ing that’s needed. And I, too, am dis­ap­pointed that it’s not in this bill.”

Tiberi ac­knowl­edged it would be a blow to af­ford­able mul­ti­fam­ily hous­ing but added that the low-in­come hous­ing tax credit is left in­tact in the tax bill.

How­ever, Rep. Suzan Del Bene, D-Wash., said al­most half of its use would be elim­i­nated if tax-ex­empt PABs are ter­mi­nated.

Tiberi and other Repub­li­cans on the panel who have been sup­port­ers of PABs de­fended the leg­is­la­tion pro­posed by Chair­man Kevin Brady, R-Texas, which would ter­mi­nate these bonds af­ter 2017.

“At the end of the day the chair­man has a really tough job, a bal­anc­ing act that would be the equiv­a­lent of some­one on a cir­cus wire,” Tiberi said.

He also said Repub­li­cans are try­ing to elim­i­nate PAB abuses.

“These bonds have been used for golf cour­ses,” Tiberi said. “I don’t think any­body on this dais thinks that is an ap­pro­pri­ate use,” also list­ing of­fice build­ings as an­other ex­am­ple of an abuse.

But PAB sup­port­ers took is­sue with his re­marks about abuses.

“The tax code cur­rently ex­plic­itly pro­hibits pri­vate ac­tiv­ity bonds from be­ing used for golf cour­ses and of­fice build­ings with no gov­ern­men­tal ten­ants,” said Tim Fisher, leg­isla­tive and fed­eral af­fairs co­or­di­na­tor for the Coun­cil of De­vel­op­ment Fi­nance Agen­cies. Those fi­nanc­ings were pro­hib­ited 31 years ago by the 1986 Tax Re­form Act, he said.

Rep. San­der Levin, D-Mich., ob­jected to what he said is an im­bal­ance in the bill, which low­ers the cor­po­rate tax rate to 20% from 35%.

“How do you end abuse by elim­i­nat­ing the pro­vi­sion?” he asked. “How does that work? How do you do that?”

An­other Demo­crat, Rep. Bill Pascrell from New Jersey, said he has worked with two Repub­li­cans on the com­mit­tee – Reps. Tom Reed of New York and Pa­trick Mee­han of Penn­syl­va­nia – on cospon­sor­ing leg­is­la­tion to al­low the use of PABs for wa­ter in­fra­struc­ture.

“What hap­pened? Have you aban­doned ship?” Pascrell asked. “With con­straints on lo­cal bud­gets, pri­vate ac­tiv­ity bonds are the best method of pump­ing bil­lions of dol­lars of pri­vate cap­i­tal into pub­lic in­fra­struc­ture projects while shift­ing the eco­nomic risk away from mu­nic­i­pal­i­ties and to­wards the pri­vate sec­tor.”

Pascrell said PABs are used for air­ports, schools, as­sisted liv­ing fa­cil­i­ties, col­leges and not-for-profit health­care fa­cil­i­ties.

DelBene, who pro­posed the amend­ment to main­tain PABs and in­crease the avail­abil­ity of the low-in­come hous­ing tax credit by 50%, said there is a hous­ing af­ford­abil­ity cri­sis in the Puget Sound re­gion she rep­re­sents.

“We have peo­ple liv­ing on our streets,” she said, cit­ing a 64.5% jump in the me­dian home price in the last five years.

Ac­cord­ing to the Wash­ing­ton State Hous­ing Fi­nance Com­mis­sion, 2,088 af­ford­able apart­ments that would house over 4,000 peo­ple in six coun­ties across my state that are cur­rently planned for the next two years would not be built with­out pri­vate ac­tiv­ity bonds,” she said. Those prospec­tive renters earn less than 60% of the me­dian in­come in the re­gion.

“Pri­vate ac­tiv­ity bonds have helped build more than 76,000 apart­ments across the state of Wash­ing­ton and pro­vide over 46,000 home loans for first time home buy­ers,” DelBene said.

The ad­vance re­fund­ing amend­ment was pro­posed by Rep. Terri Sewell, D-Ala., who ear­lier in the week de­scribed her­self as “a for­mer or a re­cov­er­ing bond lawyer.”

“I can at­test to the fact that through tax ex­empt bonds we have built hos­pi­tals and schools and roads and bridges,” Sewell said, not­ing they have been used for in­vest­ments in “his­tor­i­cally low in­come com­mu­ni­ties.”

Sewell said Chil­dren’s Hos­pi­tal in Birm­ing­ham is an ex­am­ple of the ben­e­fits of an ad­vance re­fund­ing that was done in 2015 at a lower in­ter­est rate af­ter orig­i­nally fi­nanc­ing the project “in 2009 when we were go­ing through a really tough eco­nomic time.” ◽

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