**Help Bailout your State and Municipalities**

**Cosponsor the Municipal Debt Refinancing Act**

 

Help give your state and municipalities needed financial assistance, by
giving them a new source of revenue through refinancing their debt.

 

A bill we plan on introducing, the Municipal Debt Refinancing Act, will
give states and local governments more flexibility to refinance their
existing debt portfolios, allowing them to take advantage of today\'s
low interest rates. This flexibility will provide our governors and
mayors needed savings to close the budget gaps and meet public
obligations. By lifting these arbitrary federal restrictions, states can
immediately work on lowering their deficits. This bill is identical to
S. 271 introduced in the Senate by Senators Gordon Smith and Jon
Corzine.

 

Homeowners across the country are refinancing their mortgages and saving
large sums of money as a result of the current low interest rates.  It
is only fair that we offer the same opportunity to our states and
localities to help mitigate the financial burden that they are
enduring. 

 

Unlike homeowners who can usually refinance at any time, state
governments can only redeem existing debt on specific dates - known as
call dates. If an issuer would benefit from a refunding transaction but
the existing bonds are not currently eligible to be called, the issuer
can still refinance by executing an \"advance refunding.\" In this case,
the state or local government issues advance refunding bonds and the
proceeds of the new bonds are held in reserve to pay the interest and
principal on the old bonds until they become callable.

 

Enacted as part of the Federal Tax Reform package of 1986, the IRS Code
Section 149(d) says that bonds originally issued after 1985 may only be
advance refunded once. Bonds issued before 1986 may be advance refunded
twice. As a result local governments throughout the country are
potentially losing out on tens of millions of dollars of much needed
savings.  Our bill would allow one additional advance refunding.

 

This legislation is not without precedent. Congress acted swiftly to
allow New York City the opportunity to advance refund outstanding debt
in the wake of the September 11, 2001 terrorist attacks with very
positive results.  The substantial savings in debt service payments
helped blunt the devastating impact of those attacks on the city\'s debt
burden. The time has come to allow all of America\'s city, county and
state governments this same benefit.

 

State and local access to capital at the lowest possible cost is
critical at this time and vital to your state\'s long-term economic
growth. Further, tax-exempt bonds fund a wide variety of capital
infrastructure projects such as schools, roads and highways, bridges,
water and sewer systems, airports, and parks, among many others. As our
governors face a large scale fiscal difficulties, this advance refunding
is an innovative way the federal government can help cities and towns
provide vital infrastructure and services. We ask all my colleagues to
join us as a cosponsor of this important legislation that will help
municipalities across this nation.

 

If you would like more information or are interested in cosponsoring the
Municipal Debt Refinancing Act, please contact Brian Wild in Rep.
Toomey\'s office at 5-6411 or <brian.wild@mail.house.gov>. 

 

Sincerely,

** **

** **

**Rep. Patrick J. Toomey                       Rep. Paul E. Kanjorski**