Washington, DC - U.S. Senators Jeff Bingaman (D-NM) and Mike Crapo (R-ID) today began their push to permanently extend a provision that helps small and rural municipal governments raise capital to finance local infrastructure projects - including school and road construction -- and meet other ongoing needs.
Before 2009, banks had incentives to purchase municipal bonds only from municipalities that issue $10 million or less in debt each year - a level that was unchanged since 1986. The American Recovery and Reinvestment Act incorporated a provision pushed by Bingaman and Crapo to raise that limit to $30 million, but that measure expires at the end of this year. The Bingaman-Crapo Municipal Bond Market Support Act of 2010 would make the $30 million level permanent, and index it for inflation.
The increased level has so far enabled municipalities from across the country to place bonds directly at financial institutions, including community banks. When municipal governments work directly with community banks, they achieve considerable savings on interest and transaction costs.
"This provision has helped small communities across New Mexico and the country finance critical infrastructure needs and create jobs. The higher bank-qualified limit is a great success and deserves to be made permanent. We need to ensure that our small municipalities can continue to raise capital, particularly in periods of tight credit," Bingaman said.
"As our small communities continue to struggle to secure financing for important infrastructure improvement projects, our efforts last year have proven successful in Idaho and throughout the country. I look forward to continuing to work with Senator Bingaman and my colleagues on the Senate Finance Committee to extend these important provisions," Crapo said.
In 2009, the dollar amount of bank qualified issuances doubled to $32.7 billion, with nearly 6,000 issuances. Among the beneficiaries are New Mexico and Idaho counties, cities, and school districts in all corners of the states.
At least 13 organizations have expressed support for the Municipal Bond Market Support Act of 2010. They are as follows:
American Hospital Association
Council of Development Finance Agencies
Government Finance Officers Association
International City/County Management Association
National Association of Bond Lawyers
National Association of College and University Business Officers
National Association of Counties
National Association of Health and Educational Facilities Authorities
National Association of State Auditors, Comptrollers and Treasurers
National League of Cities
Regional Bond Dealers Association
Securities Industry and Financial Market Association
US Conference of Mayors
The bill has been sent to the Senate Finance Committee; both Bingaman and Crapo are members of that panel.