[Congressional Record Volume 143, Number 136 (Friday, October 3, 1997)]
[Senate]
[Pages S10321-S10322]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. D'AMATO (for himself and Mr. Breaux):
  S. 1251. A bill to amend the Internal Revenue Code of 1986 to 
increase the amount of private activity bonds which may be issued in 
each State, and to index such amount for inflation; to the Committee on 
Finance.


                   private activity bonds legislation

  Mr. D'AMATO. Mr. President, I rise today with my friend and 
colleague, Senator Breaux, to introduce long overdue legislation to 
increase the private activity tax-exempt bond cap to $75 per capita or 
$250 million, if greater, and index the cap to inflation. The current 
cap, which has not been adjusted in over a decade--not even to account 
for inflation--is severely restricting the ability of States and 
localities to meet pressing housing, economic development, and other 
needed investments in their citizens and communities.
  This cap, imposed in 1986, is now $50 per capita or $150 million, if 
greater. It applies to issuers of tax-exempt bonds for affordable 
single and multifamily housing, redevelopment of blighted areas, 
student loans, manufacturing, municipal service, and hazardous waste 
disposal facilities.
  Cap growth is limited to State population increases, but not 
inflation. As a result, inflation has severely eroded capped bonds' 
purchasing power. The 1987 bond cap, adjusted for the current limit, 
would have been $14.3 billion. Ten years later, the 1997 cap is $15 
billion a mere 5-percent increase--due to population--over a period of 
far greater inflation.
  Mr. President, Congress never intended to restrict the growth of this 
program. In fact, Congress never intended the cap to shrink at all. It 
allowed the cap to grow with State populations and imposed the cap in 
the same legislation, the 1986 Tax Reform Act, which terminated by 1989 
the two heaviest cap users: mortgage revenue bonds [MRB's] for housing, 
and industrial revenue bonds [IDB's] for manufacturing. That left 
plenty of room for the remaining capped bonds. Congress then extended 
MRB's and IDB's several times past the 1989 expiration dates and 
finally made them permanent in 1993.
  What Congress did not do at that time was adjust the cap to 
accommodate these additional uses. Accordingly, demand for capped bonds 
now exceeds supply in most States. One example is the overwhelming 
demand in many States for MRB's, issued primarily by State Housing 
Finance Agencies [HFA's] to finance modestly-priced first-time homes 
for lower income families. In 1996, State HFA's issued almost $8 
billion in MRB's for nearly 100,000 mortgages, according to the 
National Council of State Housing Agencies [HCSHA].
  Since January 1, 1995, the State of New York Mortgage Agency [SONYMA] 
has financed more than 1 billion dollars' worth of affordable first-
time home mortgage loans with MRB's. SONYMA's Construction Incentive 
Program has allocated $250 million in MRB funding which will create 
2,400 new homes and 6,000 full-time jobs in New York.
  The State of New York also relies heavily on tax-exempt bond 
authority for multifamily housing. In 1997 alone, the New York State 
Housing Finance Agency expects to finance $420 million worth of 
multifamily mortgage loans with multifamily housing bonds. 
This investment will create, 2,150 new, privately owned and managed 
apartments, 430 of which will be affordable to low-income families. In 
addition to providing desperately needed housing, this investment will 
promote economic integration in many neighborhoods.

  Unfortunately, home ownership and a decent apartment remain out of 
reach for thousands more families whom the MRB and multifamily housing 
bond programs could serve better than any other. State HFA's could have 
used an estimated additional $2.4 billion in bond cap authority in 
1996, according to NCSHA. SONYMA could have used another $100 million 
last year.
  The private activity volume cap also includes tax-exempt bond 
authority to assist small and midsized companies finance the expansion 
of manufacturing facilities. These companies often do not have 
reasonable access to the capital markets and cannot easily finance 
construction of manufacturing facilities. I used these bonds in my 
capacity as town supervisor of Hempstead to allow existing businesses 
to grow and to attract new business. Without this financing, these 
companies, and their employees, would not be in New York State. 
Nationwide, over $2.612 billion of tax-exempt manufacturing bonds were 
issued in 1996. In 1996 alone, New York State issues over $96 million 
of tax-exempt bonds for manufacturing facilities. The Council of 
Development Finance Agencies reported that bond issuance increased 32 
percent in 1996 from the prior year. In New York, demand for this low-
cost financing greatly exceeded the almost $100 million of bonds 
issued. The Empire State Development Corp., a public agency, reported 
that demand for tax-exempt bonds to support manufacturing was about 30 
percent higher than the over $96 million of bonds actually issued in 
1996.
  Over the years, these bonds created literally thousands of 
construction and permanent jobs in my home State, and tens of thousands 
nationwide. It is critical to raise the bond cap to facilitate job 
creation by small and midsized manufacturing companies. In many cases, 
these companies cannot obtain reasonable financing to expand, but for 
tax-exempt financing.
  Mr. President, nationwide, demand for all bonds under the cap 
outstripped supply by almost $7 billion last year, according to NCHSA. 
New York alone faced unmet demand of more than $1 billion for all the 
investments strangled by the cap.
  The Nation's Governors have adopted a policy calling for a cap 
increase. The Nation's State treasurers, National Association of 
Counties, and Association of Local Housing Financing Agencies [ALHFA] 
also support raising the cap.
  One-third of the House Ways and Means Committee and nearly 100 House 
Members overall already have cosponsored companion legislation--H.R. 
979--to increase the bond cap $75 per capita or $250 million, if 
greater, and index the cap to inflation.
  The current cap is severely restricting the ability of States and 
localities from making much-needed investments in their citizens and 
communities. I urge my colleagues to join Senator Breaux and me in a 
bipartisan effort to increase the bond cap.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1251

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. INCREASE IN STATE CEILING ON PRIVATE ACTIVITY 
                   BONDS.

       (a) Repeal of Post-1987 Reduction.--Subsection (d) of 
     section 146 of the Internal Revenue Code of 1986 (relating to 
     State ceiling) is amended by striking paragraph (2).
       (b) Adjustment of State Ceiling for Increases in Cost-of-
     Living.--Subsection (d) of section 146 of such Code is 
     amended by inserting after paragraph (1) the following new 
     paragraph:
       ``(2) Cost-of-living adjustment.--
       ``(A) In general.--In the case of a calendar year after 
     1998, each of the dollar amounts contained in paragraph (1) 
     shall be increased by an amount equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year by substituting 
     `calendar year 1997' for `calendar year 1992' in subparagraph 
     (B) thereof.
       ``(B) Rounding.--If any increase under subparagraph (A) is 
     not a multiple of the applicable dollar amount, such increase 
     shall be rounded to the nearest applicable dollar amount. For 
     purposes of the preceding sentence, the applicable dollar 
     amount is--
       ``(i) $1 in the case of an adjustment of the $75 amount in 
     paragraph (1)(A), and
       ``(ii) $5 in the case of an adjustment of the $250 amount 
     in paragraph (1)(B).''
       (c) Effective Date.--The amendments made by this section 
     shall apply to calendar years after 1997.


[[Page S10322]]


  Mr. BREAUX. Mr. President, I am pleased to introduce today with my 
colleague, Senator D'Amato, an important bill that will assist States 
and localities in working with private industry to foster economic 
development and provide home ownership opportunities to low-income 
Americans. Specifically, our bill will increase the private activity 
tax-exempt bond cap to $75 per capita or $250 million, if greater, and 
index the cap to inflation. Congress created the private activity-
exempt bond decades ago to apply to mortgage revenue bonds and other 
bonds for multifamily housing, redevelopment of blighted areas, student 
loans, manufacturing, and hazardous waste disposal facilities. However, 
Congress unintentionally restricted the growth of this program by 
imposing a cap on the bond volume of $50 per capita or $150 million, if 
greater, which has meant States cannot meet the demand for these bonds.
  Tax-exempt bonds are issued by State and local governments to provide 
below market interest rates to fund authorized programs and projects. 
Revenue bond investors accept lower interest from these bonds because 
the interest income is tax-exempt. Mortgage revenue bonds are issued to 
help lower income working families buy their first homes with low 
interest loans from private investment in State and local bonds, 
significantly lowering the cost of owning a home.
  In my own State, the Louisiana Housing Finance Agency has issued over 
$1.1 billion in mortgage revenue bonds for almost 16,000 affordable 
home mortgages since the program began. In 1996 alone, the agency 
issued over $112 million in mortgage revenue bonds for nearly 1,200 
home loans. That's 1,200 Louisiana families who now know the pride of 
owning their own home--Louisiana families that earned, on average, less 
than $28,000 last year. The Louisiana Housing Finance Agency estimates 
that it alone could have used another $50 million in bond authority. 
Nationwide, States could have used an additional $7 billion in bond cap 
for mortgage revenue bonds, student loan bonds, industrial revenue 
bonds, pollution control bonds, and other worthy investments.
  Student loan bonds are issued to raise a pool of money at tax-exempt 
interest rates to fund college loans at lesser interest rates. In my 
State, the Louisiana Public Facilities Authority has issued $745 
million in student loan bonds since 1984. These bonds have funded over 
80,000 college loans for deserving Louisiana students--students who 
otherwise might not have been able to afford to attend college.
  In Louisiana, the roughly $40 million of remaining 1997 volume cap 
will not come close to fulfilling the $330 million of demand for these 
bonds. The total 1997 volume cap for Louisiana was $217,500,000. After 
funding minimal housing and student loan needs, little volume cap 
remains available for industrial development bonds for manufacturing 
purposes. Many of the industrial and manufacturing facilities create 
substantial employment opportunities that are not possible due in part 
to a deficiency in volume cap.
  Our bill will correct this woeful situation and improve the ability 
of States and localities to provide home ownership opportunities to 
low-income families throughout the United States, to help fund student 
loans for college students and to help finance industrial and 
manufacturing facilities. These facilities will, in turn, increase 
employment and the tax base of local governments. I urge my colleagues 
to join me and Senator D'Amato in this effort.
                                 ______