[Congressional Record Volume 145, Number 107 (Tuesday, July 27, 1999)]
[Senate]
[Pages S9393-S9394]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LOTT:
  S. 1446. A bill to amend the Internal Revenue Code of 1986 to allow 
an additional advance refunding of bonds originally issued to finance 
governmental facilities used for essential governmental functions; to 
the Committee on Finance.


  state and local government essential services financing legislation

  Mr. LOTT. Mr. President, I rise today to introduce legislation to 
help state and local governments more effectively finance the cost of 
essential services such as schools, streets, and water and sewer 
systems.
  By easing tax law restrictions on the refinancing of certain bonds, 
this proposal would allow local jurisdictions to take advantage of 
favorable market interest rates. Financing the essential projects of 
our communities is primarily a state and local government 
responsibility. Federal tax laws should make it easier--not more 
difficult--for them to lessen the burden of taxes and other 
governmental charges on our citizens.
  The proposal would adjust tax law restrictions on the refinancing of 
certain bonds issued to provide services such as government-owned 
schools, hospitals, streets and water and sewer systems.
  Under current tax rules, most state and local governments may 
undertake an advance refunding of bonded indebtedness only one time and 
are thus unable to take full advantage of periods when market interest 
rates are low.

[[Page S9394]]

This legislation would allow every state and local government an 
additional opportunity to refinance bonded indebtedness issued to 
finance essential governmental projects.
  Furthermore, this legislation would give state and local governments 
flexibility skin to that of a homeowner who refinances a mortgage to 
reduce monthly payments and thereby increase income. The federal 
government should not expect state and local governments to shoulder 
the burden of financing local infrastructure, and then deny them the 
flexibility to handle their own affairs in the most efficient and cost-
effective manner. The change will help continue shifting power and 
control to local government where it belongs.
  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. 1446

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

     SECTION 1. ADDITIONAL ADVANCE REFUNDINGS OF CERTAIN 
                   GOVERNMENTAL BONDS.

       (a) In General.--Section 149(d)(3)(A)(i) of the Internal 
     Revenue Code of 1986 (relating to advance refundings of other 
     bonds) is amended--
       (1) by striking ``or'' at the end of subclause (I),
       (2) by adding ``or'' at the end of subclause (II), and
       (3) by inserting after subclause (II) the following:

       ``(III) the 2nd advance refunding of the original bond if 
     the original bond was issued after 1985 or the 3rd advance 
     refunding of the original bond if the original bond was 
     issued before 1986, if, in either case, the original bond was 
     issued as part of an issue 90 percent or more of the net 
     proceeds of which were used to finance governmental 
     facilities used for 1 or more essential governmental 
     functions (within the meaning of section 141(c)(2)),''.

       (b) Effective Date.--The amendments made by this section 
     shall apply to refunding bonds issued on or after the date of 
     enactment of this Act.

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