[Congressional Record Volume 149, Number 80 (Tuesday, June 3, 2003)]
[Extensions of Remarks]
[Page E1114]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


        RELIEF TO MUNICIPAL UTILITIES WHO ISSUE TAX EXEMPT BONDS

                                 ______
                                 

                        HON. JOHN M. SPRATT, JR.

                           of south carolina

                    in the house of representatives

                         Tuesday, June 3, 2003

  Mr. SPRATT.  Mr. Speaker, I rise today in support of legislation that 
I have just reintroduced to provide relief to municipal utilities who 
issue tax exempt bonds. This legislation would permit these utilities 
to take advantage of a process known as ``advance refunding,'' which 
allows the bond issuer to take advantage of favorable market conditions 
by refinancing their debt at a lower interest rate. The bill is 
identical to legislation I introduced in the 107th Congress that was 
cosponsored by the entire South Carolina Congressional delegation.
  Advance refunding works just like refinancing your home. If interest 
rates have dropped since you purchased your home, then you can 
refinance, or ``advance refund,'' that home at the lower rate. This can 
save the average homeowner thousands of dollars in foregone interest 
payments.
  This same refinancing has, in the past, been allowed for municipal 
utilities who use tax exempt bonds to finance their facilities and 
equipment. Because of the large capital costs associated with power 
generation and distribution, the debt incurred from these issues is 
often substantial, and debt service payments end up being one of the 
largest expenses for the utility. These higher costs are then passed on 
to the consumer in the form of higher electric rates. If these 
companies are allowed to refinance, they can save millions of dollars 
in foregone interest payments, which translates into lower rates for 
the average consumer.
  Under current tax law, these municipal utilities have been able to 
advance refund their debt only once since 1986. Many of these utilities 
companies still face staggering debts. For one utility company in my 
state, these debt payments have become particularly burdensome, and all 
of its customers are suffering from the resulting high rates. With 
interest rates so low, this utility is convinced that if it is allowed 
to advance refund one additional time, it will be able to stabilize its 
debt service and significantly lower these rates.
  That is what my legislation does. It allows municipal utilities to 
advance refund one additional time if they have already advance 
refunded since 1986.
  Municipal utilities are by no means the only issuers of tax exempt 
bonds. I have limited the scope of this bill to municipal utilities 
because they face substantial debts and are subject to limitations that 
state and local governments are not. The bill is open to modification 
for others who might benefit from advance refunding of their debt.
  During consideration of the most recent tax bill in the Senate, 
Senator Lincoln offered an amendment that allowed for additional 
advance refunding for Arkansas schools. While I am sure that Arkansas 
schools need such relief, other sectors need similar relief, and 
especially municipal utilities. I am pleased to see Senator Lincoln 
reopen the advance refunding debate, and would welcome the opportunity 
to discuss inclusion of my bill in tax reform measures taken up by the 
House in the future. The benefits to my state, and others, would be 
significant, and they would ultimately be enjoyed by consumers.

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