[Congressional Record Volume 149, Number 80 (Tuesday, June 3, 2003)]
[Senate]
[Page S7229]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


        JOBS AND GROWTH TAX RELIEF RECONCILIATION TAX ACT, 2003


                            ADVANCE REFUNDING

  Mr. SMITH. Mr. President, I realize it cannot be considered as part 
of the pending legislation, but I ask Senator Grassley to consider 
including a bill I have introduced, the Municipal Debt Refinancing Act, 
in future tax legislation. The Municipal Debt Refinancing Act would 
permit an additional advance refunding for bonds used to finance 
governmental facilities as part of the tax legislation to be considered 
by the Finance Committee. The Municipal Debt Refinancing Act would 
permit fiscally strapped State and local governments to take advantage 
of the current low market interest rates by refinancing their 
outstanding bonds an additional time. This proposal could translate 
into millions of dollars in savings for states and localities across 
the country. By requiring bond issuers to use the additional advance 
refunding authority within the next 2 years, the legislation also 
guarantees the maximum near-term benefit.
  Individuals and corporations who borrow money are free to refinance 
these debts whenever the opportunity to borrow at a lower rate arises. 
State and local governments who issue tax-exempt bonds generally do not 
share this freedom. States and localities are permitted to ``advance 
refund'' outstanding bond issues only one time, or else they must wait 
until a pre-set date when interest rates have risen and the opportunity 
to garner savings has passed. But cost-saving refinancing opportunities 
typically occur only when market interest rates fall below the rate on 
the original bond issue. Issuers cannot effectively predict when this 
will happen. By providing an additional advance funding, your 
legislation would give issuers more flexibility to react to interest 
rate changes and manage their debt. This legislation would mean 
significant savings for State and local governments--many of which are 
in the midst of their worst fiscal crisis in memory--without raising 
taxes or increasing spending.
  Mr. GRASSLEY. I appreciate the Senator's work in this important area. 
It is true that permitting States and localities to advance refund 
governmental bonds one additional time would provide important 
financial flexibility at a critical time. State and local governments 
across the country are facing unprecedented fiscal crisis. Being able 
to refinance debt at a lower rate will clearly translate into important 
savings for our Nation's cities, counties and states.
  I assure the Senator this proposal will receive serious and thorough 
consideration by the Finance Committee, which I chair, as we address 
tax legislation in the future.

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