HomeMy WebLinkAboutR-691-4-86RESOLUTION NO. 691-4-86(R)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
ALLEN, COLLIN COUNTY, TEXAS, OPPOSING H.R. 3838
IN ITS CURRENT FORM AS IT RELATES TO THE ISSUANCE
OF MUNICIPAL BONDS; SUPPORTING PRECISE AND TARGETED
REFORMS OF SOME TAX-EXEMPT BORROWING PRACTICES;
AND DIRECTING CERTIFIED COPIES OF THIS RESOLUTION
TO CERTAIN CONGRESSIONAL LEADERS, REPRESENTATIVES
OF TEXAS, AND THE SECRETARY OF THE TREASURY.
WHEREAS, the City of Allen depends and will continue
to depend on the issuance of the tax-exempt bonds for
needed capital facilities and relies upon collection of
local taxes, fees, rates and revenues to repay the debt
created; and,
WHEREAS, on December 17, 1985, the House of Representatives
passed H.R. 3838, entitled the "Tax Reform Act of 1985" which
includes amendments to the provisions of the Internal Revenue
Code that relate to the tax-exempt status of bonds issued by
or on behalf of the states and their political subdivisions;
and,
WHEREAS, the Bill in its current form is effective as
to all bonds issued during the year 1986 and thereafter, and
the municipal bond market has been disrupted, even though the
Bill has not yet become law; and,
WHEREAS, the Bill's requirement to rebate arbitraged
interest earnings from invested bond proceeds effectively
amounts to a "tax" on local governments in violation of the
tenet of intergovernmental tax immunity; and,
WHEREAS, H.R. 3838, if passed in its current form is
expected to have the following effects:
1) The costs of borrowing by local governments will
be increased with resulting higher taxes and higher
utility rates;
Resolution No. 691-4-86(R)
Page 2
2) The volume limitations of the Bill unnecessarily
rations the ability of local governments to borrow
money for legitimate purposes;
3) The Bill places the risk of retroactive taxability
of bonds issued by local governments on the investors;
4) Liability for that risk will likely be incurred
by the local government; and,
5) Many traditional public purpose bonds can no longer
be issued due to the provisions which restrict the
use of debt financed facilities by persons other
than governmental entities.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF
THE CITY OF ALLEN, COLLIN COUNTY, TEXAS, THAT:
Section I. The City of Allen, Texas strongly opposes
H.R. 3838 in its current form and substance as it relates to
the issuance of tax-exempt bonds.
Section II. That, with respect to any future revisions
of H.R. 3838, the City of Allen, Texas urges the Congress to
reject any provisions that would result in direct and indirect
increases in the costs of borrowing by the states and their
local governments and instrumentalities in all of their
historic public activities and specifically would urge the
Congress to consider the following:
a) Eliminate all provisions in H.R. 3838 that provide
for the taxability of municipal bonds retroactively
to their date of issuance.
b) Continue to permit traditional and essential public
functions to be financed on a tax-exempt basis outside
state cap limitations.
c) Permit the advance refunding of state and local public
debt on the basis now permitted by law.
d) Eliminate all provisions from H.R. 3838 which require
payment of interest earned on investments to the
federal treasury.
Resolution No. 691-4-86(R)
Page 3
e) Eliminate all provisions of H.R. 3838 that impose
arbitrary constraints on governmental decision
making or that require violations of state law, such
as:
1) The provision requiring that 50 of the net
proceeds be spent within 30 days of issue; and,
2) The requirement that all of the proceeds be
spent within three years of the date of issuance.
Section III. The City of Allen, Texas strongly supports,
and urgently requests the adoption by the Senate and the House
of Representatives of S. Con. Res. 105 and H. Con. Res. 279,
each of which delays the effective date of any tax reform
legislation that would adversely affect the tax-exempt status
of municipal bonds while the merits of H.R. 3838 are being
considered and developed.
Section IV. In the tax reform effort, the City of Allen,
Texas supports the continuation of the arbitrage limitations
now present in the Internal Revenue Code, and would support
precise and targeted amendments to current law designed to
correct practices that may be perceived by the public to be
abusive; for example, the retention of state volume limitations
under current law, and limiting "small issue industrial
development bonds" to those envisioned by the original legisla-
tive intent, as the City of Allen has done through the Allen
Industrial Development Corporation.
Section V. That a certified copy of this resolution be
forwarded to all members of Congress representing Texas, to
the Chairman of the House Ways and Means Committee, the Chairman
of the Senate Finance Committee, the Majority and Minority
Leaders of the House and Senate, and the Secretary of the
Treasury.
Resolution No. 691-4-86(R)
Page 4
DULY PASSED AND APPROVED BY THE CITY COUNCIL OF THE
CITY OF ALLEN, COLLIN COUNTY, TEXAS, ON THIS THE 4th DAY
OF APRIL, 1986.
APPROVED:
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ATTEST:
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Marty Hendrix,, ITY SECRETARY