WASHINGTON - Proponents of municipal bonds may have to reinvent the wheel next year when it comes to educating members of Congress on issues related to tax-exempt finance.
Bond proponents spent the last six years working to make legislators understand the problems the Tax Reform Act of 1986 created for the municipal market. This effort began to pay off in the last couple of years, as Rep. Beryl Anthony, D-Ark., made his colleagues more aware of the problems with the tax act and Congress became more willing to pass proposals to ease bond curbs.
But issuers woke up on Nov. 4 to discover that a large number of those lawmakers had been voted out of office on Election Day and will not return when the 103d Congress convenes in January.
That turnover left 13 vacancies on the powerful House Ways and Means Committee, which originates all tax legislation, and also means there will be 110 House freshmen next year. The departing members include Anthony, a Ways and Means Committee member who was defeated in a primary runoff election.
"To the extent you lose members you've taken the time to educate and work with, that makes our life more difficult, even if the new people are favorably disposed to you in general," said Guy Land, a lobbyist for the Council of Development Finance Agencies. "You still need to spend a lot more time working with new members to educate them. "
Micah S. Green, executive vice president of the Public Securities Association, said there are "some people who are leaving who attained a great deal of knowledge. That knowledge base is gone and will be difficult to replace."
The need to educate new members of the House in general, and the Ways and Means Committee in particular, is most immediate for proponents of the tax exemptions for mortgage revenue bonds and small-issue industrial development bonds, which expired June 30.
In the 102d Congress, those lobbyists worked to get as many members as possible to "co-sponsor," or sign on as supporters for legislation to extend those exemptions.
A total of 232 House members cosponsored legislation offered by Rep. Bill Coyne, D-Pa., that would have extended the IDB exemption through 1996, while 401 House members co-sponsored a bill by Rep. Barbara Kennelly, D-Conn., that would have made the mortgage bond exemption permanent. Congress passed extensions of both exemptions as part of a bigger tax package that President Bush vetoed.
Next year, 63 of the IDB bill's co-sponsors will not return, while 107 of the co-sponsors of the mortgage bond bill will no longer be in Congress.
Because the level of co-sponsorship is seen as a barometer of support for mortgage bonds and IDBS, proponents of the exemptions make it a point each year to make sure they match or exceed the previous year's number of co-sponsors. The high rate of turnover in the recent elections will make that task much more difficult, said John T. McEvoy, executive director of the National Council of State Housing Agencies.
"I look at it as a dreadful prospect," he said.
But one factor that makes it easier for the council and other housing groups is President-elect Bill Clinton's strong support for mortgage bonds and the low-income housing tax credit, said John C. Murphy, executive director of the Association of Local Housing Finance Agencies.
"We're certainly encouraged by the fact that the President-elect's housing policy calls for permanent extensions of both mortgage bonds and the credit," Murphy said. "Having said that, we've still got work to do on [Capitol] Hill with so many new members."
One positive aspect of the turnover in House members is that a high percentage of the freshmen already have government experience and are likely to be familiar with municipal finance, said Frank Shafroth, director of policy and federal relations for the National League of Cities.
"Seventy-five percent of the new members have either state or local service backgrounds," Shafroth said. "The chances are good of new members coming on board who understand the first thing about how tax-exempt financing provides public facilities and public benefits. "
Amy K. Dunbar, director of governmental affairs for the National Association of Bond Lawyers, noted another benefit of having so many freshmen in Congress next year.
"There will be so many new people without established agendas" who may be willing to champion the cause of state and local finance, she said.
The job of explaining the role of tax-exempt bonds may also be made easier by the push now on in Congress to improve the nation's infrastructure, Green said.
"I think public finance, now more than at any time in recent history, is truly a part of the solution to the nation's problems," Green said. "I think we've got a good story to tell."