wASHINGTON -- The municipal bond market has a good opportunity to help itself -- unless its genetic predisposition toward greed gets in the way.

It seems that as part of its massive highway spending bill the House Public Works Committee is likely to propose easing some restrictions on tax-exempt bonds to spur the financing of infrastructure projects. That may present the municipal market with the best chance it has had in the last five years of winning relief from some of the curbs placed on it by the Tax Reform Act of 1986.

Those proposals, which can be financed by the increase in the gasoline tax that is to be included in the highway bill, could range from modest to radical.

On a lesser level, they may incorporate Rep. Beryl Anthony's bond curb simplification legislation, which includes proposals that would increase the bank deduction for small issues, expand the small-issuer rebate exemption, and allow issuers who must rebate arbitrage profits to retain 10% of the earnings -- proposals that would not cost the government much, yet would make it much easier for many issuers to finance needed public projects.

Or, on a radical level, they may include some of the proposals advanced in the last couple of years that would attempt to roll back many of the tough curbs imposed on private-activity bonds by exempting from restrictions such as the volume cap and the alternative minimum tax bonds used to finance infrastructure and environmental projects that benefit private firms.

While there may be a move by some in the municipal market to lobby the public works panel to include the most radical proposals to undo many of the bond curbs, market participants should avoid the temptation to push for anything smacking of wholesale rollbacks. Such a campaign would surely be shot down when the proposals are referred to the House Ways and Means Committee and could prompt tax writers to refuse to consider any proposals to ease the bond curbs.

Rather, lobbyists should start off by working to encourage both the public works and tax panels to consider approving the reasonable and restrained proposals pushed by Rep. Anthony, changes that are designed to streamline the bond curbs and make it easier for issuers to finance all kinds of needed public projects.

Some industry lobbyists made a serious mistake in 1986 by spending more time trying to roll back the 1984 bond curbs than they did in working to mitigate the curbs that were proposed in the tax reform measure. As a result, some feel the 1986 bond curbs were tougher than they should have been.

Legislation to help repair the nation's infrastructure appears likely to be passed this year and the municipal market must make sure that some constructive easing of the bond curbs is included.

But the market must make sure that it doesn't risk coming up empty handed by asking for too much.

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