WASHINGTON - The municipal bond market may have gotten a renewed glimmer of hope that it can convince Congress to ease of some of the curbs on tax-exempt bonds this year.
In early February, when President Clinton failed to include any municipal bond proposals in his fiscal 1995 budget plan, the outlook was glum.
The first glimmer of hope came later in February when lobbyists said it might be possible to convince Congress to include in the health care reform package measures to ease the curbs on hospital bonds.
Measures include a proposal to ease the limits on advance refundings so that hospitals forced to merge, consolidate, or restructure as a result of the reform plan will be able to dissolve existing bond covenants as they reorganize. Other proposals would ease or eliminate the $150 million limit on the amount of bonds a nonhospital 510(c)(3) organization may have outstanding and would increase the $10 million limit on bank deductible debt.
Some in the industry also want to convince Congress to broaden those measures by raising the $150 million limit for colleges and other non-profit institutions and increasing the limit for all bank-qualified debt.
Only days ago, the odds of getting approval this year for either the broader proposals or merely the hospital bond measures seemed slim because of a perennial problem: lack of revenues to pay for them.
Within the last 10 days, however, several developments in Congress appear to have given a boost to the bond proposals, as well as to the long-standing bond simplification measures that would ease some of the arbitrage restrictions.
Suddenly, House Ways and Means Committee Chairman Dan Rostenkowski, D-III., is talking about the need for broad tax increases to fund health care reform, and leaders from both the House and Senate are beginning to consider raising revenues by taxing employee health care benefits.
Either of the two initiatives is likely to raise billions of dollars in new taxes - revenues that could be used both to fund the proposed system of universal health coverage and the proposals involving bonds.
Last week, nine of the 24 Democrats on the Ways and Means Committee sent a letter to Rostenkowski urging him to include the hospital bond provisions in the health care legislation the panel is expected to start drafting as early as this week.
The jury is still out on whether Congress will be able to pass any kind of tax increase this year to fund health care reform.
But the mere discussion of a broad tax measure, plus the push by the nine House Ways and Means members for the hospital bond measures, gives the market a renewed glimmer of hope that tax writers can be convinced to approve changes that would benefit all bond issuers, including the issuers of hospital bonds.