WASHINGTON -- The National League of Cities has given White House officials, at their request, a proposal for easing curbs on tax-exempt bonds to promote infrastructure improvement and capital investment in economically distressed areas.

The proposal was presented over the weekend by the league's board to Robert Rubin, head of the National Economic Council, and was sought by the White House as part of its effort to draft an infrastructure investment plan to send to ConFess in 1995.

The league's proposal would permit both public-purpose and private-activity tax-exempt bonds that are geared toward infrastructure development to receive interest rate subsidies and to be bank qualified, regardless of the size of the issuer.

Under current law, banks are permitted to deduct 80% of the cost of purchasing and carrying tax-exempt bonds only if they are governmental bonds purchased from an issuer who expects to sell no more than $10 million annually.

In his July 16 meeting with the board, Rubin declined to say how much of the proposal the administration might incorporate into its plan, but promised he would present a detailed response at the league's annual meeting in Minneapolis in December, according to Frank Shafroth, the league's chief lobbyist, who attended the meeting.

The league's proposal is designed to benefit communities that want to improve their infrastructure and create jobs, but are having trouble doing so because they have difficulty tapping into the credit markets.

The plan would permit those issuers to receive an interest rate subsidy on their bonds so that their rate would be equivalent to that on bonds issued by the most creditworthy communities in their region. The subsidy would come from a pool generated by fees that would be charged to banks seeking to buy the bank-qualified debt generated by the program.

Alternatively, a community could seek a letter of credit that would be provided by a bank interested in purchasing the program's bank-qualified debt. The letter of credit would enable the community to issue bonds rated single-A by a nationally recognized rating agency.

The program would be open to any issuer interested in participating, but qualified purposes under the program would be sharply limited.

The board did not specify which purposes would be eligible, but said they should be ones that would spur capital investment leading to infrastructure improvement, job creation, and economic development, Shafroth said. One example discussed by the board, according to Shafroth, was telecommunications.

Finding ways to finance infrastructure improvements was a theme of Bill Clinton's campaign and a subject he mentioned often early in his presidency. Hopes for an administration infrastructure bill faded last year as Clinton tackled other big issues, such as the federal budget, crime prevention, and health care reform.

But Clinton signaled his renewed interest in infrastructure in May during an appearance at a televised town hall meeting in Cranston, R.I. During that meeting, Clinton said his staff was working on an infrastructure bill and expected to have a plan to submit to Congress early in 1995.

Rubin's remarks to the league indicated that the administration is still intent on coming up with a plan to finance infrastructure improvements in the coming months, said Shafroth, who is director of policy and federal relations for the league.

"Rubin was very clear that they are working on it. He was clearly sincere" about the administration's intention to unveil a plan next year, Shafroth said.

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