WASHINGTON -- There is often reason for long-term optimism even when there are short-term setbacks.
That is the way the municipal market should look at the apparent death of comprehensive health care reform legislation for this year.
The almost certain failure of Congress to approve a major health care package this year will doom any chances for enactment before Congress recesses in October of a provision to ease curbs on 501(cX3) bonds, which was included in the Senate Finance Committee's version of health care reform.
That provision would have removed the $150 million limit on the amount of tax-exempt bonds that private, nonprofit organizations may have outstanding at any one time.
It also would have attempted to put 501(c)(3) bonds more on a par with governmental municipal bonds by removing some of the private-activity restrictions placed on them by the Tax Reform Act of 1986.
Congress's failure to act on the 501(c)(3) proposal definitely will be a setback for the market, but should not be viewed as a disaster.
Rather, it should be seen as a stepping-stone to next year when Congress is likely to consider a major tax bill that could be the vehicle for numerous long-sought measures to ease the eight-year-old curbs on tax-exempt bonds.
Approval of the 501 (c)(3) provision by the Senate Finance Committee provided valuable exposure that should give it a leg up next year.
The discussion of the measure this year and its inclusion in the Senate panel's version of the ill-fated health care package makes it more likely that it will be included in any tax measure drafted next year.
Since the provision is a pet project of Sen. Daniel Moynihan, D-N.Y., the chairman of the Senate Finance Committee, it is likely to be included in any tax bill the finance panel drafts next year and, because of Moynihan, is also likely to be supported by the White House.
The measure will be reconsidered at an opportune time because President Clinton is expected to propose a major infrastructure financing bill that is likely to include proposals to ease the curbs on tax-exempt bonds, and the 501(c)(3) measure could easily be slipped into that legislation.
The League of Cities has already been lobbying White House officials on a proposal to ease the curbs on tax-exempt bonds to promote infrastructure development.
Now is the time for all other market participants to join that campaign and prepare a comprehensive proposal for easing the bond curbs to promote infrastructure finance and begin selling it to the White House and Congress.
That is the best way to turn this year's setback into a long-term gain.
