WASHINGTON - The municipal bond community is divided over whether a trio of bond proposals should be added to the health care reform bill that will be drafted by the House Ways and Means Committee over the next few weeks.

A group of 501(c)(3) bond issuers and the Public Securities Association have been urging Congress to approve provisions to ease limits on health care advance refundings, bank deductibility, and the amount of bonds that individual health care institutions may have outstanding.

But organizations representing state and local governments - including the National League of Cities, the National Association of Counties, the Government Finance Officers Association, and the National Association of State Treasurers - are not fighting for the provisions, their lobbyists said yesterday.

The issues involved are too narrow for the organizations to spend their political capital on, the lobbyists said. In addition, any attempt to include them in the health care reform bill could disrupt or delay the bill's progress through Congress, they said.

"We're not pressing those issues. We're not only not pressing them, but if they are disruptive or interfere at all in the [legislative] process we will not support them," said Frank Shafroth, the chief lobbyist for the National League of Cities.

Shafroth said he discovered recently that the Ways and Means Committee had developed the mistaken notion that states and local issuers were pushing the three bond proposals. He said he made clear to staff members that the proposals "have not been raised by the state or local governments, periods."

Tom Joseph, a lobbyist for the National Association of Counties, said he supported Shafroth's effort to clarify the position of states and localities with the committee.

"There are bigger issues of concern to us in the legislation," Joseph said. "So, we are not mustering an all-out fight against those [three proposals] or for them."

Micah S. Green, the PSA's executive vice-president, said it is "not surprising that groups with a broad array of responsibilities will have focuses beyond that dealing with municipal bonds."

But, Green said that even though those groups are not in the fight, "the community of health care facility issuers is broadly supportive of these provisions, and that's exactly the right community to be vocal on those issues."

The community is represented by the National Council of Health Facilities Finance Authorities, whose members are 23 501(c)(3) authorities - 22 statewide and one local - that issue tax-exempt bonds for construction, expansion, and renovation of health care institutions.

How seriously the committee will consider the three bond proposals should be known in the next few weeks. The House Ways and Means Committee was originally scheduled to begin drafting a health care reform bill yesterday or today, but it now appears that work may not begin until next week.

Chairman Dan Rostenkowski, D-Ill., attributed the postponement to a delay in obtaining budget estimates from the Congressional Budget Office. Lobbyist said another problem is that panel members have failed to reach a consensus on major issues.

The three bond proposals first surfaced in February when the PSA and the health finance council testified before the Ways and Means panel's subcommittee on select revenue measures.

They told the subcommittee that Congress needs to ease or eliminate the $150 million limit on the amount of bonds that a non-hospital 501(c)(3) organization may have outstanding at any one time. Mergers and consolidations of various institutions that are needed because of health care reform could be made more complicated and costly by the limit, they said.

The same argument applies to tax law limits on advance refundings of hospital bonds, the two organizations said. Health care facilities that have used up their allotment of advance refundings should be allowed to do an additional refunding if it is needed to change bond covenants to facilitate mergers or changes in services, they argued.

The third proposals involves easing the current law provision that permits banks to deduct 80% of the cost of purchasing and carrying tax-exempt bonds only from issuers that expect to sell no more than $10 million of debt annually. The bank deduction does not apply to small issuers that pool their debt into a larger issue. The two organizations said the limitation should be eliminated for small health care facilities, which need to be able to market their debt to banks.

The state and local associations said they were more interested in pursuing the enactment of legislation introduced by Rep. Bill Coyne, D-Pa., that would ease a much broader range of bond curbs. The lobbyists have said they see little opportunity to enact the bill this year, but are setting their sights on 1995. Bond proposals may be highlighted next year if President Clinton, as he said Monday night, delivers an infrastructure financing bill to Congress early next year.

Among its provisions, the Coyne bill would: create a new category of tax-exempt bonds to finance businesses in economically depressed areas; index the private-activity volume cap for inflation; and increase to $20 million the $10 million bank deductiblity limit.

"At this point, I think we're just sort of keeping track" of the three health care bond items, said Milton Wells, director of federal relations for the National Association of State Treasurers. "We don't want them to divert us from our main goals for the larger, broader issues" embodied in Coyne's bill.

The Government Finance Officers Association also has no policy position on the three proposals, said Catherine L. Spain, the director of the association's federal liaison center.

"It's an effort we're watching," but the proposals "are very narrow issues, from a lobbying perspective," Spain said. "It's not an effort that we've been asked to lend our support to."

Instead, GFOA members "are concerned about the issues that are embodied in the Coyne legislation," Spain said.

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