WASHINGTON - "It was the best of times. It was the worst of times."
Depending how you look at it, the opening lines from Dickens' "A Tale of Two Cities" are a good measure of how the municipal bond market fared at the hands of federal legislators and regulators this year.
This week we'll look at 1993 from the legislative front where, most would agree the market had undoubtedly its best year since the disastrous days of tax reform in the mid-1980s.
Next week, we'll look at the past year from the regulatory side, which some consider a disaster while others see long-term gain in the short-term pain now being inflicted.
In 1993, after several years of small or hold-the-line measures in various tax bills, the municipal market took its first substantive legislative steps forward in a decade.
But it was a roller-coaster ride.
After enduring four years of the Bush Administration, which basically ignored public finance, municipal market proponents had high hopes when President Clinton took office. As the governor of a state that relied on tax-exempt debt, Clinton was expected to push to ease many of the curbs that were imposed on municipal bonds in 1986. These included including bank deductibility, arbitrage rebate requirements, private-activity bond caps, and the limits on the amount of bonds that non-hospital 501(c)(3) organizations may have outstanding.
But former Rep. Beryl Anthony, D-Ark., astutely cautioned in early February that any wholesale easing of the bond curbs could be in trouble if Clinton's economic plan focused on reducing the federal deficit.
When Clinton's plan was unveiled in mid-February, hopes were partly dashed when the plan focused on the deficit and didn't include any easing of the most onerous bond curbs.
But hopes were buoyed because the plan did include long-sought permanent extensions for single-family mortgage bonds, small-issue industrial development bonds, and the bond-related low-income tax credit, as well as small, but significant expansions in the use of bonds for high-speed rail and projects in enterprise zones.
Hopes remained high when the Ways and Means Committee and the House approved the permanent extensions and the rail and enterprise zone bond provisions, only to have the bubble burst when the Senate Finance Committee and the Senate approved only two-year extensions of the three bond programs and dropped the rail and enterprise zone measures.
But the ride ended with an upward surge when House and Senate conferees restored the permanent extensions and included scaled-down versions of the rail and enterprise zone plans in the tax bill that Clinton signed into law Aug. 10.
The market didn't get nearly what it wanted, but 1993 was the best year in a long time,