HomeMy WebLinkAbout1990-05-22 - AGENDA REPORTS - TAX EXEMPT PUBLIC FINANCING (2)p
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NEW BUSINESS
DATE: May 22, 1990
AGENDA REPORT
City Manager Approval /AZY,
Item to be presented by:v
Andrea Daroca
SUBJECT: Adoption of Resolution 90-94 Supporting Tax -Exempt Public
Financing
DEPARTMENT: Finance P
BACKGROUND
The exemption from federal income of interest on municipal bonds acts as an
incentive to invest in public services and allows state and local governments to
borrow at rates that are 25 to 30 percent less than what they would pay if the
interest were taxable, thereby keeping the cost to taxpayers:as low as possible.
The tradition of tax-exempt financing is nearly as old as America. A city
borrows money at below-market rates and improves the community at a rate greater
than the interest it pays. Tax-exempt financing is a dollars and cents issue
which determines how much it will cost to finance the many long-term capital
• needs of states and local communities, including roads, bridges, schools,
hospitals and public transit.
Numerous laws enacted by Congress in recent years, including the Comprehensive
Tax Reform Act of 1986, have made it increasingly difficult and more expensive
for state and local governments to use tax exempt bonds.
Numerous national professional organizations representing state and local
governments, including International City Management Association and Government
Finance Officers Association to which the City holds memberships, have joined
together to form the Public Finance Network group. The message this group is
fostering is the importance of municipal tax-exempt financing and the need to
stop tampering with municipal bonds. Attached is a resolution the group is
requesting state and local agencies adopt to show support for tax-exempt
financing and staff is prepared to show a 10 -minute video on the subject.
RECOMMENDATION
Keeping in mind the numerous unfunded capital projects the City has identified,
tax-exempt funding will be a very valuable tool for the City in the future.
Staff's recommendation is that the City Council review and adopt Resolution
90-94 supporting tax-exempt public financing.
ATTACHMENTS
Resolution 90-94
•Pamphlet "Bonds Build America" Continued To:
Agenda Item:
RESOLUTION NO. 90-94
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF SANTA CLARITA, CALIFORNIA,
TO PRESERVE TAX-EXEMPT BONDS FOR
STATE AND LOCAL GOVERNMENTS
WHEREAS, the productive capacity of the American economy and the
health, safety and welfare of the nation depend upon the quality of a reliable
infrastructure and the availability of adequate basic public facilities and
services, and
WHEREAS, the principles of federalism, which have served this nation
for more than 200 years, include the immunity of states and local governments
from federal taxation of interest for public functions in order to maintain
the balance of power between states, and the federal government, and
WHEREAS, the federal government has steadily reduced its
responsibility for infrastructure requirements, and has shifted more and more
financial responsibility to states and units of local governments, and
WHEREAS, financing state and local government projects through the
issuance of bonds, the interest on which is not taxed by the federal
government, is critical to allow states and local governments to exercise the
responsibilities entrusted to and expected of them, and
WHEREAS, in recent years, the U.S. Congress has both limited the use
of tax-exempt bonds by states and local governments and made municipal bonds
less attractive to significant groups of purchasers, thereby driving up the
cost of financing public service projects, and
WHEREAS, the U.S. Supreme Court overturned a 100 -year-old precedent,
ruling for the first time that the Constitution does not prohibit the federal
government from taxing the interest on state and local governments bonds, and
WHEREAS, state and local borrowing costs will increase by an
estimated 20 to 30 percent if the interest on tax-exempt bonds is subject to
federal income tax, and this added burden will be reflected in reductions in
public services or by increased state and local taxes, and
WHEREAS, shifting the tax burden from the national level to state
and local governments is an illusory savings for taxpayers and provides no net
-- tax relief, and
WHEREAS, further restrictions on the use of tax-exempt bonds will
seriously impair the ability of state and local governments to finance
essential services and facilities, including schools, hospitals, prisons,
roads, water, gas, electric, sewer, transportation and other basic functions,
to the detriment of all citizens;
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RESOLUTION NO. 90-94
Page 2
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NOW, THEREFORE, BE IT RESOLVED: that the City of Santa Clarita
calls upon Congress and the President to recognize that the state and local
burden of maintaining and expanding the national infrastructure and providing
citizens with needed basic governmental services cannot be met without
tax-exempt bonds, and to resist all further efforts to reduce the use of such
bonds to finance governmental projects.
SECTION 1. The City Clerk shall certify to the adoption of this
Resolution and certify this record to be a full, true, correct copy of the
action taken.
PASSED, APPROVED, AND ADOPTED this day of , 1990.
JO ANNE DARCY, MAYOR
ATTEST:
GEORGE CARAVALHO, CITY CLERK
I HEREBY CERTIFY that the foregoing Resolution was duly adopted by
the City Council of the City of Santa Clarita, at a regular meeting thereof,
held on the day of , 1990, by the following vote of
the Council:
AYES: COUNCILMEMBERS
NOES: COUNCILMEMBERS
ABSENT: COUNCILMEMBERS
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GEORGE CARAVALHO,,CITY CLERK