January 30, 2003

Smith Bill Provides Flexibility to Local Governments in Financing Public Debt

Legislation may affect over 700 municipal bonds in Oregon

Washington, DC – Today, Senator Gordon Smith (R-OR) introduced the Municipal Debt Refinancing Act of 2003, providing state and local governments additional opportunities to refinance public debt. If enacted, the legislation has the potential to allow local communities throughout Oregon to negotiate better terms on over 700 government issued bonds worth billions of dollars.

At a time when Oregon is facing a budget crisis, Smith's bill would allow local governments to take advantage of low interest rates when possible by granting them one additional opportunity to refinance debt.

"Across America, and particularly in Oregon, we have faced painful decisions about whether to cut programs or raise taxes," Smith said. "Now, more than ever, we need to give local governments as much other options. Tax-exempt bonds are the lifeblood of communities trying to build schools and roads. By making them more affordable, we will provide them opportunities to make capital improvements without sacrificing fiscal responsibility. This bill would save Oregonians millions of dollars. "

State and local governments have long used municipal bonds to finance capital improvements. These tax-exempt bonds allow cash-strapped communities to provide schools, roads, and other important needs without depleting general tax revenues. However, current federal law hinders the cost-effectiveness of tax-exempt bonds by limiting local authorities' ability to refinance this debt. Because local governments may only refinance once over the life of the bond, they are largely prohibited from taking advantage of current favorable market conditions and saving the public unnecessary expense.

###