Jeff Bingaman United States Senator from New Mexico

WASHINGTON – U.S. Senators Jeff Bingaman (D-NM) today began his push to permanently extend a provision that helps small and rural municipal governments raise capital to finance local infrastructure projects – including school and road construction -- and meet other ongoing needs.

Before 2009, banks had incentives to purchase municipal bonds only from municipalities that issue $10 million or less in debt each year – a level that was unchanged since 1986.  The American Recovery and Reinvestment Act, passed last year, incorporated a provision pushed by Bingaman to raise that limit to $30 million, but that measure expires at the end of this year.

Bingaman, along with Senator Mike Crapo (R-ID), today introduced the Municipal Bond Market Support Act of 2010 – and bill that would make the $30 million level permanent, and index it for inflation.

The increased level has so far enabled municipalities from across the country to place bonds directly at financial institutions, including community banks.  When municipal governments work directly with community banks, they achieve considerable savings on interest and transaction costs.

"This provision has helped small communities across New Mexico and the country finance critical infrastructure needs and create jobs.  The higher bank-qualified limit is a great success and deserves to be made permanent.  We need to ensure that our small municipalities can continue to raise capital, particularly in periods of tight credit," Bingaman said.

In 2009, the dollar amount of bank qualified issuances doubled to $32.7 billion, with nearly 6,000 issuances.  Among the beneficiaries are New Mexico counties, cities, and school districts in all corners of the states.  For instance:

• The proceeds of a $17 million bond issued by Santa Fe County financed roads, trails and parks for open space, a fire facility, a solid waste transfer station, water rights acquisition and water projects.
• The City of Las Cruces was able to place $17.5 million of bank-qualified debt to refinance a utility bond, which ultimately saves the city in interest costs.
• The City of Artesia has completed two bank-qualified transactions, to finance building a public safety complex and a new waste water treatment facility.
• The Bloomfield School District placed $19 million in bank-qualified debt to finance capital expenditures.

New Mexico's community banks applauded Bingaman's bill, saying that they stand ready to continue partnering with New Mexico municipal governments.  "Local community banks in New Mexico can better assist the financing needs of their communities with the support for Senator Jeff Bingaman's bill to extend the $30 million, small-issuer limit for bank-qualified bonds, said Jerry Walker, President and CEO of the Independent Community Bankers Association of New Mexico.  "With this change, community banks can help local governments, and other tax-exempt entities such as hospital and schools access lower cost financing in this challenging economic climate."

At least 13 national organizations have endorsed Bingaman's Municipal Bond Market Support Act of 2010.  They are as follows:

American Hospital Association
Council of Development Finance Agencies
Government Finance Officers Association
International City/County Management Association
National Association of Bond Lawyers
National Association of College and University Business Officers
National Association of Counties
National Association of Health and Educational Facilities Authorities
National Association of State Auditors, Comptrollers and Treasurers
National League of Cities
Regional Bond Dealers Association
Securities Industry and Financial Market Association
US Conference of Mayors

The bill has been sent to the Senate Finance Committee; both Bingaman and Crapo are members of that panel.