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FL-2. MUNICIPAL BONDS I <br />avoidance, including tax-exempt interest on state and local bonds. These two <br />concerns have resulted in several bills in Congress to make interest on state <br />and local bonds taxable. <br />A convincing case has not been made for such a radical change which could <br />damage the independence and viability of state and local government. <br />FL-3. INDUSTRIAL DEVELOPMENT BONDS <br />The League continues to oppose federal efforts restricting local authority <br />to issue IDBs through the imposition of state -by -state per capita volume limits. <br />The League also urges Congress to remove the December 31, 1986 sunset on the <br />current authority of cities to issue small issue IDBs. <br />Industrial development bonds are useful tools which allow cities to take an <br />active role in fostering a diverse range of economic development or <br />redevelopment projects. They are also the primary means by which cities can <br />provide employment opportunities within the city. Due to federal program <br />cutbacks, the need for locally controlled development tools is greater than ever <br />before. <br />The League does not find evidence sufficient to conclude that the volume of <br />tax-exempt debt is a significant factor in determining interest rates on general <br />obligation bonds. Many factors may reduce the demand for bonds and force <br />interest rates to rise. To attribute high municipal bond rates to the <br />availability of small issue industrial development bonds ignores the complexity <br />and volatility of the present economy. <br />Furthermore, large isane IDBs take up a much larger percentage of the <br />tax-exempt market than do small issues. The League recommends, however, that <br />any issuer be required to adopt and follow local guidelines ensuring that the <br />projects be part of an overall economic and physical development plan for the <br />city. <br />FL-4. Wastewater Treatment (A) <br />Funding for the program should be substantially increased to ensure that <br />cities will be able to continue their pollution abatement efforts on an <br />uninterrupted basis. The League opposes any reduction in federal funding of <br />these programs. <br />-51- <br />