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Senator Santorum Introduces Legislation to Build Stronger Communities and Save Taxpayers Money

U.S. Sen. Rick Santorum (R-PA), a member of the U.S. Senate Committee on Finance, used a July 14 news conference in Pittsburgh to announce the introduction of legislation to build stronger communities and save taxpayers money.  Sen. Santorum has introduced legislation that would allow for members of the Federal Home Loan Banks to provide credit support to tax-exempt municipal development bonds, including Letters of Credit (LOCs). 

Under current law, state and local governments are able to issue tax-exempt bonds to help fund community and economic projects. However, the Internal Revenue Service (IRS) has classified the FHLBank LOCs as a federal guarantee, a decision that does not allow the bond to enjoy tax-exempt status.

“Legislation like this is important and I’m grateful to Senator Santorum for sponsoring the bill,” said Victor Son, Township of Hampton council president. “Municipalities like Hampton use bond financing to provide funding of basic city infrastructure and vital services like water and sewage treatment as well as providing our residents with enhancements to their quality of life such as the swimming pool, baseball fields, the park, senior facilities and the community center.”

While this is a technical change to the tax code, it is an important distinction that will encourage economic and business development and growth in Pennsylvania communities. Allowing FHLBanks to provide credit support for tax-exempt municipal bonds will translate to better loans for municipalities and greater incentives for bond buyers to invest in the community.

“I am hopeful that my colleagues in the Senate will support this legislation. Municipal bonds help communities raise money for economic development projects like schools and hospitals; they are a great way for individuals to invest in their community and see the results,” said Sen. Santorum.

“I want to thank Senator Santorum for recognizing the role the FHLBanks play in the community,” said Dana A. Yealy, FHLBank Pittsburgh senior vice president and general counsel. “His leadership in serving as an original sponsor of this legislation is going to have a significant impact on Pennsylvania taxpayers.”

Sen. Santorum’s bill is supported by the National League of Cities, the U.S. Conference of Mayors, the Independent Community Bankers of America, the Council of Federal Home Loan Banks, the National Association of Homebuilders, and the American Bankers Association, the National Association of Higher Educational Facilities Authorities and the National Council of Health Facilities Finance Authorities.  In Pennsylvania, this effort is supported by the Pennsylvania Housing Finance Agency, the Pennsylvania Association of Community Bankers, the Pennsylvania Bankers Association, The Pennsylvania School Boards Association and the Pennsylvania League of Municipalities.