What Others Are Saying About The Bond Fairness and Protection Act

The Florida Times-Union, Sept. 23, 1999
Taxes - One to Watch

"A relatively obscure bill in Congress has a potential impact on customers of JEA, and on the city government's budget. The Bond Fairness and Protection Act corrects a flaw in the tax code that threatens to penalize investors and utility companies during deregulation. Municipal power companies such as JEA are allowed to sell tax-exempt bonds, which raise capital at lower cost, a benefit to rate payers. But so-called ''private use rules'' intended to level the field for public power companies and investor-owned companies limit the sale of power to private entities.

Under deregulation, the current law threatens to remove the tax exempt status of municipal power company bonds and tax bondholders retroactively. The proposal is to grandfather the existing tax exemptions and tax future bonds when the company is in direct competition with private companies. Or, the utility can choose to continue operating under a clarified private use law.

That's fair enough.

Last year JEA put $66.5 million into the city treasury - ''in lieu of taxes'' is the official description. JEA also has some of the lowest electricity rates in the nation. Therefore, it could be costly to local taxpayers if the utility was penalized merely for doing what deregulation is intended to do.

Government always is behind the curve. The tax code is archaic in the sense that it did not envision deregulation of the industry. Without the law, JEA and other municipals might have to stay out of the competitive arena or increase rates."

Elizabeth Moler, Former Chair of Federal Energy Regulatory Commission, and Former Deputy Secretary of Energy, March 18, 1999 hearing of the House Energy and Power Subcommittee.

"The tax-writing committees need to address the private use restrictions that limit use of facilities constructed with tax-exempt bonds. Use of existing generating capacity for sales outside a municipal utility’s traditional service territory and use of existing transmission lines to provide open access transmission should not upset existing tax-exempt financing arrangements."

The Honorable Glenda E. Hood, Mayor of Orlando-R, March, 1999.

"My constituents are deeply committed to keeping local control of our municipal utility in the hands of their elected representatives here in Orlando. They, like me, are concerned that Congress may mandate changes that will force new federal taxes on public power that could raise our electricity rates and take away the right to make decisions affecting their utility. Across America, cities like Orlando must be allowed to maintain local control of their utilities, where it rightfully belongs."