All readers should be aware of LB 377 introduced by Senator Pankonin (2). This bill will allow any government entity including airport authorities, schools, cities, villages, counties, etc to get in a contractual relationship with the federal government. The federal government could possibly guarantee bonds issued by the government entity. The second questionable activity is the language that would allow bonds to be paid back by any tax (with no limits). This would also allow a way to go around other tax laws on the books.
This to me is a very dangerous bill. First because we would allow each entity to contract with the government. What if the entity defaults on the bond. Would the fed take over the running of the locality? This probably would not happen. The language in the bill states that the bond will be paid back and that the local government entity can come up with what ever taxing mechanism they want to do it all while going around other tax laws such as the sales tax, and property tax.
This bill would allow a school who is already belt tightening to take on a massive capital project knowing that they will not have the funds in the future to pay for it through traditional taxing. The school under this bill could impose a sales tax or increase property taxes ABOVE the legal lid to pay the bond. This one bill could and will allow taxes to run up quickly.
The statement of intent of this bill says that this would allow government entities the ability to obtain lower rates and overall a better deal on the bonds, however they have to be in contract with the federal government. While the statement of intent says the bill is for housing and it’s intent would be for a guarantee of loans on housing, the bill is written in such a vague way that it will be misused.
Other language in the bill states that this bill is an emergency bill which I believe means it would take effect the day after the Governor passes it. This bill is scheduled for hearing on Feb 2, 2009 and is assigned to the banking committee.