Photo: Library of Congress
The IRS issued the state of California a private letter ruling.They allowed Cali to re-market $132mm of 2010 BABs bonds.
This wasn’t supposed to happen. Congress has let the BABs legislation lapse.
But no one can argue with the IRS, so the bonds will be sold in the near future.
This is “no big deal.” But there was one aspect that gets me to comment.
Tom Dresslar, a spokesman for Cali Treasurer Bill Lockyer had this to say about the IRS decision: (Bond Buyer link)
“The best part is that we are going to be able to save taxpayers money.”
Well, good old Tom is right. It will save the “taxpayers” money.
The question is which taxpayers? The ones in Cali will pay less. But the taxpayers at the federal level will have to foot the bill. Uncle Sam will pay 35% of the interest on the re-marketed bonds.
The business of subsidizing Muni debt issuance with tax breaks or subsidies (BABs) has to end. The rallying point for this should be Dresslar’s words. I can’t think of better proof that the system is screwed up.