RES 1969-108 - 00010095145
RESOLUTION NO. 108 1969
A RESOLUTION CONCERNING THE NEED FOR CONTINUED EXEMPTION OF
MUNICIPAL BONDS FROM FEDERAL INCOME TAXATION
WHEREAS, the Council of the City of Fridley, Minnesota has consistently,
defended the exemption of municipal bond interest from federal income taxation.
We have done so and continue to do so not only because it is a constitutional
requirement but because vie deem the exemption essential in maintaining the
constitutional balance between the national government on the one hand and state
and local government on the other, and we know that without that balance our
federal system cannot survive.
We deplore renewed efforts in the present Congress to impair that exemption.
Specifically, we oppose proposals to include municipal bond interest in the base
for a minimum income tax or a limit on tax preferences or an allocation of
deductions, or to impose a guaranty subsidy plan to replace tax exemption.
We are particularly disturbed that anyone would be willing even to entertain
the idea of applying such programs to any outstanding bonds. This is not only
because of the immorality and probable illegality of depriving municipal bond
holders of the value of the exemption for which they have already paid by accepting
markedly lower interest rates. It is also because such a breach of faith, no matter
1 how small the initial target, would be a warning to all future purchasers of
municipal bonds to protect themselved by requiring public bodies to pay even higher
interest rates, necessitating higher local taxes.
The historic exemption from taxation of interest on state and local government
bonds provides major advantages, including the following.
1) Conformity to the Constitution, preserving the federal system by protecting
state and local governments from federal compulsion.
2) Freedom from federal controls of policy decisions which are properly in the
sole province of state and local governments.
3) A saving in the cost of borrowing -- without which the present urban crisis
would become more aggravated by requiring increased property, sales, and
other local taxes, and a reduction in essential services.
4) Freedom from the uncertainties of the recurrent annual federal appropriation
process to obtain state and municipal capital needs or any portion of their
interest costs.
5) Protection of, and freedom of, access to viable capital markets of local
government's own choice, without reliance on a dominant federal financial
institution.
6) Expedition in local government borrowing, free of the delay of federal
clearances which can make them miss their optimum interest market timing,
and can force them into increased capital costs as construction costs
continue to rise.
146
F
Resolution No. 108 -1969 (Continued)
Each of the identified proposals reducing the value of the exemption of
state and local government bonds would destroy one or more of these major advantages
and might well force interest rates beyond constitutional and statutory limits.
THEREFORE, we continue to oppose any plan which does not preserve all of
these benefits for state and local governments.
PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF FRIDLEY
THIS 7TH DAY OF JULY, 1969.
ATTEST:
CITY CL- N3arvin run eeTl