Response to Big-Ticket Leasing Coalition News Release
M E M O R A N D U M
To: Reporters and Editors
Re: News release from the Big-Ticket Leasing Coalition
Da: Friday, March 5, 2004
Sen. Chuck Grassley, chairman of the Committee on Finance, made the following comment in reaction to a news release from the Big-Ticket Leasing Coalition on the benefits to cities from cityinfrastructure leasing tax shelters.
“Well-paid lobbyist Mr. Kies conveniently forgets that these abusive tax shelter leases willcost state treasuries $6 billion. State and local governments are losing money on these deals -- thereis no net gain for them. This is in addition to the $33 billion the federal government will lose. Heassumes that cities will not exercise their repurchase option, but we haven’t seen a city yet that’sready to go without its sewer system.”
The Big-Ticket Leasing Coalition’s news release follows.
Senate Finance Committee Analysis Confirms Study Showing Leasing Transactions Provide Substantial Benefits to Municipalities
Washington, DC – March 5, 2004 – Senate Finance Committee Chairman Charles Grassley (R-IA)and Senator Max Baucus (D-MT) have released findings showing that municipal leasing transactionsprovide cities and their agencies $1 for every $2 that the transactions cost in reduced federal taxrevenues. These findings confirm the results of the study released by the Big-Ticket LeasingCoalition on March 2, 2004.
The Big-Ticket Leasing Coalition study found that municipalities receive benefits equal to 52.6percent of the tax savings from a municipal leasing transaction in which the municipality choosesto exercise the option it has to purchase the leased property at the end of the lease term – this resultis virtually identical to the Grassley-Baucus findings.
The Big-Ticket Leasing Coalition Study also showed that in the more likely case where themunicipality chooses not to exercise its purchase option, the benefits to the municipal lessee onaverage are likely to exceed the revenue losses to the federal government. Specifically, the studyshows that the municipal lessee benefits in the 26 transactions range from 81.8 percent to 377.7percent of the revenue losses – an average of 125.1 percent of the revenue loss.
According to Coalition leader Kenneth Kies, "the findings by Senators Grassley and Baucus confirmthat leasing is an efficient way of providing for the capital needs of municipalities compared to taxexemptbonds or other tax incentives. Indeed, it is as efficient, or more efficient, than tax-exemptbonds.”
Grassley and Baucus also revealed that municipal leasing transactions are estimated, by theCongressional Joint Committee on Taxation, to provide municipalities with $5.4 billion of benefitsover the next ten years. According to Kies, "if the Administration's municipal leasing proposals areultimately enacted, that is $5.4 billion the nation's cities will simply not have."
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