Comment on FR Doc # E8-20771

CC: PA:LPD:PR (Reg-128841-07) Room 5203 Internal Revenue Service PO Box 7604 Ben Franklin Station Washington, DC 20044 December 3, 2008 Re: Comments on Proposed Changes to Public Approval Guidance for Tax Exempt bonds under Section 147(f) of the Internal Revenue Code To Whom It May Concern: We write on behalf of Good Jobs New York, Good Jobs First, and the Fiscal Policy Institute. Our missions include promoting accountability to taxpayers in the use of economic development subsidies. As such, we are very concerned that the Internal Revenue Service’s proposed changes to public approval requirements for tax-exempt private activity bonds will substantially weaken opportunities for U.S. taxpayers to understand or comment upon proposed projects in their communities. For 10 years Good Jobs New York, a joint project of Good Jobs First in Washington, DC and the Fiscal Policy Institute in New York, has used the public hearing process to monitor and scrutinize how tax-exempt bonds for economic development are allocated in New York City. Based upon this experience, we urge the Internal Revenue Service not to approve the proposed regulations and instead push for stronger public hearing opportunities to strengthen core principles of civil society: transparency, accountability and democracy. The current public notice and hearing requirements under the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982, and subsequently the Tax Reform Act of 1986, provide interested parties the opportunity to testify before state and local government agencies on proposed public financing for a host of different projects including affordable housing, industrial facilities, nonprofit organizations, sports facilities and, in New York, even financial sector firms. For example, without TEFRA, New Yorkers would not have had the opportunity to participate in hearings for $8 billion in tax-exempt private activity Liberty Bonds allocated to New York for commercial and residential projects in the wake of the September 11, 2001 terrorist attacks. New York City residents have an enhanced ability for public participation due to the New York State legislature and the local New York City Industrial Development Agency, which have substantially improved upon TEFRA regulations. We urge the IRS to consider such policies to improve and expand—not curtail and reduce—public participation. We highlight three of the pending proposed IRS regulations we believe are grossly corrosive of the public hearing process and instead offer improved, alternative proposals. 1. Notification Process. Proposed: The proposed regulations would reduce the time a proposed project is made public by giving taxpayers half the time they now have to gather information on projects and prepare comments. In our experience, given the complexity of many projects, the current 14-day notice period is far too short, so the proposed 7-day notice would almost completely preclude meaningful public participation. Higher Standard/Alternative: The New York City Industrial Development Agency, in a 2006 Omnibus Resolution, requires that a notice must be published 30 days prior to the public hearing. The Resolution also requires the New York City IDA to post this notice on its website. This regularity provides us and diverse members of the public the opportunity to study proposed projects and to prepare testimony. Unfortunately, projects administered by our state economic development agency (Urban Development Corporation d/b/a Empire State Development Corporation) or by state or municipal housing authorities are not subject to the 30 day public approval process. Because of this limited time, existing TEFRA requirements provided New Yorkers limited opportunity to gather information and prepare testimony on projects such as the $1.65 billion in tax-exempt Liberty Bonds for Goldman Sachs, and some of the $1.6 billion dollars in Liberty Bonds approved by the state Housing Financing Agency for luxury housing in Manhattan after 9/11. 2. Cancelling Hearings Proposed: The proposed regulations would allow the governmental issuer to cancel public hearings on qualified bonds if it does not receive “timely requests” to participate in the hearing. Current regulations have no such option of no public hearing at all. Paired with the brevity of the proposed notice period, this rule seems intended to minimize the likelihood that taxpayers would be able to comment. Higher Standard/Alternative: Under no circumstances should a hearing be cancelled. Our experience with the New York City Industrial Development Agency has shown that the current process is not cumbersome. Moreover, should an agency develop a reputation for cancelling hearings, taxpayers may become disenfranchised and a self-fulfilling norm would set in, wherein agencies could come to expect that they will not need to hold hearings because they don’t think people will attend, and people would not seek to attend hearings because they come to believe that the agency doesn’t hold hearings or will cancel them at the last minute. In New York City, community members have testified on projects without providing advance notice to the government entity issuing the bonds and even without formal testimony. Considering that these hearings are sometimes the only chance for members of the public to comment on projects, there should be no option of cancelling them altogether. 3. Fewer Project Details Proposed: The proposed regulations would only require public notices to list general descriptions of the types of facilities to be financed and a general description of its location, though this “must be reasonably designed to inform readers of the location.” In addition, the proposed regulations leave open which party can be listed in the notice, saying it could be “the name of the legal owner or principal user of the facility or, alternatively, the name of the true beneficial party…” These details matter greatly. If a project is not fully described, it is impossible for taxpayers to present relevant and educated testimony on the proposed project. Existing businesses may not understand that a competing business is slated to benefit. Neighbors may not understand that a project may increase traffic or create parking problems. Particularly in urban and suburban areas where several businesses could be at one location, this proposed regulation could render a public notice useless. There is no surer way to disenfranchise a community than to provide incomplete information about an economic development project. Higher Standard/Alternative: Maintain existing requirements regarding facility types and locations. Require that the names of legal owners AND expected principal users of facilities be included in public notices. Members of the public often have concerns about specific companies that rent space in new developments. If these companies will be the principal user a facility, the public has the right to know. There are other measures governmental agencies can take to ensure that members of the public are well informed of project details, and have the opportunity to comment on them, prior to a hearing. The New York City Industrial Development Agency, for example, makes the full project applications and cost/benefit analyses for each project available to the public five days prior to a hearing. Other Transparency Suggestions In addition to the above mentioned proposals for improving transparency, regulations should require that: • State and local authorities use technology to further advance the public hearing process - The proposed regulations allow governmental units to post public hearing notices on their websites as long as they offer a reasonable method for otherwise obtaining the information. Instead, new regulations should require that, in addition to current methods for public postings, any issuer with a functional website must post public hearing notices on such website. The New York City Industrial Development Agency already does this. In addition, agencies required to adhere to TEFRA should offer taxpayers the option of signing up for a list to receive hearing notices electronically. These notices should be sent out the same day a public hearing notice is legally required. For example, Good Jobs New York maintains a list of over 300 people to whom we email a monthly “subsidy alert” of public hearing notices for proposed subsidized projects. Agencies should also create processes where they can directly notify interested parties. • More information on approved projects be listed on agency websites - For example, the Lower Manhattan Development Corporation (the LMDC was created to allocate special Community Development Block Grants after the September 11, 2001 attacks on the World Trade Center) has copies of final reports to the US Department of Housing and Urban Development on its website and copies of board minutes. And thanks to an executive order by former Governor Eliot Spitzer, the LMDC webcasts its board meetings. This could be expanded to include public hearings, which would make hearings and meetings more accessible to rural communities and people with disabilities. Summary The IRS’ proposed changes to TEFRA would make an important function of government substantially less transparent and accountable. Current TEFRA public hearing rules, which impose minimal standards that we believe should be enhanced, do not impose an undue burden on government agencies. If the proposed changes are approved, they will grossly impair and diminish public input, excluding meaningful participation and fueling public cynicism about government. We urge the IRS to vacate these proposals and instead start anew by embracing our suggestions for higher public hearing standards that enable an informed and transparent economic development process. Sincerely, Bettina Damiani Project Director Good Jobs New York 11 Park Place, #701 NY, NY 10007 212-721-7996 Greg LeRoy Executive Director Good Jobs First 1616 P St., Suite 210 Washington, DC 20036 202-232-1616 James Parrott Deputy Director Fiscal Policy Institute 11 Park Place, #701 NY, NY 10007 212-721-5624