Senators eye relief from Katrina bond defaults
WASHINGTON (Reuters) – Gulf Coast senators said on Tuesday
they were working on measures aimed at preventing municipal
bond issuers ravaged by Hurricane Katrina from defaulting on
their debts as local tax revenues wither.
Mississippi Sen. Trent Lott said his staff from the Senate
Finance Committee was weighing such measures for the devastated
region, but they needed to be considered carefully to find the
“There is no question that some of these municipalities and
counties are wiped out,” Lott told reporters after a party
caucus in Washington. “They have no tax base and won’t have for
a while so we may have to give them a helping hand just to keep
their debt payments current. We’ll have to look at how to do
Lott said Congress needed to decide whether to create a
pool of funds from which issuers could draw to meet debt
payments or to provide relief through tax legislation.
The National Association of Bond Lawyers last week proposed
that the Treasury Department provide cash advances to issuers,
to be repaid over 10 years. A Treasury spokesman said the
department was not in a position to make any announcements
regarding the proposal.
As of Tuesday, no bond issuers in Louisiana, Mississippi,
and Alabama and Florida had filed a notification of default or
payment delinquency since September 1, according to DPC Data
Inc., one of the national information repositories for
But Lott said discussions with governors, mayors and other
officials revealed that time was short. “We need to work
quickly there but we also need to think it through,” he said.
Louisiana Sen. Mary Landrieu also is working on recovery
measures that include relief to bond issuers as well as a new
tax exempt bond program aimed at attracting new development to
the region, said her spokesman, Brian Richardson.
He said details of the Democrat’s proposals would probably
be available later this week.
Sen. Charles Schumer, a New York Democrat on the Senate
Finance Committee last week called for the Katrina-hit region
to be eligible for tax-exempt bonds similar to the $8 billion
New York City Liberty Bond program that was used to attract
private development projects to lower Manhattan after the
September 11, 2001, attacks.