Local Officials Blast IRS Proposal

Article excerpt

Officials at the Internal Revenue Service (IRS) heard numerous objections last week to a proposed rule to restrict municipal prepayments for public service resources.

If finalized, this rule would ban municipal prepayments for public service resources such as natural gas. At a January 12 public hearing, municipal officials and public gas systems officials reiterated that cities and towns are not issuing tax-exempt bonds to purchase long-term supplies of natural gas or other commodities as an investment-type property to abuse arbitrage and related restrictions.

"I am simply trying to provide the most reliable and economical gas supply to my citizens," said Mayor Robert E. Knox of Thompson, Georgia. "Any change in the current regulations would jeopardize my community's industrial base, rates would increase, and the municipal gas system would probably go out of business." Mayor Knox criticized the IRS for getting "bound in technicalities, rather than recognizing the sole purpose of prepayments."

Currently, many municipal gas systems purchase long-term supplies of natural gas or other resources at a fixed amount, which ensures stable rates and guaranteed service for customers. …