University Urges Elimination Of $150 Million Cap.

David J. Morse of the University of Pennsylvania, Philadelphia, has written to encourage Treasury to eliminate the $150 million tax- exempt bond cap that affects non-hospital section 501(c)(3) organizations. Morse asks Treasury to include this recommendation in its fiscal year 1996 budget submission to Congress, stating that the timing is appropriate, given what he calls "the virtual certainty of a comprehensive tax bill in 1995" and given the administration's indications of support for removing the bond cap in order to promote renewal of the nation's infrastructure for performing fundamental research.

Morse advises Treasury that this is a critical issue for the university, which needs to renovate existing, and build new, science research facilities. "The availability of tax-exempt financing," he concludes, "would enable Penn to utilize these funds for other essential research and instructional investments."

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December 9, 1994

The Honorable Leslie B. Samuels

Dear Les:

I'm sorry that President Rodin and I were unable to see you when we were in Washington last week. We realize, of course, that the results of last month's elections and the pressing business of constructing a major new tax initiative as part of the FY 96 budget wreaks havoc with your schedule, but I hope that you will be able to meet her on one of her next visits.

Among the issues Judith wanted to discuss with you was the $150 million tax-exempt bond cap that affects non-hospital 501(c)(3) organizations. When we met in your office earlier this year, with Rob Leonard and a small group of representatives from universities affected by the cap, you provided a very candid assessment of the limited opportunities for lifting the cap in 1994. Given that accurate assessment, the Treasury position of "not opposing" elimination of the cap was fully appropriate.

In light of two factors, however, we wanted to encourage you and your colleagues in the Administration to include the removal of the cap in your FY 96 budget submission to Congress. The first, of course, is the virtual certainty of a comprehensive tax bill in 1995 that creates an appropriate legislative vehicle for lifting the cap. The second and more significant factor is the President's and Vice President's joint pronouncement in August, in their document Science in the National Interest, that the Administration will SUPPORT removal of the bond cap to promote renewal of the nation's infrastructure for performing fundamental research.

As you know, this is a critical matter for Penn and for many of our sister universities. With the exception of a very small taxable issue, we have not issued new debt since 1986, even though our needs for new science facilities and for essential renovation of existing facilities -- the Quad, the Law School library, research laboratories in the physical and biological sciences, College Hall, Logan Hall, and historic Franklin Field -- have grown substantially. From the perspective of our investments in science and technology, we are in the final stages of planning for the first new research facility in the physical sciences and engineering at Penn since 1974. We anticipate issuing approximately $100 million in taxable debt to meet partially some of the needs I have described, at a substantial additional cost of approximately $1.5 million to $2.0 million relative to tax-exempt debt. The availability of tax-exempt financing would enable Penn to utilize these funds for other essential research and instructional investments.

We have been very encouraged by the President's pronouncement on lifting the bond cap, and we hope that it can be incorporated formally into the FY 96 budget proposal. We look forward to speaking with you soon.

Sincerely,

David J. Morse

cc: Judith Rodin