To provide that certain service or management contracts will not result in municipal water or wastewater facilities being treated as used in a private business use for purposes of the limitations on private activity bonds.

Provides that the provision of services under certain service or management contracts shall not result in municipal water or wastewater facilities being treated as used in a private business use, for purposes of specified Internal Revenue Code limitations on private activity bonds. Lengthens the allowable term of such contracts to 15 years and makes inapplicable to such contracts a provision authorizing a municipality to terminate a contract, without penalty, at the end of the third contract year.