Environmental Infrastructure: Effects of Limits on Certain Tax-Exempt
Bonds (Chapter Report, 10/28/93, GAO/RCED-94-2).

Although state and local governments rely heavily on tax-exempt bonds to
finance environmental infrastructure and comply with federal
environmental mandates, Congress has capped the volume of tax-exempt
bonds that can be issued each year for this purpose. GAO discovered that
capital spending and the volume of tax-exempt bonds issued for
environmental projects have changed little since the law was revised,
suggesting that the volume cap has not curbed overall investment
nationwide.  Nevertheless, capital spending on the environment as a
percentage of the gross domestic product has fallen.  Moreover, it has
not kept pace with the rising tide of federal environmental mandates,
which will require considerably higher levels in the future.  The volume
cap has discouraged some companies from investment in environmental
infrastructure, in large measure because states' allocation processes
give low priority to environmental projects.  Also, several states
allocate private activity bond authority on a first-come, first-served
basis, increasing the risk that investors will be unable to secure all
necessary financing.  However, private companies claim that the 1986 Tax
Reform Act, which eliminated the investment tax credit and lengthened
depreciation schedules, has had the greatest influence on their
decisions to invest in environmental infrastructure.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-94-2
     TITLE:  Environmental Infrastructure: Effects of Limits on Certain 
             Tax-Exempt Bonds
      DATE:  10/28/93
   SUBJECT:  Federal/state relations
             State-administered programs
             Revolving funds
             Investment companies
             Wastewater treatment
             Environmental law
             Industrial facilities
             Municipal bonds
             Tax exempt status
             Environmental monitoring
IDENTIFIER:  Treatment Works Construction Grant
             EPA State Revolving Loan Fund
             EPA Environmental Finance Program
             New Jersey
             Texas
             California
             Arkansas
             Maryland
             Minnesota
             
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