WASHINGTON - President-elect Bill Clinton and Congress should enact legislation to allow fast-growing states that have used up their private-activity bond volume cap authority to borrow unused allocations from other states to finance infrastructure projects, Rep. Beryl Anthony said yesterday.
"We could have made that change earlier this year" in deliberations this year's tax stimulus package, "and if we had, we would have had $19 billion worth of new infrastructure projects going by now," the Arkansas Democrat and chairman of the Anthony Commission said at a meeting of the Infrastructure Investment Commission.
Anthony made his remarks in response to queries by Texas Treasurer Kay Bailey Hutchison, an infrastructure commission member, about which of his proposed bond reforms should be adopted by the infrastructure commission in its final report due before Congress next month.
The infrastructure commission's recommendations have been getting increased attention since many of its goals of increasing infrastructure investment mirror those espoused by Clinton during the presidential campaign.
Anthony related how he had proposed mobilizing the unused portions of some states' private-activity volume caps to spur the economy and infrastructure in private deliberations with House Ways and Means Committee Chairman Dan Rostenkowski, D-Ill., early this year. At the time, he said, Congress was considering stimulus measures that would involve speeding up some $19 billion of highway construction spending, and he believed his proposal would have had the same effect.
In 1990, for example, $3.5 billion out of a total of $14.3 billion in private-activity volume was not used and was carried over into 1991, according to available figures. Anthony said that under his proposal, states with large infrastructure needs like California, Texas, and Florida could have borrowed those unused portions and presumably leveraged them to build a large number of projects.
Anthony conceded that the volume cap proposal might be difficult to pass, given the institutional bias against bond liberalizations both in Congress and at the Treasury. "That's one where you have to reach way out there" and take a risk, he said.
But he was optimistic that such a proposal could become law if those institutional obstacles were surmounted. "If we can get the legislation out of Congress, I am sure it won't be vetoed. We have a President now who believes in infrastructure," he said, pointing out that Clinton has been a member of the Anthony Commission since 1987.
He also urged the infrastructure commission to adopt his commission's other far-reaching bond reform proposals, which would redefine "public purpose bonds," for example, to include bonds that finance facilities that may be privately owned but which benefit the public. "You need to take a risk and look at the public purpose bond proposals. That's where the impact would be the greatest." he said.
Short of that, he said, the commission should consider endorsing proposals to expand bank deductibility and ease the arbitrage rebate requirement that already passed Congress this year and that would provide some relief for public issuers. "But would you get the most bang for your buck with these proposals?" he asked. "I'm not sure."
Anthony and others appearing at the hearing took issue with a major tenet of the infrastructure panel, which has been to try to attract pension fund investment in infrastructure through the creation of a new federally guaranteed and taxable infrastructure security.
"This goal presupposes that a shortage of investment capital exists in the current market and that the low level of public investment in infrastructure is somehow due to a lack of willing investors," said Micah S. Green, executive vice president of the Public Securities Association.
"In fact, 1992 is expected to be a record year for the issuance of tax-exempt municipal securities- ... with the investing public eagerly absorbing over $200 billion in new-issue tax-exempt bonds," Green said. "Low levels of public investment have less to do with a shortage of capital than with a lack of secure and sustainable cash flows to back long-term bond issuance."
Anthony pointed out that the principal obstacle facing the commission's recommendation on creating a new federal infrastructure security is the same as the one facing his bond proposals: the federal deficit.
"That will be the biggest dilemma you will face after you make your recommendations." he said, noting, "The quickest and hardest vote Congress will have to make in March 1993 will be to raise the national debt limit, probably over $5 trillion."
He added that the idea of federally guaranteeing an infrastructure security might meet up with an additional obstacle with Congress' increasing unwillingness to take on contingent liabilities, like the savings and loan bailout, that could end up costing the government hundreds of billions of dollars.
Another witness, Steve Steckler, a privatization expert at Price Waterhouse, disputed the bond advocates' assertions, however, saying that there are some "ninjas" in the municipal bond business that have been trying to discourage taxable financing, privatization, and other creative approaches to financing infrastructure.