WASHINGTON - Bond-financed high-speed rail projects are not likely to be crippled by a last-minute decision to scale back a proposal in the final tax bill that exempts the bonds from the private-activity volume cap, rail proponents said yesterday.

Municipal bond proponents and lobbyists familiar with high-speed rail projects concede that a move by conferees to limit the exemption to governmentally owned projects may be an impediment. However, the provision probably will not turn out to be an insurmountable obstacle to using tax-exempt financing for most projects, they said.

"I think it could affect some of the systems and some of the projects, but I think by and large you were going to have to have tremendous cooperation from local governments anyway," said Jim Rock, a partner with Concord Associates, a lobbying firm whose clients include developers of high-speed rail systems.

Joseph Vranich, the director of the Washington office of the High Speed Rail Association, said that as a result of the requirement, "some plans might have to be altered somewhat, but the show still goes on."

Micah S. Green, the executive vice president of the Public Securities Association, said the change means the provision "certainly is more limited, but it's very clear none of this could go forward under the existing volume cap [rules]."

According to the PSA, plans are on the drawing board for highspeed rail systems within Pennsylvania and Florida. There are also plans for systems between California and Nevada, and across Illinois, Indiana, and Michigan.

Limiting the cap exemption to governmentally owned projects "certainly will be a constraint that has to be dealt with," said David Rece, the president of Texas TGV Corp., the company that owns the franchise to construct a high-speed rail system in Texas. But he added that the provision "is still very good news for high-speed rail."

Before 1987, high-speed rail projects could not be financed with tax-exempt bonds unless they were owned and operated by state or local governments and private participation the project did not exceed 10%. In 1987, Congress expanded the use of tax-exempt financing to cover high-speed rail, but with one stipulation: 25% of each issue was required to receive an allocation under the private-activity bond volume cap.

That requirement effectively prohibited tax-exempt financing for high-speed rail projects, because they were so large that even trying to obtain a volume cap allocation for part of the issue could wipe out a state's cap authority in a given year.

Earlier this year, President Clinton proposed removing the 25% allocation requirement as part of his economic package. The House tax bill included that provision, but the Senate's bill did not. A brief description of the final tax bill lists the provision but includes the phrase "with government ownership requirement."

Part of the reason for the change appears to be cost savings. The document describing the final tax bill shows the adjusted high-speed rail provision as costing the federal government $134 million over five years, compared with $180 million in the House bill provision.

Another reason for the governmental ownership requirement is that it was "consistent with the policy of tax reform to limit nonvolume cap property to governmental property, with the exception of 501(c)(3) bonds," said a congressional aide.

Though it is a hindrance, the governmental ownership requirement still leaves room for private participation, said Rece. "You could easily have a situation where some facilities would be owned by the government and leased back to the franchisee. There would be a whole variety of choices," in dealing with the requirement, he said.

Rock said that the requirement would probably result in the creation of separate governmental entities to handle the financing of rail projects.

"What you'll have to do is set up some sort of tax-exempt authority like a port authority or like an airport authority," Rock said.

Aside from the practical considerations, the rail provision is important for its symbolic value, Green said. "As I go back through this [tax writing] process, it's quite clear that bonds were viewed as a constructive element in helping to leverage limited federal dollars, and it's very encouraging."

The provision on high-speed rail "indicates the administration does place a very high priority on transportation needs and financing infrastructure," Green said.

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