EPA Advisory Board's bond proposals delayed by ongoing dispute with OMB.

WASHINGTON -- The publication of a draft Environmental Protection Agency advisory board report that recommends reclassifying environmental bonds as governmental bonds continues to be held up because of opposition from the Office of Management and Budget, agency and board officials said last week.

The delay in publishing the draft report, which was expected out this past spring, is causing frustration among the board's 31 members because they eflt it could influence this year's debate in Congress on infrastructure and tax policy, as well as reauthorization of the Clean Water Act.

Board members noted that some members of Congress would like to include a proposal reclassifying infrastructure bonds -- which could extend to environmental infrastructure bonds -- in the highway reauthorization bill, which Congress is expected to pass by the program's expiration date on Sept. 30.

Under such a proposal, bonds issued to finance federally mandated environmental and infrastructure projects would be exempt from some 1986 tax law curbs, such as the 10% private-use limit or the state volume cap, even if the projects substantially benefited private interests.

But Charles Grizzle, EPA's assistant administrator, said that he does not now expect to present the advisory board report to EPA Administrator William Reilly until August or September because, among other things, OMB's objections to the report's bond proposals still have not been addressed or resolved. The report would not be formally published until the administrator has been briefed and given the opportunity to consider endorsing it.

To illustrate how critical the timing may be, officials noted that House Public Works and Transportation Committee leaders currently are drafting a highway bill that would raise about $6.6 billion a year in new federal gasoline taxes that could be used to pay for the proposed reclassification of infrastructure bonds as well as new infrastructure programs and projects.

Committee leaders hope to unveil their draft bill next week, then complete committee action and move it through the House by the end of the month. Part of their tight schedule would include a brief referral of the bill to the House Ways and Means Committee to act on the gas tax and other tax measures.

Any bond proposals included in the bill or offered as amendments most likely would provoke a heated battle in the tax committee. Board members said supporters on the committee would be better armed if they had the official endorsement of the EPA advisory board, if not the EPA administrator himself.

"The report could sensitize the committees about their need to deal with the bond issues, and could be helpful in getting some changes made, though it certainly would not be an overwhelming influence," said one board member, who asked not to be identified.

Publication of the report in particular could give a boost to two board members who are also members of Congress and who have championed separate measures to reclassify environmental and infrastructure bonds -- Sen. Pete Domenici, R-N.M., and Rep. Beryl Anthony, D-Ark.

While the report would be useful in "educating" Congress, another member, asking to remain anonymous, cautioned that by far its greatest potential impact would be in reshaping administration policy. That would be possible if Mr. Reilly adopted the reclassification and other recommendations and became an advocate for bond reforms within the administration.

"It's up to the administrator. He'll have to decide whether to endorse the report. We only hope he will do so and use it effectively," the member said.

Besides proposing some major bond reforms, the draft report contains extensive recommendations on preserving and expanding the Clean Water Act revolving fund program, which is scheduled to phase out in 1994.

Its recommendations in this area also come belatedly, since leaders of the Senate Environment and Public Works Committee introduced their clean water reauthorization bill in May. That bill would not preserve the revolving fund program with its unique municipal bonding and loan characteristics, but rather woulconvert it largely into a grant program for nonmunicipal cleanup projects.

"It would have been useful to have the report on the street by now," said a third committee member, who said she hopes committee members can still be convinced to change the bill.

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