WASHINGTON -- The Clinton Administration's proposals to streamline federal transportation programs could lead to increased issuance of municipal bonds, lobbyists said yesterday.

However, it is unclear how much of an effect the streamlining will have on state and local finance because the details of the program have not yet been provided, said Bob Folge, associate legislative director for the National Association of Counties.

The administration this week proposed creating state infrastructure banks that would leverage additional investment in transportation from private capital and other sources like tax-exempt municipal bonds. The proposal also recommends consolidating 30 grants into one worth more than $11 billion annually, according to a Department of Transportation briefing paper.

The infrastructure bank appears to be designed to work the same way as the existing state revolving loan funds, which leverage federal seed money through the issuance of tax-exempt bonds to help finance modernization and construction of wastewater treatment plants, said Tim Masanz, group director of economic development and commerce for the National Governors' Association.

"Conceptually, [the infrastructure bank] looks good because the state revolving loan fund acknowledges the role capital markets can play" in infrastructure financing, said Micah Greene, executive vice president of the Public Securities Association. But he agreed that more details were needed to understand how the banks would work.

The key question for localities is "to whom the [federal] money is given" because as the federal transportation aid program works now, transit and aviation aid is given straight to the localities that know their project funding priorities, Fogle said.

If the federal funds were channeled through the state bureaucracy, it could create more problems than it is intended to solve, said Robert R. Wigington, senior vice president for government legal affairs at the Airport Council International.

The national aviation transportation system now in place "works well ... we don't see justification for" giving state government an increased role in aviation management, Wigington said.

The program specifics still need to be worked out, but it appears the federal streamlining "will create new state requirements and strings and add costs because a state bureaucracy will have to be developed to run" the aviation system, he said.

Wigington also expressed concern that federal airport improvement grants will be cut to a minimum in the upcoming fiscal 1996 budget because of the intense pressure on Congress and President Clinton to cut the federal budget deficit.

The whole restructuring "is a function of downsizing government. It is budget driven," Wigington said.

The reality of receiving less federal money will encourage airports, the majority of which are locally owned, to find alternative funding methods, he said. For example, the airport council plans to urge the Federal Aviation Administration to clarify rules concerning when the agency can repeal the passenger facility charge airports collect from airlines.

Current law allows the FAA to terminate collection of the facility charges if an airport violates certain standards -- the revenue diversion laws, for example. The aviation administration's ability to terminate the fees removes the facility charge as a possible revenue source to back the issuance of tax-exempt bonds, Wigington said.

Another main concern for state and local government is full funding of the sweeping Intermodal Surface Transportation Efficiency Act of 1991 that made major changes in highway funding, Masanz of the governors association said. State highway funding priorities are decided by groups of local officials and "we don't want to see that go back to the state government," NACO's Fogle said.

The idea of increased flexibility for state and local governments and the promise of less federal regulation sounds great, "but we don't know what flexibility means," Fogle said.

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