WASHINGTON - As expected, the Clinton Administration's plan for funding environmental cleanup required by the North American Free Trade Agreement makes no provisions for easing curbs on tax-exempt bonds, Treasury Department documents show.
But the Treasury's explanation of the funding plan that was sent to Congress does envision "an unprecedented degree of local involvement" in helping to improve the environment along the U.S.-Mexico border.
Financing will include "direct government support, such as grants, loans, and guarantees from federal, state and local governments," the report states.
In September, U.S. Trade Representative Mickey Kantor told Congress that $8 billion will be needed for the border cleanup. He estimated that the border states of Arizona, California, New Mexico, and Texas would provide a total of $2 billion through tax-exempt financing and other means.
At the time, Treasury Department officials said that the four state governments would have to use the bond authority they have under current law, and should not expect any proposals for broadening that authority. The Treasury documents released this week confirm that the administration is not contemplating any new bond proposals for the cleanup.
But the current bond curbs will make it difficult to use tax-exempt financing for cleanup activities, municipal lobbyists have said. One curb is the per-capita state volume cap on private-activity bonds. Another is the requirement that no more than 10% of a public-purpose bond issue be used to benefit private business.
Expecting states and localities to issue bonds without giving them additional flexibility is "pie in the sky," said Frank Shafroth, the director of policy and federal relations for the National League of Cities.
The financing plan described by the Treasury this week envisions the creation of two organizations, the Border Environment Cooperation Commission and the North American Development Bank
The cooperation commission would be made up of U.S. federal, state, and local officials, and Mexican officials. It would provide technical and financial planning assistance for environmental infrastructure projects in border areas.
The commission would also help to arrange for grants, loans, and guarantees from federal, state, and local governments. In addition, the commission would attempt to "mobilize private capital to the maximum extent possible in order to leverage government financing."
The development bank would offer up to $3 billion in loans and loan guarantees to cleanup projects that are certified by the commission as eligible for assistance. The bank would be financed initially through contributions of $225 million apiece from the United States and Mexico. Additional funding would come through debt issuance by the bank.
Kantor has said that the rest of the $8 billion needed for cleanup activities would come from a variety of sources, including the World Bank and the Inter-American Development Bank.
The plans for working with Mexico to clean up the border area depend on ratification of the overall trade pact. Nafta has sparked controversy in Congress, with both major political parties split as to whether it should be approved.
