Senator PACKWOOD. Okay. You are assuming Mr. VOLCKER. It is assumed that this pollution has such priority, it will go ahead anyway. Senator PACKWOOD. You are assuming that EPA under the most hard-pressed circumstances will guarantee these municipal bonds despite the fact that they have no viable capacity, they are limited to the bond capacity, the voters won't allow them any more, they are not allowed to use revenues to pay them off? Mr. VOLCKER. They are allowed to use revenue as a source to pay them off. I would not make the assumption that the issue is not viable. I would make the assumption that in some cases without a guarantee, the investment community or a potential buyer would have a question about it, and that is why they charge a very high rate, or do not make the money available at all. In those cases the EPA could step in with a guarantee. But I don't think they would step in with a guarantee where there is no prospect that the revenue would be available. I don't think that would happen. They could be revenue bonds. We are talking about waste treatment facilities, obviously an essential public service, and I think the bonds in the end are not going to be clearly nonviable bonds. They are going to be bonds upon which there is enough question so that a guarantee would have to be provided. Senator PACKWOOD. Your concept of what might be financially viable is not necessarily the same as what a city council thinks is politically viable. Mr. VOLCKER. In the end, that is going to be a decision for the city council, but the city council is going to be a lot better off, and that is the whole object of the thing of course, if it knows it can get money at a reasonable rate from EFA than if it is doubtful it can get it at all or it can only get it at a much higher rate. That is precisely the purpose of the legislation. Thank you, Mr. Chairman. (Copies of the bills and reports are reprinted as follows:) 92D CONGRESS 1ST SESSION S. 1015 [Report No. 92-424] IN THE SENATE OF THE UNITED STATES FEBRUARY 26 (legislative day, FEBRUARY 17), 1971 Mr. COOPER (for himself, Mr. TOWER, Mr. ALLOTT, Mr. BAKER, Mr. BAYH, Mr. BEALL, Mr. BENNETT, Mr. BENTSEN, Mr. BOGGS, Mr. BROCK, Mr. BUCKLEY, Mr. CASE, Mr. DOLE, Mr. DOMINICK, Mr. ERVIN, Mr. FANNIN, Mr. GOLDWATER, Mr. GRIFFIN, Mr. GURNEY, Mr. HART, Mr. HATFIELD, Mr. HRUSKA, Mr. JAVITS, Mr. JORDAN of Idaho, Mr. MANSFIELD, Mr. MATHIAS, Mr. MILLER, Mr. MUSKIE, Mr. PACKWOOD, Mr. PASTORE, Mr. PEARSON, Mr. PERCY, Mr. PROUTY, Mr. RANDOLPH, Mr. SAXBE, Mr. SCHWEIKER, Mr. SCOTT, Mr. TAFT, and Mr. WEICKER) introduced the following bill; which was read twice and referred jointly to the Committees on Public Works and Banking, Housing and Urban Affairs NOVEMBER 3, 1971 Reported by Mr. COOPER, without amendment and referred to the Committee on Banking, Housing and Urban Affairs A BILL To establish an Environmental Financing Authority to assist in 1 the financing of waste treatment facilities, and for other purposes. Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That this Act may be cited as the "Environmental Financing 4 Act of 1971". 1 2 2 CREATION OF AUTHORITY SEC. 2. There is hereby created a body corporate to be 3 known as the Environmental Financing Authority, which 4 shall have succession until dissolved by Act of Congress. 5 The Authority shall be subject to the general supervision 6 and direction of the Secretary of the Treasury. The Authority 7 shall be an instrumentality of the United States Government 8 and shall maintain such offices as may be necessary or 9 appropriate in the conduct of its business. 10 il 12 13 PURPOSE SEC. 3. The purpose of this Act is to assure that inability to borrow necessary funds on reasonable terms does not pre vent any State or local public body from carrying out any 14 project for construction of waste treatment works determined 15 eligible for assistance pursuant to section 5 of this Act. 16 17 BOARD OF DIRECTORS SEC. 4. (a) The Authority shall have a Board of Direc18 tors consisting of five persons, one of whom shall be the Sec19 retary of the Treasury or his designee as Chairman of the 20 Board, and four of whom shall be appointed by the Presi21 dent from among the officers or employees of the Authority 22 222 or of any department or agency of the United States 23 Government. 24 (b) The Board of Directors shall meet at the call of its 25 Chairman. The Board shall determine the general policies 3 1 which shall govern the operations of the Authority. The 2 Chairman of the Board shall select and effect the appoint 3 ment of qualified persons to fill the offices as may be pro4 vided for in the bylaws, with such executive functions, 5 powers, and duties as may be prescribed by the bylaws or 6 by the Board of Directors, and such persons shall be the 7 executive officers of the Authority and shall discharge all 8 such executive functions, powers, and duties. The members of 9 the Board, as such, shall not receive compensation for their 10 services. 11 23 FUNCTIONS 12 SEC. 5. (a) The Authority is authorized to make com13 mitments to purchase and to purchase on terms and condi14 tions determined by the Authority, any obligation or par ticipation therein which is issued by a State or local public body to finance the non-Federal share of the cost of any project for the construction of waste treatment works which the Administrator of the Environmental Protection Agency has determined to be eligible for Federal financial assistance. under the Federal Water Pollution Control Act (33 U.S.C. 466). (b) No commitment shall be entered into, and no purchase shall be made, unless the Administrator of the Environmental Protection Agency (1) has certified that the public body is unable to obtain on reasonable terms sufficient 4 1 credit to finance its actual needs; (2) has approved the 2 project as eligible under the Federal Water Pollution Con3 trol Act (33 U.S.C. 466); and (3) has agreed to guaran4 tee timely payment of principal and interest on the obliga5 tion. The Administrator is authorized to guarantee such 6 timely payments and to issue regulations as he deems neces7 sary and proper to protect such guarantees. Appropriations 8 are hereby authorized to be made to the Administrator in 9 such sums as are necessary to make payments under such 10 guarantees, and such payments are authorized to be made 11 from such appropriations or from any other available funds. 12 (c) No purchase shall be made of obligations issued 13 to finance projects, the permanent financing of which oc14 curred prior to the enactment of this Act. 15 (d) Any purchase by the Authority shall be upon such 16 terms and conditions as to yield a return at a rate determined 17 by the Secretary of the Treasury taking into consideration 18 (i) the current average yield on outstanding marketable 19 obligations of the United States of comparable maturity or 20 in its stead whenever the Authority has sufficient of its own 21 long-term obligations outstanding, the current average yield on outstanding obligations of the Authority of comparable 23 maturity; and (ii) the market yields on municipal bonds. 22 24 225 (e) The Authority is authorized to charge fees for its 25 commitments and other services adequate to cover all ex 78-443 O 723 |