Federal Barriers Inhibit Privatization
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Although both the Bush and Clinton administrations gave lip-service to privatization,
federal laws continue to inhibit municipalities in their efforts to attract
private investment and sell off infrastructure.
- Indianapolis was frustrated in its effort to lease the city's wastewater plant by the tax code and IRS rules that forbid long-term contracts when facilities have been built with tax-exempt bonds.
- Syracuse was told it could not sell its airport until all federal grants were repaid. The federal barriers are in the tax code, rules for the use of grants and in various regulations.
- Various provisions in the tax code severely limit the use of private operators for infrastructure financed with tax-exempt bonds.
- The private sector must use taxable bonds while government facilities may use tax-exempt bonds for identical facilities, setting up an interest rate disparity between public and private endeavors.
- Grant barriers include many restrictions on how an enterprise that receives federal grants can be operated.
- Another restriction requires that past federal grants be repaid if a facility is leased or sold.
Congress could create a level playing field by rooting out regulatory barriers
in environmental and transportation laws and regulations.
Source: Robert W. Poole, Jr. (Reason Foundation), "Guest Editorial:
How to Boost Privatization," Investor's Business Daily, September
1, 1995.
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