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private corporations; because there’s no federal tax on the income earned from are willing to accept interest rates a percentage point or two lower than they could get for their money on the privatebut taxablebond market. In effect, as the Texas House Study Group said in an August report on this scheme, “The city or county uses its tax-exempt status to obtain a low-cost loan for the construction of the company’s plant.” On the maximum allowable bond issue of $5 million,* this method of financing would save a company about $75,000 on interest payments alone. TIC insists this boon to industry comes at no expense to local taxpayers, and up to a point that’s truethe cities and counties are forbidden to put their credit directly on the line, and the revenue bond buyers look exclusively to the lease payments made by the company occupying the government-owned facility for the payoff on their investment. But local taxpayers are also federal income taxpayers, and in that capacity they end up paying indirectly for the tax break the bond buyers get. As State Sen. Babe Schwartz puts it, “Those of us that pay taxes are carrying the load for those who don’t.” Moreover, the requirement that bond buyers rely entirely on the private companies for repayment has the side effect of insuring that only well-established firms that pose no credit risk will be able to take advantage of revenue bonds. Investors simply won’t buy the bonds unless they know there’s no chance of default. Thus, it is the corporate giants, for whom the inducement is too small to matter anyway, who will be the beneficiaries of the “low-cost loan” provided by revenue bonds. In fact, revenue bonds may even make financing harder to find than before for small businesses. If a bank has a choice between a tax-exempt bond backed by the likes of Tenneco and a loan to an independent small business, it’s not hard to figure out which it’s likelier to invest in. The upshot is that, if they can afford it at all, enterprises in the smaller, more of the economy have to pay higher rates of interest to make up for this new disadvantage government policy imposes on them. Policy objections like these don’t faze the folks at TIC, however. Their response to the argument against revenue bond financing has simply been to treat it as nothing more than a selling problem, * The $5 million limit is imposed by the IRS, which won’t exempt from taxes anything over that amount on a single bond issue. A proposal recently approved by the U.S. Senate finance committee would raise the exemption to $12 million. President Carter has asked that the ceiling be raised to $20 million. easily solvable by mounting another public relations campaignonly this time aimed at Texas voters instead of out-ofstate corporations. The campaign commenced in earnest last year, when TIC prevailed on the Legislature to approve submission of the revenue bond amendment to the electorate and to enact enabling legislation that will go into effect as soon as the amendment is approved. After the Legislature adjourned, the commission voted unanimously to endorse the amendment, and presented plaques to Sen. Bill Meier and Rep. Tom Craddick for getting the measures passed with a minimum of fuss. Agency staffers also set to work assembling a booklet to sing the praises of revenue bonds. The earliest opportunity for reforming the TIC comes November 7, when voters can and should reject Amendment Number 2, a wrongheaded proposal to create an industrial development bond authority in Texas. Now this may already seem like inappropriate behavior for a state agency, but it doesn’t hold a candle to what came next. Last January, 200 Texas industrialists, chamber of commerce officials, and TIC representatives gathered in Austin, at the request of Governor Briscoe, to form a political action committee devoted to the passage of the revenue bond amendment. Briscoe said he was endorsing the amendment because, as everybody knows, “a rising tide lifts all boats.” Thus inspired, the businessmen duly created the “Jobs for Texans” PAC, headed up by Glenn Biggs, president of First National Bank of San Antonio, and former attorney general John. Ben Shepperd of Odessa. The TIC attendees came back to the commission with glowing reports, but enthusiasm in the private sector soon subsided. “They didn’t get organized,” says Pamela Johnson, an Austin public relations consultant who was hired by Biggs and is now severing her ties with the near-moribund PAC, which has taken in a total of $4,000 so far and operates a single “office” in Fort Worth out of the private residence of a local utility official. The commissioners took the bad news about shirking in the business community pretty well when Biggs appeared before them at their quarterly meeting in July. The San Antonio banker is recorded in the minutes as having said “that he would like the Texas Industrial Commission to hold public hearings as a service to the citizens of the state of Texas, to familiarize them with the advantages of industrial revenue bonds.” The commission responded by passing a motion to assist “Mr. Biggs and his industrial revenue bonds committee,” and promptly launched a round of hearings in 23 cities around the state during July and August. Both commission chairman Truett Smith and executive director Harwell claim that the hearings were held simply to get citizen comment on the guidelines TIC has drafted to implement the proposed amendment, but local newspaper reports tell a different story. TIC staff members spoke as advocates of revenue bonds at those hearings. Reported the Conroe Courier of the hearing held in its community: “The meeting was basically a seminar on the positive aspects of the amendment and on how to promote it.” Senators Babe Schwartz and Lloyd Doggett have both questioned the propriety of the TIC’s behaving like a political action committee at taxpayers’ expense, but the people in charge at TIC don’t seem to understand the question. Commission chairman Smith, for instance, admitted that he had made some comments favorable to the amendment during the hearings, but added that “as a commissioner I can express my opinion on these things”speaking only for himself, you see. Embarrassing questions Why is this extraordinary new bonding authority being sought by TIC and its legislative proponents? Well, say the commissioners, 46 other states have some form of this bait to attract firms, and the absence of it here makes our little state “uncompetitive.” But wait a minute. Isn’t Texas the diamond-studded buckle on the Sunbelt? Don’t they claim that Texas has drawn 1,800 plants in just six years? They are not suggesting that an out-of-state firm would choose to move to the God-forsaken hills of Arkansas, or some such, just because Lone Star taxpayers won’t finance construction of their plant, are they? That’s exactly what they are claiming. Indeed, they have it figured down to the last job lost by our lack of a revenue bond funding mechanismHarwell asserted flatly that he has a list of 51 industries that would have come to Texas if only we’d had those bonds, and he says this shortcoming cost our people 10,611 jobs that the 51 firms would have brought, plus another 13,037 jobs created indirectly by service industries that would have sprung up. TIC staffers, like chamber of commerce managers everywhere, are given to making such disarming, down-to-thelast-digit statements, with the result that few people ever question them further. But one might ask, for example, how can they be so sure that the 51 located else 4 OCTOBER 6, 1978