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POWERS CONFERRED BY ACT AS ADDITIONAL AND SUPPLEMENTARY
The powers conferred by this act shall be in addition and supplementary to those in other laws and the limitations by this act shall not affect the powers conferred by any other law. L.1973, c. 376, § 15, eff. Jan. 9, 1974. 40:37C–17. Severability
The provisions of this act shall be severable, and if any of the provisions hereunder shall be held to be unconstitutional or otherwise invalid, such decision shall not affect the validity of any of the remaining provisions of this act. L. 1973, c. 376, § 17, eff. Jan. 9, 1974. 40:37C-18. Annual audit of accounts; filing
It shall be the duty of every authority created pursuant to this act to cause an annual audit of the accounts of the authority to be made and filed with the authority, and for this purpose the authority shall employ a registered municipal accountant of New Jersey or a certified public accountant of New Jersey. The audit shall be completed and filed with the authority within 4 months after the close of the fiscal year of the authority and a certified duplicate copy thereof shall be filed with the Director of the Division of Local Government Services in the Department of Community Affairs within 5 days after the original report is filed with the authority. Every authority created pursuant to this act shall file a certified copy of every bond resolution with the Director of the Division of Local Government Services in the Department of Community Affairs and in addition shall file a certified copy of all bond proceedings with the director. L. 1973, c. 376, § 18, eff. Jan. 9, 1974.
Mr. POWELL. I would be happy to answer any questions.
Mr. SMITH. I want to compliment you on your statement. I think it was brief and very much to the point, and amazing in some respects. We usually think of the eastern seaboard as the residual of large industries, and yet you tell us that fewer than 10 percent of the industries in New Jersey employ more than 250 people.
Essentially, as you describe the use of tax-exempt bonds to finance the purchase of pollution control equipment in New Jersey, it is largely being used as a method of obtaining lower interest rates and, in effect, having the Federal Government, you might say, subsidize part of the cost of pollution control equipment?
Mr. Powell. That is correct.
Mr. Smith. And one can argue that it is good or bad but whether it is good or bad, it ought to be available for small businesses as well as large businesses. As it is being used, it is only the large business that is able to take advantage of it.
Mr. POWELL. That is correct. And, Mr. Chairman, may I add on that point that in Commissioner Bardin's testimony he has appended a specific list of the pollution control projects that his department has certified over the past 9 months. And you will note that with one exception, a $500,000 financing, those projects which have been certified are substantial projects dollarwise. Chevron Oil, $10 million, Exxon Corp., $30 million, Mobil Oil Corp., $27 million and DuPont Co., $20 million. We think the incentive for pollution control financing ought to be there with the large companies as well, because in terms of volume of pollution, they certainly are a substantial problem. But, there is no question that there is a double standard in this field, and that that low interest financing is just not available now to the smaller companies.
One other item I might note that Commissioner Bardin has included in his testimony is some information on the relative size of air pollution projects that his Department has issued permits for over the past
year. He indicates that on the average, the air pollution permits that he is issuing are for projects that cost approximately $14,000. He gives a number of examples of even smaller air pollution projects that have had to be undertaken by small business. And as I indicated, those types of expenditures now simply do not qualify for tax-exempt bonding.
Mr. SMITH. Thank you.
Mrs. FENWICK. I am delighted and very proud of the report that comes from a State, a small portion of which I represent. And to learn how the Pollution Act has worked out, the Air Pollution Control Act.
I wonder is it still true that the proceeds of these bond issues may, because of Federal laws, Internal Revenue Service requirements, only go for pollution and cannot be used in any way to increase production ? Is that still part of the Federal law that governs the issuance of these bonds?
Mr. POWELL. Well, if one wants to finance more than $5 million in capital expenditures, using an industrial revenue bond, then the bond issue would have to be a pollution control bond issue. And in order to qualify as a pollution control industrial development bond, you are correct, the proceeds must be used only for equipment and machinery and related expenditures that control pollution.
As you may know, the Internal Revenue Service, which administers these regulations, has become more and more vigilant, tougher and tougher, frankly, in defining what pollution control equipment is. The section of the IRS that now administers this whole pollution control field is dominated by engineers and not lawyers, so that one must discount any gains that the pollution control equipment would bring to the company. If, for example, a bag house would extract valuable metal that has a salvage value, one has to discount with some rather complicated mathematics the price of the bag house to the extent that it returns a small profit to the company.
If the pollution control equipment preserves or extends the useful life of other equipment in the plant, that extension of life has to be discounted in the price of the pollution control equipment and deducted from the amount to be financed.
Mrs. FENWICK. I am not surprised at the number of businesses, because I made a survey of small business when I was there myself, and I think over 1 million people in New Jersey, which only has some 7 million-plus people, are in very, very small businesses, Mom and Pop, including up to 20. But, how does this work, how would this work? You speak in your testimony of making a group of these small businesses. Well, now, if their revenue bonds, depending upon their acceptability, how would this work out? Would that fee still be—I mean, vou spoke of the fee being relatively valuable economically as a benefit when the bond issue is big enough, and not valuable when it is small. But, could they all be brought under so that that fee would cover all, is that your feeling there?
Mr. POWELL. Yes, that is correct. Let me give you an example. If the Small Business Administration were able to guarantee obligations of our authority, which is going to be used for pollution control, we, working in cooperation with the State department of environmental protection, could aggregate 10 small business pollution control projects, each of which had a value of $50,000, with a total amount of borrowings at $500,000, and we then could go to the Small Business Admin
istration and ask, that pursuant to this legislation, that they examine each of the projects and commit themselves to indirectly guarantee our $500,000 bond issue, the proceeds of which would be divided into 10 parts and distributed among the 10 small businesses. We would be able, today, to sell a bond issue of that sort, which is fully guaranteed by the Federal Government, as the legislation would provide, at an interest rate of around 5 percent and perhaps even lower. The bond issue would be as good as general obligation bonds of the Federal Government.
Mrs. FENWICK. I feel no embarrassment toward asking the taxpayer to take up some of the load of this financing and the loss of revenue in the guarantee of the bonds, because the point of pollution is the general good. And we are asking, in other words, we are merely saying to the general public that you are going to benefit. Otherwise, we would not have these laws, these regulations and so it is natural that we should ask you to share.
Thank you, Mr. Chairman.
Mr. HUNGATE. No questions. Thank you, Mr. Chairman. I have heard of New Jersey all of my life. I understand you have the biggest mosquitoes in the world.
Mr. POWELL. I thought Texas had that distinction. Mr. HUNGATE. Thank you very much. That was a helpful statement. Thank you, Mr. Chairman.
Mr. SMITH. Thank you very much. Your statement was very much to the point and brief, and we appreciate it.
Mr. Powell. Thank you, sir.
[Whereupon, at 11:43 a.m., the hearing was adjourned, to reconvene at 10 a.m., Friday, July 18, 1975.]
SBA ASSISTANCE FOR AGRICULTURAL CONCERNS
AND TO MEET POLLUTION STANDARDS
FRIDAY, JULY 18, 1975
HOUSE OF REPRESENTATIVES,
Washington, D.C. The subcommittee met, pursuant to notice, at 10 a.m., in room 2359, Rayburn House Office Building, Hon. Neal Smith (chairman of the subcommittee) presiding.
Mr. Smith. The subcommittee will come to order. The first witness this morning is Hon. Jesse Unruh, treasurer, State of California, concerning H.R. 78, and related proposals.
Mr. Unruh, we are very fortunate and pleased to have you with us this morning on this very important matter. Others from California have given testimony to the importance of this matter to the State of California and told us some about how it works in California, but I am sure, from the standpoint of the treasurer of the State, that you can give us more information that will be of considerable help. You may proceed.
TESTIMONY OF HON. JESSE UNRUH, TREASURER, STATE OF
Mr. Unruh. Thank you, Mr. Chairman. I will be very brief. In addition to being treasurer of the State of California, I am also chairman of the California Pollution Financing Authority, which was created in 1972 as a five-man board created to administer that law. That board elects its chairman, and I was elected chairman at the first meeting of that authority in March of this year.
I would like to address myself to what almost amounts to a redress of grievances insofar as small business is concerned in the pollution control financing field.
After the authority was created, and even after it had withstood successfully the various court tests that most of these kind of actions have to, the legislature authorized $200 million in bonds. The authority, after it was authorized to proceed with the utilization of this amount, went back to the legislature but was refused further financing authority.
Now, what actually happened, I suppose, is something that should have been predictable and could have been foreseen. The large companies, who had a hand in creating this authority and the consequent