TABLE IV-1 COMPARISON OF PUBLIC FACILITY CAPITAL CUTLAYS OF STATE AND LOCAL PUBLIC AGENCIES IN 1965 WITH ESTIMATED CAPITAL REQUIREMENTS DURING 1965-75 wrter and sewer Electric and gas Transportation Education Her 1th Recreation 1 end cultural Other public buildings. Tot l Source: State and Local Public Facility Needs and Financing, vol. 1, n. 14. in The rise in State and local governments' capital requirements, turn, will lead to greatly increased municipal debt financing. By 1970, the annual level of new long term municipal debt is expected to increase to $17.6 billion and by 1975 to $22.7 billion. (See Table IV-2). Assuming that these projections are realized over longer periods of time, the aggregate new municipal debt for the six years from 1968 through 1973 would be $108.8 billion, an amount in excess of the total outstanding municipal debt in 1966. From the end of this year to the end of 1975, new municipal bond issues are expected to total $153.3 billion. The level of outstanding municipal debt at the end of 1975 will be slightly less than $200.0 billion, almost precisely double that of mid-1965. Future Revenue Issues Affected by S. 1306 While the pending legislation permitting banks to underwrite revenue bond issues will affect only a relatively small proportion of the projected new municipal debt, the dollar volume that would be affected is substantial indeed. As shown in Chapter III, revenue bond issues have generally represented from 30 to 40 percent of new municipal debt during recent years. But there also has been a modest upward trend in this percentage. Therefore, a third, and higher, estimate of the amount of new debt that might be affected was computed based on an even split of new municipal debt between GOs and revenue issues. A substantial volume of new revenue bond issues do not fall into the rating categories most relevant for appraising the benefits of the pending legislation. The volume of revenue bonds rated Baa or higher, however, has been increasing relative to the total amount of new revenue issues. The three rating categories covered in this study constituted about 42 percent of all revenue issues in 1965 and 55 percent in 1966. During the first six months of 1966, the issues in this group accounted for 59 percent of the total for that period. To encompass the likely range in the volume of new issues that would be affected by S. 1306, estimates were prepared based on assumptions that 40, 50, and 60 percent of new revenue issues would fall in the rating categories studied. The volume of new revenue issues that would be affected by S. 1306 may be stated in terms of the amount of new issues in any one year or in terms of the amount of outstanding debt at one time. It should be noted, however, that these two methods of computing the affected volume of new issues would dictate different methods of calculating the burden of the added costs due to the prohibition of bank competition in underwriting revenue bonds or, alternatively, the savings that would flow from permitting banks to enter this market. Briefly, the first calls for calcu lation of the added costs over the entire life of the issue, whereas the second calculation may be based on the added interest payments in any one year. Various estimates of the volume of issues that would be affected by S. 1306 are given in Tables IV-3 and IV-4. In 1968 the volume of new issues affected might be $1,884 million, assuming that revenue bonds |