Hon. EDWARD A. GARMATZ, COMPTROLLER GENERAL OF THE UNITED STATES, Chairman, Committee on Merchant Marine and Fisheries, DEAR MR. CHAIRMAN: By letter of May 5, 1971, you requested our comments on H.R. 2492, 92d Congress, which would amend the Marine Resources and Engineering Development Act of 1966, as amended, to provide for the effective management of the Nation's coastal and estuarine areas by adding title III which, if enacted, would be cited as the "Coastal and Estuarine Area Management Act." We have no information as to the advantages or disadvantages of the proposed legislation and therefore we have no recommendation with respect to its enactment. However, we have the following comments concerning specific provisions of the bill. Section 303 (c) authorizes the Administrator of the National Oceanic and Atmospheric Agency to enter into agreement with any coastal State to underwrite, by guarantee, bonds issued or loans obtained by such State for land acquisition, water development, or restoration projects undertaken by such State in connection with the implementation of a coastal or estuarine management plan. We believe that the bill should prescribe the terms and conditions of the bond issues or loans that may be guaranteed by the Administrator. We also believe that an aggregate principal amount of guaranteed bonds and loans that may be outstanding at any time should be stated in the bill. Further, assuming that the appropriations authorized by section 308 (b) relate to activities under section 303 (c) (2), the bill makes no provision for the possibility that the liability for payments under section 303 (c) (2) might exceed the amounts appropriated. Also it does not identify the recourse or rights of the Federal Government in the event of any defaults. Section 304 (a)(1)(A) of the bill lists factors to be considered in the determination of allotments among participating coastal States. The committee may wish to be more specific as to the financial needs which the Administrator is to take into consideration in the making of allotments and the relative weight to be accorded to the three factors listed in this section. Section 304 (c) (1) contains a list of Federal assistance programs with which coordination must be assured by the Administrator. The committee may wish to add the following acts to that list: the Clean Air Act, as amended; the Federal Water Pollution Control Act, as amended; and the Solid Waste Disposal Act of 1965, as amended. Section 306 (5) defines "coastal State" as any of the several States which include coastal or estuarine areas within their boundaries, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, and American Samoa. We assume that it is not intended to include the Trust Territory of the Pacific Islands and the Panama Canal Zone. Sections 303 (a) and (b) of the bill would provide the Administrator with authority to make grants to any coastal authority to carry out the purposes of the proposed legislation. There is no provision in the bill, however, authorizing the Administrator or the Comptroller General or their representatives to have access to the books and records of the recipients of the Federal grants for the purpose of audit and examination. Such authority is provided to Federal grantor agencies and the Comptroller General with respect to grants-in-aid to States pursuant to section 202 of the Intergovernmental Cooperation Act of 1968, 82 Stat. 1101. We recommend that similar authority be provided with respect to recipients of funds under the proposed legislation. This could be accomplished by the following language: "Each recipient of a grant under this Act shall keep such records as the Administrator may prescribe, including records which fully disclose the amount and disposition by such recipient of the proceeds of such grant, the total cost of the project or undertaking in connection with which such grant is made or used, the amount of that portion of the cost of the project or undertaking supplied by other sources, and such records as will facilitate an effective audit. "The Administrator and the Comptroller General of the United States, or any of their duly authorized representatives, shall have access for the purpose of audit and examination to any books, documents, papers, and records of the recipient of any grant under this Act which are pertinent to any such grant." On page 2, line 24, "Agency" should be "Administration." Sincerely yours, ROBERT F. KELLER, Assistant Comptroller General of the United States. U.S. DEPARTMENT OF THE INTERIOR, OFFICE OF THE SECRETARY, Washington, D.C., June 11, 1971. Hon. EDWARD A. GARMATZ, Chairman, Committee on Merchant Marine and Fisheries, DEAR MR. CHAIRMAN: This responds to your request for our comments on H.R. 2492, H.R. 2493, and H.R. 3615, similar bills to assist the States in their establishment of coastal zone management plans and programs. Because we recognize a real and urgent need for comprehensive land use planning, which would include the coastal zone and estuaries, we recommend the enactment of this Administration's National Land Use Policy Act of 1971, now pending as H.R. 4332, H.R. 4437, H.R. 4569 and H.R. 5504, in lieu of H.R. 2492, H.R. 2493 or H.R. 3615. H.R. 2492 and H.R. 2493 would both amend the Marine Resources and Engineering Development Act of 1966 (33 U.S.C. 1101 et seq.) by adding a new Title III, to be cited as the "Coastal and Estuarine area Management Act" and the "National Coastal and Estuarine Zone Management Act of 1971", respectively. Consistent with a Congressional declaration that there is a national interest in the effective management, beneficial use, protection, and development of the Nation's coastal and estuarine zone, the Administrator of the National Oceanic and Atmospheric Administration (H.R. 2492) or the Secretary of Commerce (H.R. 2493) would be authorized to assist coastal States in the development and administration of an approved management plan and program. No such program could be approved without a finding that the coastal State has legal authority and institutional organization adequate for the management of its coastal zone. H.R. 2492 would authorize grants not to exceed 50% of two years' operating expenses for a coastal authority, and a like percentage annually for long-range planning or implementation of a management program. H.R. 2493 would authorize cost-sharing grants of 66% for development and subsequent administration of an approved management program. Both bills would provide for bond and loan guarantees to facilitate land acquisition, land and water development, and restoration projects. In addition, H.R. 2493 provides for appointment of a fifteen-member advisory Committee and Federal assistance in the States' acquisition of estuarine sanctuaries. H.R. 3615 would amend the so-called Estuary Protection Act of August 3, 1968 (16 U.S.C. 1221 et seq.) by adding a second title, the "National Estuarine and Coastal Zone Management Act of 1971". The Secretary of the Interior would make grants not to exceed 50% of costs for program development and operation, and would be directed to develop a comprehensive Federal plan for that portion of the coastal zone beyond the territorial sea. There is provision, too, for the appointment of advisory committees to "consult with and make recommendations to the Secretary on matters of policy concerning the coastal zone". As the result of two studies conducted by this Department and the Stratton Commission report, this Administration recommended that the 91st Congress enact legislation similar in concept to H.R. 2492, H.R. 2493 and H.R. 3615. We believed then, as we believe now, that the finite resources of our coastal and estuarine areas are threatened by population growth and economic development. At the Federal level, this Department had already been directed by the Estuary Protection Act of 1968 to conduct a study and inventory of the Nation's estuaries. As we reported to the Committee during the last Congress, it was a conclusion of our study and others that effective management of land and water resources could best be promoted by encouraging the States to accept a broadened responsibility for land use planning and management. In its First Annual Report, the Council on Environmental Quality last August recognized "a need to begin shaping a national land use policy". In February of this year, the President urged that we "reform the institutional framework in which land use decisions are made", and recommended enactment of a proposed "National Land Use Policy Act of 1971". It is the President's proposal that $20 million be authorized in each of the next five years to assist the States in establishing methods for protecting lands, including the coastal zone and estuaries, of critical environmental concern, methods for controlling large-scale development, and improving use of land around key facilities and new communities. "This proposal", the President said, "will replace and expand my proposal submitted to the last Congress for coastal zone management, while still giving priority attention to this area of the country which is especially sensitive to development pressures". Specifically, H.R. 4332 would authorize a two-phase program of grants to be administered by the Secretary of the Interior. In that cost-sharing grants would be awarded both for program development and for program management, H.R. 4332 is similar to H.R. 3492, H.R. 2493 and H.R. 3615. The Administration proposal differs from the bills under consideration, however, with respect to the scope of a State's planning activity and, indeed the number of States eligible for assistance. To assure that coastal zone and estuarine management receive the priority attention of coastal States, H.R. 4332 would identify the coastal zones and estuaries as "areas of critical environmental concern" and require that a State's land use program include a method for inventorying and designating such areas. Further, the Secretary would be authorized to make grants for program management only if State laws affecting land use in the coastal zone and estuaries take into account (1) the aesthetic and ecological values of wetlands for wildlife habitat, food production sources for aquatic life, recreation, sedimentation control, and shoreland storm protection and (2) the susceptibility of wetlonds to permanent destruction through draining, dredging, and filling, and the need to restrict such activities. Most important, perhaps, funds for program development and management would be allowed to the States under regulations which must take into account the nature and extent of coastal zones and estuaries. Of the manmade threats to coastal environments described by the Council on Environmental Quality in its First Annual Report, most have their origin in heavily populated land areas at or near the water's edge. But others can be traced further inland, where eventual impact upon the coastal environment is not so easily recognized. Thus, while pressures become most intense at the point where land meets water, many cannot be alleviated without truly comprehensive planning. This fact, and the related absence of any precise geographic definition for the coastal zone, lies behind the integrated approach embodied in H.R. 4332. It may be noted that several States, coastal and inland, have already expressed a commitment to this concept. We urge that the Congress and your Committee, so effective in its concern for sound management of the coastal zone, join in this initiative to encourage planning for effective management of all the Nation's lands and waters. The Office of Management and Budget has advised that there is no objection to the presentation of this report from the standpoint of the Administration's program. Sincerely yours, Hon. EDWARD A. GARMATZ, HARRISON LOESCH, Assistant Secretary of the Interior. SMITHSONIAN INSTITUTION, Washington, D.C., June 24, 1971. Chairman, Committee on Merchant Marine and Fisheries, House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: Thank you for the opportunity to comment on H.R. 2492, a bill "To provide for the effective management of the Nation's coastal and estuarine areas," and H.R. 2493, a bill "To assist the States in establishing coastal and estuarine zone management plans and programs." Essentially, H.R. 2492 would empower the Administrator of the National Oceanic and Atmospheric Administration (NOAA) to make grants, subject to certain limitations, to State coastal authorities for the purpose of developing long-range planning and management of their respective coastal and estuarine areas. Further, the Administrator would be authorized to underwrite a guarantee, bond issue, or loan obtained by a coastal State for land acquisition, water development, or restoration projects undertaken pursuant to a coastal or estuarine area management plan. Such plans would require approval by the Administrator as one condition to the making of a grant or underwriting loans, etc. H.R. 2493 also would encourage coastal States to develop effective management plans for coastal and estuarine areas subject to competitive uses. Encouragement would assume the form principally of grants by the Secretary of the Department of Commerce to such States for the purpose of assisting in the development and administration of management plans and programs. The Secretary also would be authorized to underwrite bond issues or loans incurred by coastal States for the purpose of land acquisition, or land and water development and restoration projects accomplished in accordance with approved management plans and programs. The Secretary would be required to submit an annual report to the Congress, through the President, setting forth the undertakings and programs in the administration of this legislation. Finally, effective interagency coordination and cooperation would be required in accomplishing the objectives of the bill. The Smithsonian Institution agrees that (1) the coastal and estuarine zones are ecologically fragile; (2) there are increasing and competing demands made upon the lands and waters of our coastal and estuarine zones; and (3) an integrated management and planning mechanism is necessary for effective development and protection of coastal and estuarine resources. Accordingly, the Smithsonian supports the basic objectives in H.R. 2492 and H.R. 2493. However, it should be noted that the Administration's comprehensive "National Land Use Policy Act of 1971" (introduced as H.R. 4332) also gives concrete recognition to the importance of the Nation's coastal and estuarine areas, by encouraging the coastal States to adopt special protective measures pertaining to these areas. For this reason, although the Smithsonian supports the general objectives of H.R. 2492 and H.R. 2493, the Institution defers to the views of the Council on Environmental Quality and the Department of the Interior regarding the specific provisions set forth in those bills. The Office of Management and Budget has advised that there is no objection to the presentation of this report from the standpoint of the Administration's program. Sincerely yours, Hon. EDWARD A. GARMATZ, S. DILLON RIPLEY, Secretary. THE GENERAL COUNSEL OF THE TREASURY, Chairman, Committee on Merchant Marine and Fisheries, House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: Reference is made to your request for the views of this Department on H.R. 2492, "To provide for the effective management of the Nation's coastal and estuarine areas," and H.R. 2493, "To assist the States in establishing coastal and estuarine zone management plans and programs." The bills would authorize Federal guarantees of obligations issued by coastal States for land acquisition, water development, and restoration projects. H.R. 2492 would provide that the interest on any obligation so guaranteed is not exempt from Federal taxation. H.R. 2493 would not alter the tax status of obligations guaranteed under the bill. Thus, H.R. 2493 would result in Federal guarantee of tax-exempt obligations. The bills raise a number of questions of overall Federal credit program policy, including problems with Federal guarantees of tax-exempt obligations and the need to husband Federal credit resources. The enclosed statement by Assistant Secretary Weidenbaum before the Subcommittee on Oceans and Atmosphere of the Senate Committee on Commerce on S. 582, a similar bill, contains a detailed discussion of the Federal credit program policy questions which are also raised by H.R. 2492 and H.R. 2493. The Department has been advised by the Office of Management and Budget that there is no objection from the standpoint of the Administration's program to the submission of this report to your Committee. Sincerely yours, Enclosure. ROY T. ENGLET, Acting General Counsel. STATEMENT BY HON. MURRAY L. WEIDENBAUM, ASSISTANT SECRETARY OF THE TREASURY FOR ECONOMIC POLICY MR. CHAIRMAN: I am pleased to be here today to express the views of the Treasury Department on S. 582, a bill to establish a national policy and develop a national program for management, beneficial use, protection, and development of the land and water resources of the Nation's coastal and estuarine zones. The Administration has provided this Committee with comments on S. 582 and its relationship to the legislation proposed by the Administration, the National Land Use Policy Act, which has been introduced in the Senate as S. 992. My comments will be addressed to the issues raised by the provision in S. 582 which would authorize Federal Government guarantees of obligations the interest on which would be exmpt from Federal income taxation. S. 582 would add a new title III to the Act of October 15, 1966, and the proposed new section 307 would authorize the Secretary of the Interior to guarantee obligations issued by coastal States for the purposes of land acquisition, or land and water development and restoration projects. The total amount of guaranteed obligations outstanding at any time could not exceed $140 million. As stated in the Treasury Department's report of April 14, 1970 to Chairman Magnuson on S. 3460, 91st Congress, which is similar to S. 582, the Treasury Department opposes Federal guarantees of tax-exempt obligations because of four fundamental problems raised by such guarantees: 1. The guarantee of tax-exempt obligations is an inefficient form of subsidy since the Federal tax revenue loss exceeds the interest savings to the borrower because of the tax-exempt feature. For example, a guaranteed bond might sell in the current market at 5 percent on a tax-exempt basis and 7 percent on a taxable basis, in which case the tax-exempt feature would result in a savings to the borrower of 2 percent. Yet an investor in the 50 percent Federal income tax bracket would net only 32 percent after taxes on a 7 percent taxable bond. Thus, only 2 percent of the 32 percent Federal revenue loss would be realized by the borrowing public body. 2. The guarantee of tax-exempts disproportionately benefits investors in the higher Federal income tax brackets. That is, an investor in the 30 percent tax bracket receives roughly the same income after taxes on a 7 percent taxable bond and a 5 percent tax-exempt bond with the same Federal guarantee; but an investor in the 70 percent tax bracket who holds a 5 percent tax-exempt bond is receiving as much interest after taxes as he would on a 17 percent taxable bond. 3. Such guaranteed obligations heighten the competition for the limited amount of funds available to State and local borrowers from high tax bracket investors and raise the cost of financing other local projects for which direct Federal credit aid is not provided. For instance, a local public body might be required to pay a higher interest rate on its school bond issues if potential investors were attracted instead to the added supply of tax-exempt bonds with Federal guarantees. 4. Such guarantees conflict with Federal debt management policy by creating a class of securities (tax-exempt) which the Federal Government itself is prohibited from issuing by the Public Debt Act of 1941. In addition to our concern with the problems resulting from Federal guarantees of tax-exempt obligations, we are also concerned with the growing tendency to rely on direct Government support of borrowings in the private market. There have been several studies in recent years by the Administration, the Congress, and others of the various methods of providing Federal credit assistance to States and local public bodies as well as to private borrowers. The general conclusion from these studies has been that the provision of credit in our economy is properly a function of private lending institutions and that direct Federal credit assistance should generally not be provided except in cases where borrowers are unable to obtain credit on reasonable terms in the private market for programs of high national priority. In this regard, section 307 would permit full Federal guarantees of tax-exempt bonds for any borrowings for the purposes set forth in that section. Thus, all eligible borrowers might be encouraged to seek this Federal credit aid regardless of the borrower's ability to obtain funds from normal private market sources. The guarantee would effectively shift to the Federal Government the investment risk normally entailed in these obligations so that they would sell on the market at rock bottom interest rates along with other top rated securities. It is easy to see how widespread availability of Federal guarantees would quickly lead to Federal intervention in credit activities throughout the economy. The Treasury Department is not itself aware of the specific problems which coastal States might have in borrowing for the purposes stated in S. 582 in the private market without Federal guarantees of their obligations or, indeed, whether the States desire to borrow for these purposes. |