H01 1 <#FROWN:H01\>Some reporters had difficulty distinguishing in their
H01 2 records between parts that should have been included in 'road
H01 3 vehicles and parts' or 'other transport equipment' and parts that
H01 4 should have been included in other categories. BEA reviewed reports
H01 5 with large trade values and, after discussions with reporters,
H01 6 revised those with incorrect reporting. However, reports with low
H01 7 values were not reviewed, and in some cases, reporters may have
H01 8 erroneously included both types of parts in 'road vehicles and
H01 9 parts' or 'other transport equipment.' Thus, these two categories
H01 10 may be overstated, and other categories, particularly machinery,
H01 11 may be understated.
H01 12 Total U.S. trade associated with U.S. parents and their foreign
H01 13 affiliates consists of (1) trade between U.S. parents and their
H01 14 foreign affiliates, (2) trade between other U.S. persons and
H01 15 foreign affiliates, and (3) trade between U.S. parents and
H01 16 unaffiliated foreigners. Data on trade between U.S. parents and
H01 17 their foreign affiliates were collected on the BE-10A and
H01 18 BE-10B(LF) and (SF) forms; on the BE-10A form, total trade of a
H01 19 given U.S. parent with all of its foreign affiliates combined was
H01 20 reported, while on the BE-10B(LF) and (SF) forms, trade of the U.S.
H01 21 parent with only the individual foreign affiliate covered by that
H01 22 form was reported. In principle, the sum of a U.S. parent's trade
H01 23 with each of its individual foreign affiliates, as reported on the
H01 24 BE-10B forms for those affiliates, should equal the parent's total
H01 25 trade with all of its affiliates combined, as reported on the
H01 26 parent's BE-10A form. In fact, however, the sum of the data from
H01 27 the affiliates' BE-10B forms may not equal the total reported on
H01 28 their parent's BE-10A form, because of differences in timing and
H01 29 valuation and because the parent's BE-10A form may include data for
H01 30 affiliates that are exempt from being reported on the BE-10B
H01 31 forms.
H01 32 In this publication, the data on trade between parents and
H01 33 affiliates used in computing total U.S. trade associated with U.S.
H01 34 parents and their foreign affiliates are derived from the
H01 35 affiliates' BE-10B forms rather than from the U.S. parents' BE-10A
H01 36 forms. (However, the data derived from the parents' BE-10A forms
H01 37 are shown as an addendum.) Data on trade between other U.S. persons
H01 38 and foreign affiliates are also derived from the affiliates' BE-10B
H01 39 forms. However, data on trade between U.S. parents and unaffiliated
H01 40 foreigners are from the parents' BE-10A forms.
H01 41 In this publication, BEA is showing, for the first time,
H01 42 separate data on U.S. parent trade with foreign parent groups
H01 43 (FPG's). A U.S. parent has an FPG if the U.S. parent is, in turn,
H01 44 owned 10 percent or more by a foreign person. For a given U.S.
H01 45 parent, the FPG consists of (1) the foreign parent of the U.S.
H01 46 parent, (2) any foreign person, proceeding up the ownership chain,
H01 47 that owns more than 50 percent of the person below it, and (3) any
H01 48 foreign person, proceeding down the ownership chain(s) of each of
H01 49 these members, that is owned more than 50 percent by the person
H01 50 above it.
H01 51 Direct Investment Position and Balance of Payments
H01 52 Data
H01 53 Direct investment position and balance of payments data cover
H01 54 U.S. parents' positions in, and transactions with, their foreign
H01 55 affiliates; in contrast, the direct investment financial and
H01 56 operating data, discussed earlier, cover the overall activities of
H01 57 the parents and affiliates themselves. For foreign affiliates, the
H01 58 data include positions in, and transactions with, them by all
H01 59 persons, not just their U.S. parents. The U.S. direct investment
H01 60 position abroad is equal to U.S. parents' equity in, and net
H01 61 outstanding loans to, their foreign affiliates; foreign affiliates'
H01 62 total assets, in contrast, are equal to the sum of (1) total
H01 63 owners' equity in affiliates held by both U.S. parents and all
H01 64 other persons and (2) total liabilities owed by affiliates to both
H01 65 U.S. parents and all other persons. For example, suppose that an
H01 66 affiliate is owned 80 percent by its U.S. parent and that the
H01 67 affiliate has total owners' equity of $50 million and total
H01 68 liabilities of $100 million (including $20 million owed to the
H01 69 parent). In this case, the affiliate's total assets would be $150
H01 70 million (total owners' equity of $50 million plus total liabilities
H01 71 of $100 million), and the parents' position in the affiliate would
H01 72 be $60 million (80 percent of the $50 million of owners' equity
H01 73 plus the $20 million of intercompany debt).
H01 74 In the benchmark survey, data for the position and balance of
H01 75 payments items were reported in part III of the BE-10B(LF) or (SF)
H01 76 (or the BE-10B BANK) forms. The balance of payments items consist
H01 77 of transactions between parents and their affiliates and of
H01 78 transactions between parents and other persons that change the
H01 79 parents' equity in their affiliates. The major items that appear in
H01 80 the U.S. balance of payments accounts for U.S. direct investment
H01 81 abroad are these:
H01 82 <*_>bullet<*/> Direct investment capital outflows,
H01 83 <*_>bullet<*/> Direct investment income,
H01 84 <*_>bullet<*/> Direct investment royalties and license fees,
H01 85 and
H01 86 <*_>bullet<*/> Other direct investment services.
H01 87 It should be noted that there are two types of adjustments made
H01 88 to the balance of payments data presented here before the data are
H01 89 entered into the U.S. international accounts. First, as noted
H01 90 earlier, two of these items - income and capital outflows - are not
H01 91 entered into the international accounts at the reported book values
H01 92 until they are adjusted to reflect current-period prices.
H01 93 Second, as discussed in the section on fiscal year reporting,
H01 94 the direct investment position and balance of payments data
H01 95 collected in the 1989 benchmark survey and shown in this
H01 96 publication are on a fiscal year basis, whereas the data in the
H01 97 U.S. balance of payments accounts and in BEA's annual series on the
H01 98 direct investment position are on a calendar year basis. Before
H01 99 being incorporated into the balance of payments accounts and the
H01 100 series on the position, the data from the 1989 benchmark survey
H01 101 will be adjusted to a calendar year basis. These adjusted data for
H01 102 1989 will also be extrapolated forward to derive universe estimates
H01 103 for subsequent calendar years, based on sample data collected in
H01 104 BEA's quarterly surveys for those years. The adjusted 1989 data and
H01 105 the extrapolated estimates for calendar years 1990-92 are scheduled
H01 106 for publication in the June and August 1993 issues of the
H01 107 Survey of Current Business. As noted earlier, BEA also
H01 108 plans to revise its balance of payments and direct investment
H01 109 position data for 1983-88 to incorporate information from the 1989
H01 110 benchmark survey.
H01 111 The balance of payments data included here differ from data
H01 112 from the 1982 benchmark survey because of methodological and
H01 113 definitional changes introduced in June 1992 to make BEA's data
H01 114 more consistent with the international standards recommended in the
H01 115 forthcoming fifth edition of the International Monetary Fund's
H01 116 (IMF) Balance of Payments Manual and in the United
H01 117 Nations System of National Accounts. These changes include (1) the
H01 118 presentation of receipts and payments of income, royalties and
H01 119 license fees, and other private services before deduction of
H01 120 withholding taxes and (2) the removal of capital gains and losses
H01 121 from direct investment income. These and other changes are
H01 122 explained in the sections that follow.
H01 123 U.S. direct investment position abroad
H01 124 As noted earlier, the U.S. direct investment position abroad is
H01 125 equal to U.S. parents' equity in, and net outstanding loans to,
H01 126 their foreign affiliates. The position may be viewed as the U.S.
H01 127 parents' contribution to the total assets of their foreign
H01 128 affiliates or as financing provided by U.S. parents to their
H01 129 affiliates in the form of either equity or debt. The data are
H01 130 derived from the foreign affiliates' books at yearend.
H01 131 The direct investment position estimates published here are at
H01 132 book value and are not adjusted to current value. Thus, they
H01 133 largely reflect prices at the time of investment rather than prices
H01 134 of the current period. Because historical cost is the basis used
H01 135 for valuation in company accounting records in the United States,
H01 136 it is the only basis on which companies can report data in BEA's
H01 137 direct investment surveys. It is also the only basis on which
H01 138 detailed estimates of the position are available by country, by
H01 139 industry, and by account. (Elsewhere, however, BEA does provide
H01 140 aggregate estimates of the position valued in current-period
H01 141 prices.) For simplicity, all subsequent references to the position
H01 142 are to the position on a historical-cost (book-value) basis, unless
H01 143 otherwise stated.
H01 144 U.S. parents' equity in incorporated foreign affiliates
H01 145 consists of the U.S. parents' holdings of capital stock in, and
H01 146 other capital contributions to, their affiliates and U.S. parents'
H01 147 equity in the retained earnings of their affiliates. Capital stock
H01 148 comprises all stock of affiliates, whether common or preferred,
H01 149 voting or nonvoting. Other capital contributions by U.S. parents,
H01 150 also referred to as the 'U.S. parents' equity in additional paid-in
H01 151 capital,' consists of capital, invested or contributed, that is not
H01 152 included in capital stock, such as amounts paid for stock in excess
H01 153 of its par or stated value, capitalizations of intercompany
H01 154 accounts (conversions of debt to equity) that do not result in the
H01 155 issuance of capital stock, and donations. U.S. parents' equity in
H01 156 retained earnings is the U.S. parents' shares of the undistributed
H01 157 earnings of their incorporated foreign affiliates.
H01 158 For most unincorporated affiliates, U.S. parents' were able to
H01 159 provide a breakdown of owners' equity by type. Thus, in tables
H01 160 showing U.S. parents' equity in affiliates by type, the parents'
H01 161 equity in both incorporated and unincorporated affiliates are shown
H01 162 together. For those unincorporated affiliates for which no
H01 163 breakdown of owners' equity by type was available, all of the
H01 164 parents' equity in the affiliates was included in capital stock
H01 165 (which includes additional paid-in capital and capital
H01 166 contributions) rather than in retained earnings, because these
H01 167 affiliates usually remit all of their earnings to the U.S. parent.
H01 168 The U.S. parents' share in total owners' equity (not broken down by
H01 169 type) is shown separately for incorporated and unincorporated
H01 170 affiliates in addenda to the direct investment position tables.
H01 171 The U.S. parents' net outstanding loans to their foreign
H01 172 affiliates, shown in the tables as the affiliates' net intercompany
H01 173 debt to U.S. parents, consist of trade accounts and trade notes
H01 174 payable, other current liabilities, and long-term debt owed by the
H01 175 affiliates to their U.S. parents, net of similar items due to the
H01 176 affiliates from their U.S. parents.
H01 177 Intercompany accounts include the value of all capital leases
H01 178 and of operating leases of more than 1 year between U.S. parents
H01 179 and their foreign affiliates. (Only long-term operating leases are
H01 180 included in intercompany accounts to conform to U.S. data on
H01 181 merchandise trade, which also exclude shipments under leases for
H01 182 periods of 1 year or less.) The value of property so leased to a
H01 183 foreign affiliate by its U.S. parent is included in affiliates'
H01 184 payables, and the net book value of property so leased by a foreign
H01 185 affiliate to its U.S. parent is included in affiliates'
H01 186 receivables. Capital leases recognize that title to the leased
H01 187 property will usually be transferred to the lessee at the
H01 188 termination of the lease - similar to an installment sale.
H01 189 Operating leases have a term significantly shorter than the
H01 190 expected useful life of the tangible property being leased, and
H01 191 there is usually an expectation that the leased property will be
H01 192 returned to the lessor at the termination of the lease. For capital
H01 193 leases, the net book value of the leased property is calculated
H01 194 according to GAAP. Under GAAP, the lessee records either the
H01 195 present value of the future lease payments or the fair market
H01 196 value, whichever is lower; the lessor records the sum of all future
H01 197 lease receipts. For operating leases of more than 1 year, the value
H01 198 is the original cost of the leased property less accumulated
H01 199 depreciation.
H01 200 For bank affiliates, the direct investment position is defined
H01 201 to include only their parents' permanent debt and equity investment
H01 202 in them; similarly, the direct investment flows that enter the U.S.
H01 203 balance of payments accounts for these affiliates include only
H01 204 transactions related to such permanent investment. All other
H01 205 transactions and positions - mainly claims and liabilities arising
H01 206 from the parents' and affiliates' normal banking business - are
H01 207 excluded from the direct investment accounts because they are
H01 208 included with other banking claims and liabilities in the portfolio
H01 209 investment accounts. The definition of permanent investment may
H01 210 vary somewhat from bank to bank. Examples of such investment are
H01 211 funds from parents that are used to establish or acquire the
H01 212 affiliates or that finance the affiliates' purchases of property,
H01 213 plant, and equipment.
H01 214
H02 1 <#FROWN:H02\>CHAPTER I
H02 2 INTRODUCTION
H02 3 Members of the Kentucky General Assembly were not surprised
H02 4 when the 101st U.S. Congress, in its closing days, placed stringent
H02 5 new controls on the burning of coal by electric utilities.
H02 6 Proposals to control acid deposition, commonly referred to as acid
H02 7 rain, were introduced in Congress as early as 1981. From 1982 until
H02 8 1990, interim committees of the Kentucky General Assembly studied
H02 9 congressional proposals to control acid rain and communicated
H02 10 regularly with the state's congressional delegation on the issue.
H02 11 Recognizing that Congressional action was close at hand, the 1990
H02 12 General Assembly enacted Senate Concurrent Resolution 73 on March
H02 13 29, 1990. Senate Concurrent Resolution 73 directed an interim
H02 14 legislative committee, the Energy Task Force, to study the
H02 15 potential impacts of federal acid rain legislation in Kentucky's
H02 16 economy and to develop a strategy for addressing those impacts.
H02 17 On November 15, 1990, the President of the United States signed
H02 18 into law S.1630, the Clean Air Act Amendments of 1990, Public Law
H02 19 101-5491. Title IV of the Act contains the acid rain
H02 20 legislation.
H02 21 Acid rain forms when fossil fuel combustion from electric power
H02 22 plants, industrial boilers, and motor vehicles release pollutants,
H02 23 primarily sulfur dioxide (SO2) and nitrogen oxides
H02 24 (NOx), into the atmosphere. Reacting with the
H02 25 SO2 moisture in the atmosphere, and NOx
H02 26 emissions are converted into sulfuric and nitric acids,
H02 27 respectively. The acidic materials, which may be carried long
H02 28 distances by wind, are released back into the atmosphere or are
H02 29 deposited on the ground in the form of rain, fog, snow, gas, or dry
H02 30 particles. Acid rain, in certain concentrations and under certain
H02 31 conditions, can damage forests, lakes, streams, aquatic life,
H02 32 buildings, and monuments, and cause human respiratory problems.
H02 33 According to a national inventory completed in 1985, electric
H02 34 utilities were responsible for 69% of SO2 emissions in
H02 35 the United States, with most of those emissions created by coal
H02 36 combustion. The transportation sector was identified as the largest
H02 37 source <}_><-|>catetgory<+|>category<}/> for NOx
H02 38 emissions, 43% of the total. Electric utilities were responsible
H02 39 for 32% of NOx emissions. Fairly early in the process,
H02 40 proposals to tackle the acid rain issue narrowed to one source:
H02 41 fossil-fueled electric power plants.
H02 42 Although the Clean Air Act, prior to the 1990 Amendments, did
H02 43 no specifically address acid rain formations, it did require
H02 44 certain controls on SO2 and NOx for industrial
H02 45 power facilities, as well as electric utility power plants.
H02 46 However, as the phenomenon of acid rain was recognized and concern
H02 47 over the effects of acid rain grew in the 1980's, controls in the
H02 48 existing law were viewed as inadequate and support for increased
H02 49 controls grew, leading to the inclusion of Title IV acid rain
H02 50 provisions in the 1990 Clean Air Act Amendments.
H02 51 The acid rain issue provoked much argument among the states and
H02 52 between the U.S. and Canada. Canada and the northeastern states
H02 53 initiated the congressional acid rain battle, claiming that their
H02 54 forested areas and lakes were suffering from the long-range
H02 55 transport of acid rain originating in the midwest.
H02 56 Once it became clear that acid rain legislation would target
H02 57 emissions from coal-burning electric utilities, the congressional
H02 58 proposals pitted states with high-sulfur coal reserves against
H02 59 states with low-sulfur coal reserves. The mid-western states of
H02 60 Ohio, Indiana, and Illinois, which have high-sulfur coal, favored
H02 61 proposals to require installation of pollution control equipment on
H02 62 all existing coal-fired utility units. States with low-sulfur coal,
H02 63 such as Wyoming and Montana, pushed for proposals to give affected
H02 64 utilities more options for reducing sulfur emissions, including
H02 65 switching to their low-sulfur coal. States with utilities targeted
H02 66 for the largest SO2 reductions, again, primarily
H02 67 midwestern states, argued for cost-sharing provisions where
H02 68 all electric consumers, nationwide, would be subject to a tax to be
H02 69 used to subsidize the cost of the acid rain controls. The regional
H02 70 battles still continue, months after the signing of the Clean Air
H02 71 Act Amendments, as the rules for implementation are being
H02 72 developed.
H02 73 Kentucky, as one of the nation's largest coal-producing states,
H02 74 with large reserves of high-sulfur coal in the west and
H02 75 low-to-medium sulfur coal in the east, was in a particularly
H02 76 difficult position during congressional deliberations. Proposals
H02 77 which favored one of the state's coalfields were not always
H02 78 favorable to the other coalfield.
H02 79 The state was one of the early supporters of clean coal
H02 80 technology development, contributing over $10 million for
H02 81 construction of the atmospheric fluidized bed combustion project at
H02 82 the Tennessee Valley Authority's Shawnee plant near Paducah. And
H02 83 much support did exist within the state and the General Assembly
H02 84 for the position that Congress should not act on the issue without
H02 85 sound scientific knowledge of the benefits and costs of new acid
H02 86 rain control. To gain this knowledge the federal government
H02 87 embarked in 1980 on one of the largest research projects of its
H02 88 kind ever undertaken, the National Acid Precipitation Assessment
H02 89 Program (NAPAP). The project took over ten years and $600 million
H02 90 to complete and involved the efforts of over 1000 scientists in the
H02 91 United States, Canada, and Great Britain.
H02 92 Ironically, the fiscal assessment by the NAPAP project was not
H02 93 available to either the Senate or House of Representatives as each
H02 94 chamber passed their initial version of the Clean Air Act
H02 95 Amendments. A draft of the report surfaced just a month prior to
H02 96 final action by a conference committee but had little effect on the
H02 97 legislative process. The final NAPAP report raises serious
H02 98 questions as to whether the costs of the new acid rain controls
H02 99 outweigh the benefits NAPAP was able to identify.
H02 100 The final bill gives utilities flexibility in making
H02 101 SO2 and NOx reductions. Pollution control
H02 102 equipment is not mandated and no cost-sharing provisions are
H02 103 included.
H02 104 Task Force Activity
H02 105 Soon after the President signed the Clean Air Act Amendments of
H02 106 1990, hereafter referred to as the CAAAs, the Interim Energy Task
H02 107 Force began its work on Senate Concurrent Resolution 73. In
H02 108 November 1990, a subcommittee of the Energy Task Force met with
H02 109 researchers at the University of Kentucky's Center for Applied
H02 110 Energy Research and reviewed the center's current coal research.
H02 111 Also that same month the Energy Task Force received its first
H02 112 briefing on the Clean Air Act Amendments of 1990 from state
H02 113 officials in the Natural Resources and Environmental Protection
H02 114 Cabinet and the Governor's Office for Coal and Energy Policy.
H02 115 In January 1991, when the General Assembly reorganized several
H02 116 House and Senate committees, the Energy Task Force's jurisdiction
H02 117 was broadened to include tourism and the name was changed to the
H02 118 Tourism Development and Energy Task Force. Because of the 1991
H02 119 Extraordinary Session of the General Assembly, the new task force
H02 120 did not meet during the first three months of 1991. At its April
H02 121 meeting, the Tourism Development and Energy Task Force established
H02 122 the Subcommittee on Energy and assigned the subcommittee the task
H02 123 of completing the Senate Concurrent Resolution 73 study on acid
H02 124 rain legislation.
H02 125 The subcommittee devoted most of the remainder of the interim
H02 126 to the study, hearing testimony from coal producers and coal
H02 127 miners, from electric utilities in the state, and from various
H02 128 state agencies which will be involved in implementation of the acid
H02 129 rain legislation. On November 12, 1991, the Tourism Development and
H02 130 Energy Task Force completed its work on SCR 73, with the receipt of
H02 131 the subcommittee's report and adoption of recommendations.
H02 132 Review of Chapters
H02 133 This report is the final product by the Tourism Development and
H02 134 Energy Task Force on Senate Concurrent Resolution 73. Chapter II
H02 135 describes the federal acid rain legislation, including an
H02 136 SO2 emissions trading system, and discusses the various
H02 137 compliance options available to affected utilities. Chapter III
H02 138 presents coal mining trends in this state, as well as factors which
H02 139 affect national coal markets. Chapter IV is an analysis, based on a
H02 140 computer model simulation, of the effects of the federal
H02 141 legislation on the state's economy. Chapter V presents all issues
H02 142 identified by the various participants of the study process, and
H02 143 the final chapter presents the task force's findings and
H02 144 recommendations.
H02 145 Future Review
H02 146 As the Tourism Development and Energy Task Force worked on this
H02 147 issue, through its subcommittee, it quickly became apparent that
H02 148 the task force's work is preliminary. Title IV of the Clean Air Act
H02 149 Amendments of 1990 - as well as the entire act - is a very
H02 150 complicated piece of legislation, a product of much political
H02 151 compromise. The emissions trading system is experimental; there is
H02 152 uncertainty as to how or indeed whether the experiment will work.
H02 153 Congress left many of the implementation details up to the U.S.
H02 154 Environmental Protection Agency (EPA), which has not yet worked out
H02 155 many of those details. Utilities are now formulating compliance
H02 156 plans without the final rules; the task force completed its work
H02 157 under similar uncertainties. As recommended by the task force, the
H02 158 General Assembly, through its interim committee system, will need
H02 159 to continue to monitor implementation of Title IV of the Clean Air
H02 160 Act Amendments of 1990.
H02 161 CHAPTER II
H02 162 CLEAN AIR AMENDMENTS OF 1990: ACID RAIN PROVISIONS
H02 163 When President Bush signed S.1630 into law on November 15,
H02 164 1990, a major overhaul of the nation's air pollution law was set
H02 165 into motion. The Clean Air Act Amendments of 1990 (CAAAs) are the
H02 166 first amendments to the Clean Air Act since 1977 and the first
H02 167 major environmental law of the 1990s. The amendments will require
H02 168 as many as 175 regulations. The CAAAs, which include 11 titles,
H02 169 tighten air standards to control acid rain, urban air pollution,
H02 170 and toxic air pollution. The legislation sets out a new permitting
H02 171 program, strengthens enforcement efforts, and mandates additional
H02 172 clean air research. This chapter summarizes the acid rain
H02 173 provisions of the CAAAs and explores the various ways affected
H02 174 entities may comply.
H02 175 Title IV, the acid rain title, mandates that by the year 2000,
H02 176 utilities' overall SO2 emissions will be ten million tons
H02 177 less than they were in 1980. Nitrogen oxide emissions are to be two
H02 178 million tons less than they were in 1980. Reductions of
H02 179 SO2 and NOx will be accomplished in two phases.
H02 180 The U.S. Environmental Protection Agency (EPA) will administer the
H02 181 first phase; states with approved permit programs will administer
H02 182 the second phase. Whereas there will be no fees for permits in the
H02 183 first phase, there will be a permit emission fee in Phase II,
H02 184 which, in most states, will run $25.00 per ton of emissions. All
H02 185 affected units are required to install continuous emission monitors
H02 186 to record the levels of SO2 and NOx emitted at
H02 187 specific time intervals.
H02 188 Utility generating units larger than 25 megawatts will, at some
H02 189 point, become an affected source. Cogeneration facilities,
H02 190 facilitites that produce both electricity and process heat from the
H02 191 same source, are exempt if they produce less than one-third of
H02 192 their electric output for use by a utility.
H02 193 Sulfur Dioxide Reductions
H02 194 Title IV's SO2 reduction provisions represent a
H02 195 radical departure form federal emissions control programs of the
H02 196 past. A permanent annual sulfur emissions cap for electric utility
H02 197 plants is set at 8.95 million tons for the year 2000 and each year
H02 198 thereafter. This represents approximately a 50% reduction in
H02 199 SO2 emissions. No absolute caps on sulfur emissions are
H02 200 to be set for individual utilities. Instead the sulfur reductions
H02 201 will be accomplished through a market-based emissions allowance
H02 202 trading system. The underlying goal of the SO2 provisions
H02 203 is to allow each utility flexibility to choose the most
H02 204 cost-effective way to make SO2 reductions.
H02 205 Affected units are to be given set allowances to emit
H02 206 SO2. One allowance will permit an affected source to emit
H02 207 one ton of SO2 during or after a specified calendar year.
H02 208 The allowances can be traded within the utility's own system,
H02 209 banked for future use, or sold on the open market. Utilities which
H02 210 exceed their emissions allowance and do not obtain any additional
H02 211 allowances to cover their deficit will be fined $2000 per excess
H02 212 ton and will be required to offset the excess tons the following
H02 213 year. However, regardless of the number of allowances an affected
H02 214 source may hold, previously existing SO2 air quality
H02 215 standards must still be met. For example, units which come under
H02 216 the New Source Performance Standard of 1977 will not be permitted
H02 217 to exceed their current SO2 emission rate of 1.2 pounds
H02 218 per million Btus.
H02 219
H03 1 <#FROWN:H03\>Although we are here to discuss the subject matter
H03 2 in a broad nature, I want you to know that I support H.R. 1502,
H03 3 which is the Violence Against Women Act.
H03 4 I have a special interest in the provisions relating to
H03 5 domestic violence and, in fact, offered an amendment to the crime
H03 6 bill that incorporated part of Mrs. Boxer's bill last session. As a
H03 7 former prosecutor, I know firsthand how difficult it is for women
H03 8 to come forward in domestic violence cases.
H03 9 I am sad to report that today a battered woman stands a better
H03 10 chance in the courts if her assailant is a stranger. The undeniable
H03 11 fact is that if the husband or partner is the assailant her
H03 12 complaint is often dismissed as a domestic squabble or a private
H03 13 matter between husband and wife. Until very recently, battery
H03 14 almost never resulted in arrest.
H03 15 Why is it that battered women who eventually kill their
H03 16 husbands in self-defense receive on an average double the sentence
H03 17 that men who murder their wives receive. I believe we in Congress
H03 18 have a responsibility to recognize domestic violence for what it
H03 19 is; and that is, it is a crime. Those guilty of domestic violence
H03 20 crimes must be held accountable for their actions and punished
H03 21 under the law.
H03 22 We must work to change the perception that domestic violence is
H03 23 a family matter. We can begin by passing laws that will give our
H03 24 Nation's police officers, judges, and prosecutors the tools
H03 25 necessary to treat these types of offenses in the same way as any
H03 26 other crime. In addition, victims of domestic violence who are
H03 27 often terrified to come forward need assurances and, indeed, should
H03 28 be guaranteed that the system will help them and not work against
H03 29 them.
H03 30 Sadly, Mr. Chairman, the problem of violence against women goes
H03 31 well beyond the disturbing trends in domestic violence. In today's
H03 32 violent culture, it seems as though every woman has reason to fear.
H03 33 In fact, the Department of Justice's calculations that three out of
H03 34 four American women could expect to be victims of at least one
H03 35 violent crime in their lifetime is, as astounding as it is,
H03 36 unacceptable. Also unacceptable is the FBI statistic indicating
H03 37 that rapes have increased four times as fast as the general crime
H03 38 rate during the past decade, and Mrs. Boxer's bill suggests
H03 39 proposals in those areas as well.
H03 40 I look forward to hearing the testimony this morning and thank
H03 41 you again, Mr. Chairman, for scheduling this hearing.
H03 42 Mr. SCHUMER. Thank you, Mr. Sangmeister.
H03 43 Mr. Gekas.
H03 44 Mr. GEKAS. I thank the Chair, and I too welcome Senator Biden
H03 45 and Congresswoman Boxer and Congresswoman Morella to this
H03 46 hearing.
H03 47 For a long time, I had been laboring under the false impression
H03 48 that we had made great strides in the arena of victimization of
H03 49 women. In my own State and elsewhere, even in the Federal
H03 50 establishment, we began to develop recognition of groups that would
H03 51 be honing in on these various individual problems, like rape
H03 52 crisis, and other domestic violence entities that really had a
H03 53 firsthand, hands-on knowledge of the series of problems that we are
H03 54 encountering in this field, and I was feeling rather smug about it
H03 55 until this last couple of years when the headlines began to scream
H03 56 all over the country with a renewed, shall we say, outbreak of
H03 57 visible incidents involving the victimization of women. So when
H03 58 Senator Dole and Congresswoman Molinari and I got together to do
H03 59 our version of a women victims' rights bill, I was eager to renew
H03 60 my own interest in this field and in preventing such
H03 61 victimizations.
H03 62 We have shield laws, we have increased penalties, we have even
H03 63 the inclusion of rape-murder in the death penalty provisions
H03 64 pending, so we are continuously cognizant of the problem. But, a
H03 65 sweeping change in the attitudes of our citizens and in our law
H03 66 enforcement, and in those of us who have the responsibility of
H03 67 crafting new laws, still remains with us. That is why I am eager to
H03 68 proceed with listening to our colleagues and in hearing hard
H03 69 testimony for our consideration.
H03 70 Thank you, Mr. Chairman.
H03 71 Mr. SCHUMER. Thank you, Mr. Gekas.
H03 72 Congressman Washington.
H03 73 Mr. WASHINGTON. Thank you for recognizing me, Mr. Chairman. I
H03 74 don't have a prepared statement, but I would like to say that I
H03 75 have always felt that leadership was defined by, or at least the
H03 76 qualities of leadership were essentially defined by those who had
H03 77 the courage to step forward and to recognize a problem and do what
H03 78 was right. I am therefore not at all surprised that Senator Biden
H03 79 and Congresswomen Boxer and Morella, all of whom I respect and
H03 80 admire very much, have taken the leadership on this issue. So I
H03 81 look forward to hearing their testimony, and I am happy to be an
H03 82 original cosponsor of H.R. 1502, and I hope that we can find a way
H03 83 to make all the provisions that are required in order to beef up
H03 84 our law to make all our citizens understand that there is no
H03 85 difference between violence committed against women and violence
H03 86 committed against others. In fact, if there were to be a
H03 87 distinction, I think we would look on it with more abhorrence than
H03 88 violence committed against men, but that would sound chauvinistic
H03 89 on the other end.
H03 90 At any rate, I look forward to hearing all the testimony. I
H03 91 have had the opportunity to read over the testimony of the
H03 92 witnesses last evening, a lot of which brought tears to my eyes. I
H03 93 want to hear it again, and I want us to move forward on this
H03 94 legislation. I want us to get it on the floor and get it passed and
H03 95 over to the President's desk as soon as possible.
H03 96 Thank you, Mr. Chairman.
H03 97 Mr. SCHUMER. Thank you, Mr. Washington.
H03 98 Mr. Ramstad.
H03 99 Mr. RAMSTAD. Thank you, Mr. Chairman.
H03 100 I, too, thank you for holding this important hearing today. As
H03 101 we all know, far too many women in our neighborhoods are battered,
H03 102 far too many women on our college campuses are raped, and I might
H03 103 add to Mr. Sensenbrenner's comment that the most recent national
H03 104 study corroborates the University of Minnesota study, which was a
H03 105 local study done in my State, that, in fact, one of four college
H03 106 women during her 4-year college career is the victim of either
H03 107 attempted rape or an actual rape, a full-fledged sexual assault,
H03 108 and, as we all know, far too many women are denied justice.
H03 109 On top of all that, we know that these crimes are vastly
H03 110 underreported. The same study I just cited shows that, once again,
H03 111 fewer than 10 percent of all sexual assaults in this country are
H03 112 reported.
H03 113 In Minnesota alone, with a population of just over 4 million
H03 114 people, further research indicates there may be over 400,000
H03 115 battered women, yet 41 of our 87 counties do not have battered
H03 116 women's programs. In some counties, a battered woman's nearest
H03 117 option for emergency safety is over 100 miles away. In the Twin
H03 118 Cities metropolitan area, part of which I represent, more than
H03 119 two-thirds of women seeking safe shelter from domestic violence are
H03 120 turned away due to lack of space.
H03 121 Clearly, Mr. Chairman, the Federal Government must step in to
H03 122 buttress State efforts to prevent violence against women, to
H03 123 prosecute their attackers, and to provide victims shelter and much
H03 124 needed treatment.
H03 125 Mr. Chairman, I am particularly pleased today that we will
H03 126 receive testimony from Jenny Katzoff, who was the victim of sexual
H03 127 assault as a 1st-year college student and whose allegations of rape
H03 128 were grossly mishandled by a number of different college officials.
H03 129 As Jenny knows, we tried but just weren't able to get her out to
H03 130 Minnesota to testify at a recent field hearing that Congresswoman
H03 131 Molinari, Congresswoman Penny, and I conducted last September on
H03 132 the issue of campus sexual assault. Thus, I am very pleased that we
H03 133 will be able to hear from her today.
H03 134 I am also grateful that Senator Biden and our distinguished
H03 135 colleagues, Congresswomen Boxer and Morella, are here today.
H03 136 Senator Biden and I introduced the Campus Sexual Assault Victims
H03 137 Bill of Rights Act, H.R. 2363 and S. 1287, last year. This
H03 138 legislation, which now has 165 cosponsors in the House, complements
H03 139 the Violence Against Women Act which I was proud to cosponsor.
H03 140 H.R. 2363, the campus sexual assault victims bill, would
H03 141 protect campus rape victims by requiring university and college
H03 142 officials to make victims aware of their legal rights and assist
H03 143 them in bringing allegations of sexual assault before the criminal
H03 144 justice system. Our bill also protects victims who choose to go
H03 145 through campus disciplinary proceedings. But the choice should be
H03 146 with the victim.
H03 147 Jenny's tragic story shows exactly why we must enact both the
H03 148 Violence Against Women Act and the Campus Sexual Assault Victims'
H03 149 Bill of Rights Act. Senator Biden and Congresswomen Boxer and
H03 150 Morella obviously recognize this as they are sponsors of both,
H03 151 Senator Biden being the principal sponsor of both of these bills in
H03 152 the Senate, and Congresswomen Boxer and Morella are cosponsors. We
H03 153 must work to prevent rape as well as ensure that rape survivors are
H03 154 not traumatized a second time because justice is denied them.
H03 155 Mr. Chairman, I think this will be one of the most important
H03 156 hearings that we will hold this year, and I thank you again for
H03 157 your leadership in this area.
H03 158 Mr. SCHUMER. Thank you, Mr. Ramstad.
H03 159 Now let us go on to our first panel. If the witnesses don't
H03 160 mind, I would like to ask Connie Morella maybe to join us because
H03 161 she not only has her legislation but she is the second sponsor of
H03 162 the bill after Congresswoman Boxer for the Violence Against Women
H03 163 Act.
H03 164 So, Connie, you are welcome to join us and maybe say a few
H03 165 words after Joe and Barbara.
H03 166 As our first panel of witnesses today, I am pleased to welcome
H03 167 two - three now - very distinguished Members of Congress: Senator
H03 168 Joe Biden of Delaware, Representative Barbara Boxer from the Sixth
H03 169 District of California, and Representative Connie Morella from the
H03 170 Eighth District of Maryland.
H03 171 Senator Biden and Representative Boxer and Representative
H03 172 Morella have been leaders in combating violence against women.
H03 173 Senator Biden introduced the Violence Against Women Act, S. 15,
H03 174 which was reported favorably by the Senate Judiciary Committee, and
H03 175 Representatives Boxer and Morella have introduced the Violence
H03 176 Against Women Act, H.R. 1502, here in the House. All three have
H03 177 been real leaders on this issue, being the beacon for not only the
H03 178 Congress but for the country in helping us all recognize not only
H03 179 how serious the problem is but how hidden it has been for so
H03 180 long.
H03 181 I want to thank all of you for coming, commend you for your
H03 182 efforts, and turn over the floor to you.
H03 183 Senator Biden, again, it is an honor for you to be here, and
H03 184 you may proceed. We are doing it in alphabetical order. It is not
H03 185 because you are a Senator or a man.
H03 186 STATEMENT OF HON. JOSEPH BIDEN, A SENATOR IN CONGRESS FROM THE
H03 187 STATE OF DELAWARE
H03 188 Mr. BIDEN. Thank you, Mr. Chairman. Thank you very much. Let me
H03 189 begin by thanking my colleagues on my left and right for their
H03 190 leadership. Quite frankly, it is not only their leadership in
H03 191 drafting and pushing this legislation, but also their standing that
H03 192 has given this legislation the kind of credibility that it
H03 193 otherwise might not have had. The mere fact that my friend, Barbara
H03 194 Boxer, immediately indicated an interest in perfecting this
H03 195 legislation and introducing it gave it a legitimacy - and I mean
H03 196 this sincerely - that I was not capable of giving it by the mere
H03 197 fact of drafting parts of it on the Senate side. I want to thank
H03 198 both my colleagues for their work.
H03 199 As you know, Mr. Chairman - you and I have worked together on a
H03 200 lot of crime issues - I try not to beat around the bush. I am not
H03 201 going to take your time by going through each part of this
H03 202 legislation - it has a number of titles.
H03 203
H04 1 <#FROWN:H04\>Chapter III
H04 2 ASSESSMENT OF HIGHWAY NEEDS
H04 3 The Task Force to Study Highway Needs held public hearings in
H04 4 all twelve highway districts. These hearings assisted the Task
H04 5 Force in identifying projects being proposed by the Department of
H04 6 Highways' personnel and the local elected officials of the
H04 7 district.
H04 8 The intent of the Task Force was to identify those corridors
H04 9 which would have the greatest impact on a region. The Task Force
H04 10 defines corridor as a major route through Kentucky or a route which
H04 11 connects a rural area to its regional center or another corridor.
H04 12 While the Task Force recognizes the needs for storage lanes, local
H04 13 connector roads, curve realignments and other types of local
H04 14 improvement projects, priority was given to establishing a system
H04 15 of roads which would allow each region better access to larger
H04 16 markets of the area. The state's philosophy of road building, the
H04 17 Task Force believes, should continue to emphasize connecting the
H04 18 rural areas to the urban markets.
H04 19 The finding of the Task Force is that the 1990-1996 highway
H04 20 construction proposal is the best starting point for the future of
H04 21 road building in Kentucky and these identified needs should be
H04 22 addressed prior to the introduction of other needs.
H04 23 The information obtained through the hearing process, coupled
H04 24 with an examination of the highway accessibility of every county in
H04 25 Kentucky, allowed the Task Force to develop its strategic highway
H04 26 corridor system. The highway corridor system includes the existing
H04 27 limited access system, key US routes, and other corridors which
H04 28 need upgrading to four lanes.
H04 29 The following discussion is the strategic corridor system
H04 30 identified by the Task Force to Study Highway Needs. The first
H04 31 segment is a list of highways which currently provide adequate
H04 32 access to the Commonwealth. Following that list is a discussion of
H04 33 highways which the Task Force identified as needing improvement in
H04 34 order to provide access to all regions of the Commonwealth.
H04 35 Adequate Corridors
H04 36 The following routes have been determined to provide adequate
H04 37 accessibility, with the exception of minor reconstruction and
H04 38 improvements which will maintain the functional integrity of the
H04 39 existing system. For example, several interstate routes need
H04 40 additional lanes and these improvements are critical to the highway
H04 41 network. In addition, many of the proposed corridors will connect
H04 42 to the routes presented in this section.
H04 43 East to West Corridors
H04 44 Interstate 64
H04 45 Mountain Parkway from I-64 to Campton
H04 46 Bluegrass Parkway
H04 47 Western Kentucky Parkway
H04 48 Cumberland Parkway
H04 49 Interstate24
H04 50 Audubon Parkway
H04 51 North to South Corridors
H04 52 Interstate 75
H04 53 Interstate 65
H04 54 Green River Parkway
H04 55 Pennyrile Parkway
H04 56 Purchase Parkway
H04 57 Interstate 71
H04 58 Circumferential Corridors
H04 59 Interstate 264
H04 60 Interstate 265
H04 61 Interstate 275
H04 62 KY 922, KY 4, US 25
H04 63 The Task Force is defining an adequate corridor as an existing
H04 64 facility of four or more lanes. Despite this categorization, some
H04 65 of these corridors will need reconstruction in order to maintain
H04 66 their functional value. The improvements for those purposes are
H04 67 estimated by the Department of Highways to be $2,230,400,000.
H04 68 Corridors Needing Development
H04 69 The routes which follow are projects for which the Task Force
H04 70 is recommending improvement. The Task Force recommends that each
H04 71 route be designed as a four-lane facility; however, it realizes
H04 72 that initial reconstruction as quality two-lane routes may be a
H04 73 desirable goal.
H04 74 The discussion of each route will provide the rationale for
H04 75 project inclusion, points of interest along each route and a cost
H04 76 estimate provided by the Department of Highways.
H04 77 U.S. 23
H04 78 U.S. 23 is the major north to south corridor in eastern
H04 79 Kentucky. It enters the state at South Shore, Kentucky and exits at
H04 80 Jenkins, Kentucky. Its route intersects with major east to west
H04 81 corridors including I-64, KY 114 (connects to Mountain Parkway), KY
H04 82 80, and U.S. 119. This corridor is the major route in eastern
H04 83 Kentucky and serves to connect the region with the larger markets
H04 84 in all directions.
H04 85 Completion of the segments of U.S. 23, as authorized by the
H04 86 1990 road bond issue projects, was emphasized at public hearings in
H04 87 Districts 9 and 12. The entire length of this route will be
H04 88 four-lane upon completion. Points of interest along this route
H04 89 include: Paintsville Lake State Park, Jenny Wiley State Resort
H04 90 Park, Fishtrap Lake, and Dewey Lake.
H04 91 This route will complete U.S. 23 as a four-lane facility from
H04 92 monies allocated by the 1990 bond issue and federal highway
H04 93 development funds. For that reason, no cost estimate is
H04 94 included.
H04 95 U.S. 25E
H04 96 U.S. 25E connects with I-75 at Corbin and extends southeast to
H04 97 Middlesboro and into Tennessee. Points of interest along this route
H04 98 include: Pine Mountain State Resort Park, Kentucky Ridge State
H04 99 Forest, and Cumberland Gap National Historical Park.
H04 100 Two segments of U.S. 25E are currently under construction. A
H04 101 section south of Barbourville to Pineville is being funded by the
H04 102 1990 bond issue. A second project is the Cumberland Gap tunnel
H04 103 project just south of Pineville. Upon completion of this project,
H04 104 U.S. 25E will be a four-lane facility. For that reason no cost
H04 105 estimate is included.
H04 106 U.S. 127
H04 107 U.S. 127 is a north to south corridor entering the state at
H04 108 Newport and extending south to Static, at the Kentucky line, and on
H04 109 into Tennessee. The current bond issue will provide major
H04 110 reconstruction along this route. In addition, U.S. 127 will provide
H04 111 access to I-64, the Bluegrass Parkway and the Cumberland Parkway.
H04 112 Points of interest along this route include: Buckley Hills Wildlife
H04 113 Sanctuary, Old Harrod State Park, Isaac Shelby State Historic
H04 114 Shrine, Constitution Square, Herrington Lake, Lake Cumberland, and
H04 115 Dale Hollow Lake.
H04 116 The 1990 bond issue included several sections of U.S. 127 for
H04 117 improvements. The six-year road plan included $105,977,000 in
H04 118 projects for the U.S. 127 corridor. In addition, $79,000,000 was
H04 119 cited in long range needs for U.S. 127.
H04 120 US 119
H04 121 US 119 enters Kentucky at South Williamson and traverses the
H04 122 southeast border of Kentucky, intersecting US 25E at Pineville. The
H04 123 route joins US 23 at Pikeville; therefore, the segment from Dorton
H04 124 to Jenkins is incorporated into the current bond issue, as is a
H04 125 section of US 119 over Pine Mountain to Letcher County.
H04 126 The improvements of US 119 can be divided into two distinct
H04 127 sections: the section between South Williamson and Pikeville and
H04 128 the section between Pineville and Jenkins. The section between
H04 129 South Williamson and Pikeville was identified by the local
H04 130 officials at the District 12 hearing as a major need. The two-lane
H04 131 section traverses two mountains and its narrow curvy nature makes
H04 132 it hazardous. Improvement to the section would also extend a
H04 133 multi-lane road into a previously isolated area of Pike County,
H04 134 allowing easier access to I-77 in West Virginia, opening the area
H04 135 to eastern markets.
H04 136 US 119 from Pineville to Jenkins crosses Letcher, Harlan, and
H04 137 Bell Counties. These counties have been established as being at
H04 138 least 25 miles away from an existing continuous four-lane highway.
H04 139 This project was also identified at the District 11 public hearing
H04 140 as a major corridor need for the region. The counties which will
H04 141 directly benefit from this improvement have the following
H04 142 unemployment and per capita income figures:
H04 143 table
H04 144 Development of US 119 would give this region an east to west
H04 145 route which would provide greater access to the US 23 corridor in
H04 146 Eastern Kentucky, and the US 25E corridor, which accesses
H04 147 Interstate 75. These connections would provide access to major
H04 148 markets in the northeast and southeast. A segment of this route was
H04 149 placed in the 1990 road bond issue. The estimated cost of the
H04 150 remaining portion of the project is $782,780,000.
H04 151 US 460
H04 152 The section of US 460 from Pikeville to the Kentucky-Virginia
H04 153 line is identified as a corridor which needs development.
H04 154 Improvement to this corridor was mentioned at the public hearing in
H04 155 District 12. The justification provided was improving tourist
H04 156 access to Fishtrap Lake and the Breaks Interstate Park.
H04 157 A construction project in this area would also improve access
H04 158 to an isolated area of Pike County. The county has an unemployment
H04 159 rate in excess of 9% and a per capita income of approximately
H04 160 $10,000, which is about $3,000 less than the statewide average.
H04 161 US 460 would connect at Grundy, Virginia, and eventually would
H04 162 access Interstate 77 at Princeton, West Virginia, to the east. The
H04 163 west connection at Pikeville would connect US 23, which is a major
H04 164 north-south corridor in the Eastern United States. US 23 connects
H04 165 with Interstate 64 in northern Kentucky, and the nearest interstate
H04 166 connection to the south is Interstate 77. The estimated cost of
H04 167 this project is $150,000,000.
H04 168 The Mountain Parkway and KY 114
H04 169 The segment of this corridor needing improvement is from
H04 170 Campton to Prestonsburg. The parkway's four-lane section currently
H04 171 stops at Campton and continues as a two-lane route from
H04 172 Salyersville to Prestonsburg, with truck climbing lanes to
H04 173 Salyersville, where it connects with KY 114. KY 114 is a two-lane
H04 174 route which connects with US 23. The counties directly benefiting
H04 175 from this project are Wolfe, Magoffin, and Floyd.
H04 176 The extension of the Mountain Parkway was cited as a need at
H04 177 the public hearings in Districts 10 and 12. A concern mentioned at
H04 178 these hearings was that the completion of US 23 would allow easier
H04 179 access to out-of-state markets by the populace in this area. The
H04 180 parkway has long provided Eastern Kentucky a connection to
H04 181 Lexington as a retail center, but the lack of improvement to this
H04 182 route could change the habits of consumers, especially with the
H04 183 completion of improvements on US 23. Magoffin and Floyd Counties
H04 184 are both at least 25 miles from an existing four-lane facility. An
H04 185 improved east to west feeder in this area would connect north/south
H04 186 corridors at both ends. The west connection is Interstate 64 at
H04 187 Winchester, just 16 miles from the Interstate 75 junction. The east
H04 188 connection is US 23, which has been mentioned previously.
H04 189 Wolfe, Magoffin and Floyd Counties have unemployment rates
H04 190 between 9% and 15% and per capita income ranging from $7,000 to
H04 191 $9,500. Both Wolfe and Magoffin counties have unemployment rates
H04 192 about twice the statewide average. State Parks along this route
H04 193 include Natural Bridge State Resort Park and Red River Gorge. The
H04 194 estimated cost of this project is $350,000,000.
H04 195 KY 15
H04 196 KY 15 traverses Wolfe, Breathitt, Perry, and Letcher Counties.
H04 197 Improvement to this corridor would provide easier access in these
H04 198 counties to the Mountain Parkway and US 119 south of Whitesburg.
H04 199 This improvement was cited as a need in the public hearing in
H04 200 District 10 and, as a corridor, need by the Economic Development
H04 201 Cabinet. Breathitt, Perry and Letcher Counties are all at least 25
H04 202 miles from a continuous four-lane highway. The unemployment rate is
H04 203 approximately 9% in each county and the per capita income is about
H04 204 $9,000.
H04 205 Breathitt County is one of the counties previously identified
H04 206 as a county with only Kentucky routes. Buckhorn Late State Resort
H04 207 Park is located along this corridor. The estimated cost of this
H04 208 project is $473,700,000.
H04 209 KY 7
H04 210 KY 7 was identified as having potential regional significance
H04 211 at the public hearing in District 9. This route is a north to south
H04 212 corridor which crosses one of the most economically depressed
H04 213 <}_><-|>area<+|>areas<}/> in Kentucky. The proposed improvement
H04 214 would connect KY 7 to Interstate 64 in Carter County and the
H04 215 Mountain Parkway at Salyersville. The counties receiving direct
H04 216 benefit from this corridor improvement are Carter, Elliott, Morgan,
H04 217 and Magoffin. Grayson Lake State Park lies along this corridor.
H04 218 Morgan and Magoffin Counties are 25 miles from a continuous
H04 219 four-lane highway and the major route in Elliott County is KY 7.
H04 220 The following economic data reveal problems associated with this
H04 221 area.
H04 222 table&caption
H04 223 KY 11
H04 224 KY 11 was identified as a need at the District 10 meeting. This
H04 225 route is a north to south corridor which connects at the Slade exit
H04 226 on the Mountain Parkway and runs south to just east of Manchester
H04 227 on the Daniel Boone Parkway. This corridor has been upgraded from
H04 228 Slade to Beattyville. Counties receiving direct benefit from
H04 229 improvement to the remaining segment of KY 11 include Lee, Owsley,
H04 230 and Clay.
H04 231 Lee and Owsley Counties are areas which have been previously
H04 232 identified as having only Kentucky routes. Owsley and Clay Counties
H04 233 are both outside of the 25-mile criterion. These counties can also
H04 234 be identified as depressed areas by the following data:
H04 235 table&caption
H04 236 US 421
H04 237 US 421 is a major highway in the network of interstate
H04 238 connectors.
H04 239
H05 1 <#FROWN:H05\>Second, financial factors could also have a
H05 2 bearing on a decision about whether to appropriate. In particular,
H05 3 a concern that an uncured default on a bond issued by one authority
H05 4 might cause financial markets to increase the costs of issuance or
H05 5 lower the rating assigned to subsequent bonds of other state debt
H05 6 authorities could lead the General Assembly to appropriate funds to
H05 7 cure the default. Finally, even in the absence of any legal and
H05 8 financial consequences of a default, political factors could be
H05 9 such that legislators have little choice but to appropriate
H05 10 funds.
H05 11 Thus, the purpose of the research is to identify the likely
H05 12 legal, financial and political consequences of a default of the
H05 13 various state debt authorities. Because the research issues are
H05 14 complex and because little prior research addresses the issues,
H05 15 five distinct research methods were utilized.
H05 16 Legal Research
H05 17 First, legal research was conducted by an LRC staff attorney to
H05 18 determine whether current law contains any provision that could be
H05 19 used to require the General Assembly to appropriate funds in the
H05 20 event of a default by any of the state debt authorities. The
H05 21 results of the legal research are presented in Chapter II.
H05 22 Case Studies
H05 23 The second approach was to conduct case studies of past
H05 24 defaults of bonds issued by state debt authorities in other states.
H05 25 Since the late 1970's, the Bond Investor's Association (BIA) has
H05 26 tracked defaults of corporate and municipal bonds. At the request
H05 27 of LRC staff, BIA searched their on-line database for the years
H05 28 1980-1990 and identified 71 defaults of bonds issued by state debt
H05 29 authorities, in twenty states. Staff conducted a telephone
H05 30 interview with the ranking legislative staff (or a designee) having
H05 31 knowledge of state debt management issues in each of those states.
H05 32 The interview questionnaire (Appendix A) was intended to elicit
H05 33 information regarding the legal, financial and political
H05 34 consequences of each default for the state legislature, and to
H05 35 identify any actions the legislature considered in response to the
H05 36 default. These case studies are presented in Chapter III.
H05 37 Expert Opinions
H05 38 The third piece of the research utilized a technique known as
H05 39 the 'Adelphi technique,' whereby a small number of experts in a
H05 40 particular field are asked their opinions concerning the issues
H05 41 under study. To this end, a random sample of listings was drawn
H05 42 from the Bond Buyer's Municipal Marketplace and a survey
H05 43 questionnaire was sent to each selected listing. The survey
H05 44 instrument (Appendix B) contained open-ended questions concerning
H05 45 what financial consequences the respondents perceived from the 71
H05 46 actual defaults identified in the BIA search. They were also asked
H05 47 for opinions regarding expected consequences from a
H05 48 hypothetical default of any of the active Kentucky state debt
H05 49 authorities. A summary of the survey responses is presented in
H05 50 Chapter IV and copies of the complete responses are contained in
H05 51 Appendix C.
H05 52 Periodical Search
H05 53 A fourth research activity was a search of newspaper and
H05 54 periodical indexes for articles relating to defaults of state debt
H05 55 authorities. There were two aspects to this research. First, a
H05 56 search was conducted for articles and editorials pertaining to the
H05 57 particular defaults examined in the case studies. The purpose here
H05 58 was to see if the press had extensively covered the default and
H05 59 had, perhaps as a reflection of public opinion, called for state
H05 60 action to cure the default. The results of the search pertaining to
H05 61 the existing defaults are reported in the summary of each case
H05 62 study.
H05 63 A second search of indexes focused on the more general topic of
H05 64 municipal bond defaults. Specific attention was given to
H05 65 identifying recent articles in the national financial press which
H05 66 discussed issues pertinent to market expectations about municipal
H05 67 defaults. In particular, staff reviewed all 1990 and 1991 issues of
H05 68 MuniWeek, a national news weekly devoted to the municipal bond
H05 69 market, to identify relevant articles. Articles obtained in the
H05 70 second search are discussed in Chapter IV.
H05 71 Statistical Analysis
H05 72 Staff believed that concerns about possible financial
H05 73 consequences of a default would be a major factor in any
H05 74 legislative decision to appropriate funds. However, the previously
H05 75 outlined research relied on individual perceptions of market
H05 76 responses to a default, rather than on actual assessments of market
H05 77 responses. Therefore, the final piece of the research represents an
H05 78 attempt to determine whether the defaults identified in the case
H05 79 studies had a statistically significant effect on the cost of
H05 80 subsequent issues of state debt authorities. Staff obtained data on
H05 81 bonds issued from 1980-1989 by the debt authorities of all 50
H05 82 states, for either public projects or industrial development
H05 83 projects. Variables were incorporated to control for the effect of
H05 84 other factors, such as project type, the condition of the state's
H05 85 economy, the amount of state debt-outstanding and the general level
H05 86 of interest rates in the economy. A regression analysis was
H05 87 conducted to assess the amount of variation in interest costs which
H05 88 could be attributed to the existence of a prior state default. A
H05 89 full description of the statistical research and a discussion of
H05 90 the results are presented in Chapter V.
H05 91 Chapter VI presents a summary assessment of the various
H05 92 research pieces. The chapter also includes staff recommendations
H05 93 regarding changes the General Assembly may want to consider in its
H05 94 oversight of the Commonwealth's state debt-issuing authorities.
H05 95 Current Oversight of State Debt Authorities
H05 96 Like most states, Kentucky has long issued bonds to pay for
H05 97 major capital projects. Similar to a mortgage, a bond is a promise
H05 98 to pay principal and interest in the future in return for money
H05 99 borrowed to fund a project for current use. In a mortgage loan, the
H05 100 house stands as collateral for the loan. If the borrower fails to
H05 101 repay the loan as promised, the lender is allowed to take
H05 102 possession of the house.
H05 103 However, in the case of state borrowing, it would be difficult
H05 104 for bondholders to take possession of a road or the state capitol
H05 105 building. So rather than pledging the project as collateral for the
H05 106 bonds, traditional practice has been for states to pledge the 'full
H05 107 faith and credit' of the state for bond retirement. Bonds which
H05 108 pledge the full faith and credit of a government issuer are called
H05 109 general obligation bonds. With such bonds, if the
H05 110 government fails to make the regularly scheduled debt service
H05 111 payments, bondholders may go to court and force the government to
H05 112 do whatever is necessary, including raise taxes, to make the
H05 113 promised principal and interest payments. A special or limited
H05 114 obligation bond is one that pledges only certain tax or other
H05 115 receipts as collateral for the bond. An example is the pledging of
H05 116 the receipts of a motor fuels tax to retire a bond used to build a
H05 117 highway. State bonds have usually been issued with a repayment
H05 118 schedule (or term) of 20-40 years. A bond is said to
H05 119 mature when the final scheduled debt service payment is made
H05 120 and the state's obligation to bondholders is discharged. The key
H05 121 point to note about general or special obligation bonds is that if,
H05 122 at any time before the maturity date, the state does not make its
H05 123 regularly scheduled debt service payment (or defaults on the
H05 124 bond), bondholders may have the court enforce the obligation and
H05 125 require the state to raise taxes to make debt service payments.
H05 126 Sections 49 and 50 of the Kentucky Constitution stipulate that,
H05 127 before the state can issue debt in excess of $500,000, the issuance
H05 128 must be approved by the majority of voters in a referendum
H05 129 election. This requirement applies to all state general and limited
H05 130 obligation bonds, which are issued by the State Treasurer. Kentucky
H05 131 issued its last bond subject to referendum vote in 1966.
H05 132 Section 157 of the Constitution prevents units of local
H05 133 government from issuing any debt without prior approval of
H05 134 two-thirds of those voting in a referendum election. Section 158
H05 135 limits total indebtedness of local governments to various
H05 136 percentages of the value of taxable property. Section 159 limits
H05 137 local debt to a term of no more than 40 years. The last Kentucky
H05 138 local government general obligation bond was issued in 1982.
H05 139 Revenue bonds pledge only the particular revenues
H05 140 generated by a project as collateral on the bonds issued to fund
H05 141 the project. The traditional use of revenue bonds is for the
H05 142 provision of government services which generate fees, such as
H05 143 utilities. Revenue bonds issued for fee-supported government
H05 144 services are often called special revenue bonds, to
H05 145 differentiate them from revenue bonds issued for private purposes.
H05 146 Government issuance of private-purpose revenue bonds arose
H05 147 primarily because the interest earnings on bonds issued by state
H05 148 and local governments (called municipal bonds