A high-ranking Treasury Department official has warned of the costs of tax-exempt bond financing for projects such as sports stadiums.
"The cost to the federal government of tax-exempt bonds is significant and growing," said Treasury Assistant Secretary Eric Solomon in testimony before the House Oversight Subcommittee on Tax-Exempt Bond Financing. He noted that the cost of the federal subsidy is not tracked annually through the appropriations process.
Solomon singled out for special criticism the use of the bonds for building stadiums. "The tax policy justification for a federal subsidy for tax-exempt bonds is weaker when state or local governments use governmental bonds to finance activities beyond traditional governmental functions, such as the provision of stadiums, in which the public purpose is more attenuated and private businesses receive the benefits of the subsidy," he said.
The Government Accountability Office has estimated that between 2000 and 2004, approximately $5.3 billion in tax-exempt bonds were issued in about 119 bond issues to finance stadiums and arenas.
"It is important to ensure that the tax-exempt bond program is properly targeted so that it works most effectively and that the federal subsidy for tax-exempt bonds is justified in light of the revenue costs and other costs imposed," said Solomon.
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