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I I I I I I I I I I I ! I I I I I i ! Surl~lus dollars may be made avail-hie.--Some publicly-assisted real estate projects ~ more tax dollars than r~eded to finance them. City governments can then charnel the extra money into other real estate projects instead of ~turnirg it to ~ taxpsyers. (Sc~e city goverr~ents see the generation of surplus dollars as an advantage. They say that it makes improv~__,~nts possible in ~ where r~t enough assistance Gould be made available in any other fashion. ) E~tensive use probably p~x)duces higher interest rates.--A risk exists that city governments may be payin~ higher interest rates for (~mventional borrowir~ because of e~cessive use of real estate assistar~e. This can occur in at least two ways. First, & city'.s b(x~ ratin9 may be d(~3raded~hich, in turn, means higher interest rates--if it is committir~ too mu~h ~f the 9rowth in its property taxes to real estate assistance. ~his reduces the availability of property taxes f(x other ~ur~oses, such as p~yin~ for princii~l ar~ interest o~ bonds. SUch a warning was given to at least one city in the ~Win Cities metropolitan area in 1984 by a New Yc~k bo~d rating firm. Secure, cities may be p~yirg higher interest rates for ]~rrowin~ for sewers, streets and other public infrastructure be~,~e they also are issuing large amounts of industrial revenue b~x~s. A New York state finar~ial official estimated that the v~lume of pri~te purpose, taxer debt issued in 1982 raised ~rall tax-exempt interest rates by a premf~n of 1.2 percentage points. Others disagree that the addition of ir~ustrial revenue bo~ds causes interest zates to rise fc~ z~ular city horsing. ~%~oo~dirg to the counter-argument, interest rates paid by cities for general obligation bonds fluctuate directly with the interest rate the federal 9overr~_nt p~ys when it borrows __~9~e_ y. ~his relationship is ,,~h m~re powerful in determining the interest rates pmid by cities than the impact of a flood of industrial revenue ~c~xls, say pers{x~ wbD s~port the oounter-argument. They also oontead that many investors buy (x~ly general obligation bo~ds ar~, therefore, would not Go,sider the option of an industrial rewnue bond. · he ocunter-arg,ment is faulty, say tl~)se persons who believe cities'. interest rates are higher, because e~.n tl~ cit~ rates rise ar~ fall with f _erie_tel rates, they still are higher than they wculd be in the abser~e of ir~ustrial revenue bor~s. Also, they say, investors who stick faithfully to general obligation bor~]s do not set the margir~] rate on th~se ~or~s. Other sectors of tl~ economy might need _more ~-~istance than does real estate.~ critics of national ar~ state eco~c~ic development efforts oontend that tax policy in the U.S., with few exceptions, has ~-~.licitly favored such sect,s as offics ~uildings and sl~ppirg centers, while disregarding the c~m~etitivene~ of U.S. manufacturing operati(m~s in internaticnal c~nl~ti t ion. ~k~reover, high ~cax~y rates ~m in~r~a~ir~ly more oo~z~n in office space in zecent years, which zaises the question of whether the availability of real estate assistance is co~tributirg to overbuilding.