In the past, Joseph F. Vaughan eagerly used Alexandria's power to issue tax-free industrial revenue bonds to lure the American Helicopter Society, the International Bottled Water Association, the National Society of Engineers and other organizations to the city.
But since July 19, Vaughan and a lot of other industry hunters in Virginia have had to restrict their activities to comply with new limits on the amount of tax-free industrial bonds localities may issue. Vaughan, secretary of the Alexandria Industrial Authority, predicts the new restrictions, based on a locality's population, will put Alexandria "at something of a disadvantage" in its effort to win new industries.
City Councilman Donald Casey is equally gloomy, saying the limits will bring to "a screeching halt" Alexandria's success at luring about 90 associations and corporations into the city.
Alexandria, which in 1983 issued $38 million in tax-exempt bonds and has approved a total of $42 million this year, will be restricted to $7.8 million in industrial bonds in fiscal 1985.
City officials have suggested that the authority may have to alter its past practice of allocating bonds on a "first-come, first-served" basis and hold periodic reviews of applications to better judge competing projects. City Manager Douglas Harman said in a recent report to the City Council that "it is impossible to determine lost economic opportunities" that will result from the new rules.
For almost 15 years, states and local authorities used industrial development bonds to lure businesses into their jurisdictions, pay for sewage treatment and pollution control, and provide student loans. Since interest on the bonds was exempt from state and federal taxes, the bonds carried interest rates below conventional levels and made the projects more attractive to developers and corporations.
But Congress, fearing the federal Treasury was losing too much revenue, mandated ceilings on the amount of bonds each state could issue. In addition, half of the state's bond quota, calculated at $150 per capita, must now go to localities.
The new rules will force states and localities to choose among projects ranging from student loans, pollution controls, new sports stadiums, housing redevelopment and economic revitalization.
To ease the transition, quotas for this year took effect in July. Projects approved before July 19 are not subject to the new cap, which only affects those approved in the last six months of the year.
Virginia Gov. Charles S. Robb issued a proclamation in July giving the state's 170 bond-issuing authorities until today to let state officials know how they will use their new allocations from Virginia's total quota of $825 million. State officials requested the information "to build a data base," according to George Calvert, director of debt management for Virginia's Department of Treasury.
Bond allocations that have not been earmarked by today will revert to the state's reserve fund.
In addition, local authorities have until Dec. 31 to make final arrangements for their unused bond issues or the state will take them over.
At least one local bond-issuing body rushed to complete a bond sale in order not to lose its 1984 allocation. The Norfolk-based Southeastern Public Service Authority moved up to November a bond sale that was scheduled for February. It would finance a $100 million waste-to-energy plant, which will handle waste disposal for eight southern Virginia communities, including Norfolk, Portsmouth and Virginia Beach, according to Durwood S. Curling, executive director of the authority.
The Capital Region Airport Commission in Richmond has moved up the bond sale for its planned $33 million expansion at Byrd Airport from early next year to December.
Virginia's annual bond allocation will grow next year to $832.5 million because of population growth, but the crunch should hit the year after that, Calvert said. "Next year, it's going to be tough to get it all in. At least that's the perception right now."
Maryland, which issued a total of $730 million in bonds in 1983, has an annual quota of $632 million. Local authorities got half of that amount; the rest was divided between state agencies and the secretary for economic development, according to Dennis McGee, spokesman for Maryland's Department of Economic and Community Development. He said the department will hold two public hearings this month on how the state's half of the allocation should be divided.
The new rules are "obviously going to make local governments more careful in where they issue industrial revenue bonds," McGee said. "They will look at each application a little bit closer for the ultimate economic impact a company will have on a community."
The District of Columbia, which is being treated like a state, will be allocated the state's minimum of $200 million under the new federal guidelines.
Last year, the District could not complete any bond sales because of a dispute with Congress over its charter. Curtis R. McClinton, deputy mayor for economic development, said passage of compromise legislation pending on Capitol Hill will allow the city to approve about $300 million in bond issues it already has reviewed and tentatively sanctioned.
Alexandria's Vaughan said the reduced quota for Alexandria will put it in "close competition with Fairfax County," where the impact of the restrictions "is nowhere near what Alexandria will see."
Fairfax County, with a population about six times that of Alexandria, received a quota of $47.8 million, a relatively small reduction from the $50 million in bonds the county issued in 1983, when there was no federal limit.
Fairfax's quota for the new year is considerably less -- by almost half -- than what it has issued this year in tax-exempt securities. Prior to July, the county issued $59.6 million in bonds for projects. Since then it has used up $45.2 million of its $47.8 million quota, leaving it with a projected total of $104.8 million in bond issues for 1984, according to Tom Lawson, counsel for the Fairfax Economic Development Authority. So far, only $10.6 million of those bond issues have been completed, Lawson said.
Arlington County, in contrast to Alexandria, has used its bond-issuing authority sparingly, approving only $11.5 million last year. The county did not issue any bonds during the first half of this year while the legislation was being considered by Congress, according to Mark Jinks, secretary-treasurer of Arlington's Industrial Development Authority. It plans to use only $2.3 million of its $11.5 million quota for this year, Jinks said.