a

GAO

United States Government Accountability Office

Report to the Ranking Minority Member, 

Committee on Finance, U.S. Senate

September 2006 FEDERAL TAX 

POLICY

Information on 

Selected Capital 

Facilities Related to 

the Essential 

Governmental 

Function Test

GAO-06-1082
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

September 2006

FEDERAL TAX POLICY

Information on Selected Capital Facilities 

Related to the Essential Governmental 

Function Test 

Highlights of GAO-06-1082, a report to 

Ranking Minority Member, Committee on 

Finance, U.S. Senate 

Unlike state and local 

governments, Indian tribal

governments are in general

restricted to using tax-exempt 

bonds for activities that are an

“essential government function,”

where “essential government 

function” does not include 

functions not customarily

performed by state and local

governments. This restriction has 

been difficult to enforce by the 

Internal Revenue Service (IRS) and

increased the tax compliance

burden on Indian tribal 

governments. 

GAO was asked for information on

the number of facilities that state 

and local governments finance,

construct, and operate in eight

categories: (1) Rental housing, 

(2) Road infrastructure, (3) Parking 

garages and lots, (4) Community 

recreational facilities, (5) Golf 

courses, (6) Conference centers, 

(7) Hotel and tourist 

accommodations, and (8) Stateowned gaming support facilities. 

GAO did not find a comprehensive, 

reliable source of the number of 

facilities. Instead, GAO searched

and found a variety of public and

private sources that had limited

information on the amounts of 

financing provided by state and 

local governments in related 

categories. 

Data sources showed state and local governments (municipalities) provided 

a wide range of financial support in the following types of facilities. 

• Rental housing. From 2000 through 2004 municipalities borrowed, in 

2004 dollars, a total of $46.4 billion in 3,557 bond issues for multi-family 

housing projects. Over the period these borrowings accounted for 33 to 

45 percent of debt issued for housing projects. 

• Road transportation. From 2000 through 2004 municipalities borrowed, 

in 2004 dollars, a total of $61.4 billion in 1,091 issues for toll roads and 

highways. Over the period these borrowings accounted for 27 to 38 

percent of debt issued for transportation facilities. 

• Parking facilities. From 2000 through 2004 municipalities borrowed, in 

2004 dollars, a total of $3.5 billion in 220 issues for parking facilities. In 

addition, about 73 percent of the U.S. population lived in metropolitan 

statistical areas (MSA) that reported positive user charges for parking 

facilities. 

• Park and recreation facilities. From 2000 through 2004 municipalities 

borrowed, in 2004 dollars, a total of $60.9 billion in 3,085 tax-exempt 

issues to build public facilities, including $0.6 billion in 29 issues for 

theaters; $6.1 billion in 723 issues for parks, zoos and beaches; $5.3

billion in 119 issues for stadiums and arenas; and $4.6 billion in 420 

issues in other recreation facilities. In addition, about 75 percent of the 

U.S. population lived in MSAs that reported positive user charges for 

park and recreation facilities. 

• Golf facilities. In 2005 there were about 2,400 municipal golf courses, 

about 15 percent of total golf courses in the United States. Municipal 

golf courses exist in all states. At least 120 golf courses in 29 states have 

been identified as financed, at least in part, with tax-exempt bonds. 

About 5 percent of municipal golf courses are connected to resorts or 

real estate developments.

• Convention centers. Over 300 government owned convention centers 

have been identified by government finance experts. In addition, from 

2000 through 2004 municipalities borrowed, in 2004 dollars, a total of 

$11.1 billion in 236 issues related to convention centers. 

• Hotels. GAO identified 12 hotel projects related to convention centers or 

airports that were financed with tax-exempt bonds in recent years and 

additional data sources identify 39 tax-exempt financed hotel projects.

• Gaming support facilities. According to financial and gaming reports all 

but 2 states have some form of legal gaming, and 41 states and the 

District of Columbia providing state lotteries. In addition, tax-exempt 

financing has been used for capital projects related to the gaming

industry. 

 

www.gao.gov/cgi-bin/getrpt?GAO-06-1082.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Michael 

Brostek at (202) 512-9110 or 

brostekm@gao.gov. 
Contents 

Letter 1

Results in Brief 4

Background 5

State and Local Governments Provide Substantial Financing for 

Housing 7

Transportation Facilities Often Are Publicly Financed by a Variety 

of Methods 8 

Wide Prevalence of User Charges for Parking Suggest Customary 

Provision by State and Local Governments 10 

Governments Provide Financing for a Wide Variety of Recreational 

Facilities 13

Numerous Municipal Golf Courses Exist, Some with Lodging 

Facilities 16

Public Financing Is Provided to Numerous Convention Centers 19 

Different Sources Show Public Financing of Hotels and Related 

Facilities 20

State and Local Governments Support Gaming, but Extent of

Public Financing Is Difficult to Estimate 22 

Appendix I Objective, Scope, and Methodology 25 

Appendix II GAO Contact and Staff Acknowledgments 32 

Tables 

Table 1: State and Local Government Housing-Related Borrowings 

and Number of Issues 7 

Table 2: State and Local Government Transportation-Related 

Borrowings and Number of Issues 9 

Table 3: Level of Parking User Charges in 171 Largest Metropolitan 

Statistical Areas 11 

Table 4: State and Local Government Public Facilities-Related

Borrowings and Number of Issues 13 

Table 5: Regional Distribution of Municipal Golf Courses 16 

Table 6: Selected Hotels and Related Facilities Financed with TaxExempt Bonds 21 

Page i GAO-06-1082 Federal Tax Policy
Figures 

Figure 1: Levels of Parking User Charges across Largest MSAs 12 

Figure 2: Levels of Parks and Recreation User Charges across 

Largest MSAs 15 

Figure 3: Cumulative Number of Nonpark Municipal Resort Golf 

Facilities 17

Figure 4: Cumulative Number of Municipal Real Estate 

Development Golf Facilities 18 

Figure 5: Cumulative Number of Major New Bond Issues for 

Convention Centers 20 

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Page ii GAO-06-1082 Federal Tax Policy
United States Government Accountability Office

Washington, DC 20548 

September 13, 2006 

The Honorable Max Baucus 

Ranking Minority Member 

Committee on Finance 

United States Senate 

Dear Senator Baucus: 

Congress supports public capital formation by allowing investors to 

exclude from gross income for the purpose of federal taxes the interest 

received on state and local government bonds. In 2005, this tax benefit 

resulted in lower borrowing costs for about 55,000 active bond issuers but 

it cost the federal government over $26 billion of forgone tax revenue. The 

total value of outstanding tax-exempt bonds as of January 2004 was about 

$1.8 trillion, or 11 percent of the domestic bond market. 

In order to restrict the benefits of tax exemption to government purposes, 

Congress has imposed limits on the amounts and types of facilities that 

can be financed with tax-exempt bonds by state and local governments. In 

addition, limitations are placed on the ability of Indian tribal governments 

to use tax-exempt bonds. While state and local governments can use taxexempt bonds for a variety of public and qualified private activities, the 

Internal Revenue Code (I.R.C) restricts Indian tribal governments’ use of 

tax-exempt bonds to obligations that are part of an issue substantially all 

of which proceeds are to be used in the exercise of an “essential 

government function.” The Revenue Act of 19871

 added a provision to the 

I.R.C to exclude from the definition of an “essential government function” 

any function that is not customarily performed by state and local 

governments with general taxing powers. 

This restriction has been difficult to enforce by the Internal Revenue

Service (IRS) and has contributed to the tax compliance burden on Indian

tribal governments. 2

 1

Pub.L. 100-203 (1987). 

2

The Tribal Government Tax-Exempt Bond Parity Act of 2006, S. 3567, 109th Cong. (2006)

would place tribal governments on a more equal footing with state and local governments 

in terms of their ability to issue tax-exempt bonds to fund certain governmental programs.

Page 1 GAO-06-1082 Federal Tax Policy
In order to support efforts to reduce the enforcement and compliance 

burdens, you asked us to provide information on the gross number of 

facilities that state and local governments finance, construct, and operate

in the following eight categories: 

1. Rental housing 

2. Road infrastructure 

3. Parking garages and parking lots 

4. Community recreational facilities 

5. Golf courses 

6. Conference centers 

7. Hotel and tourist accommodations 

8. State-owned gaming support facilities 

We did an extensive review of possible data sources and did not find 

comprehensive, reliable sources of the number of facilities. As agreed with 

your staff, we provide instead limited data on the number and amount of 

financings of a broader set of similar categories, describe tax-exempt 

financings by selected state and local governments of certain facilities, and 

present other indicators of public support for the types of facilities. The 

information we provide is limited because state and local governments are 

not required to report specific numbers of facilities financed with taxexempt bonds or the funding details for each facility. According to bond 

finance experts, states frequently finance with a single bond several 

capital projects in broad categories that could be similar to the eight types

of facilities in your request. 

Our data sources are Thomson Financial data contained in Bond Buyer 

Yearbooks; the U.S. Census Bureau’s (Census) 2002 Census of 

Governments; selected financial reports of state and local governments; a 

National Golf Foundation database; an American Gaming Association 

study; and testimonies, studies and interviews of experts in taxation and 

government finance. The links between the information we provide and 

the eight facilities in the request are the following. 

• Rental housing. We use Thomson Financial data to provide the number 

of bond issues and amounts of borrowing for single-family and multiPage 2 GAO-06-1082 Federal Tax Policy
family categories, which could include nonrental housing projects. 

• Road infrastructure. We use Thomson Financial data to provide the 

number of bond issues and amounts of borrowing for toll roads and 

highways and other transportation-related borrowings. 

• Parking garages and parking lots. We provide (1) the number of bond 

issues and amounts of borrowing for parking facilities using Thomson 

Financial data, (2) user charges for parking facilities in large 

metropolitan statistical areas (MSA) reported in the 2002 Census of 

Governments, and (3) tax-exempt financing of selected parking 

facilities disclosed in government financial reports. 

• Community recreational facilities and conference centers. We 

provide (1) the number of government-owned convention and civic 

centers that have been identified by Akin Gump Strauss Hauer & Feld 

LLP and (2) the number of bond issues and amounts of borrowing for 

convention centers and other similar government facilities using 

Thomson Financial data.

• Golf courses. We provide information on approximately 2,400 

municipal golf courses listed in a National Golf Foundation database 

and tax-exempt financing details of golf facilities disclosed in selected 

state and local government financial reports. 

• Hotels and tourist accommodations. We provide the number of hotels 

financed with tax-exempt bonds identified by government finance 

experts and details of tax-exempt financings of resort facilities 

disclosed in selected state and local government financial reports. 

• State-owned gaming support facilities. We provide a summary of 

gaming operations in 48 states. Gaming details provided include lottery 

operations disclosed in state financial reports, other forms of gaming 

summarized in a national study of the American Gaming Association, 

and gaming trends reported in academic studies on gaming.

• In addition to the above information sources, we interviewed experts in 

the field of government finance from top law firms and investment 

banks specializing in bond financing, officials of the Government 

Finance Officers Association, a senior finance officer of a county 

government, and officials of the Bond Market Association, and 

reviewed studies in the field of taxation and government finance. 

We determined that these data were reliable for the purpose of providing 

limited information on the eight types of facilities. Appendix I has a 

Page 3 GAO-06-1082 Federal Tax Policy
detailed description of the methodology, data sources, and limitations. We 

conducted our work from February 2006 through August 2006 in 

accordance with generally accepted government auditing standards. 

Data sources showed state and local government (municipalities) 

provided a wide range of financial support in the following types of 

facilities. 

Results in Brief 

• Rental housing. From 2000 through 2004 municipalities borrowed, in 

2004 dollars, a total of $46.4 billion in 3,557 bond issues for multi-family 

housing projects. These types of housing projects are likely to involve 

rental housing units for low-income households. Table 1, page 7, 

provides borrowing details by year for multi-family and single-family 

projects. 

• Road transportation. From 2000 through 2004 municipalities

borrowed, in 2004 dollars, a total of $61.4 billion in 1,094 issues for toll 

roads and highways. Table 2, page 9, provides borrowing details for 

different types of transportation projects. 

• Parking facilities. From 2000 through 2004 municipalities borrowed, 

in 2004 dollars, a total of $3.5 billion in 220 issues for parking facilities 

(see table 2 for annual data). According to Census data, about 73 

percent of the U.S. population lived in metropolitan statistical areas 

(MSA) that reported positive user charges for parking facilities. 

Audited financial reports of selected municipalities showed most 

provide tax-exempt financing for construction of parking facilities. 

• Park and recreation facilities. From 2000 through 2004 municipalities 

borrowed, in 2004 dollars, a total of $60.9 billion in 3,085 tax-exempt 

issues to build public facilities. This general category includes several 

recreation-related facilities, including libraries and museums ($7.5 

billion in 470 issues); convention centers ($11.1 billion in 236 issues); 

theaters ($0.6 billion in 29 issues); parks, zoos, and beaches ($6.1 

billion in 723 issues); stadiums and arenas ($5.3 billion in 119 issues); 

and other recreation facilities ($4.6 billion in 420 issues). Table 4, page 

13, provides borrowing details by year. According to Census data, 

about 75 percent of the U.S. population lived in (MSA) that reported 

positive user charges for park and recreation facilities. 

Page 4 GAO-06-1082 Federal Tax Policy
• Golf facilities. In 2005 there were about 2,400 municipal golf courses,3

about 15 percent of total golf courses in the United States. Municipal 

golf courses exist in all states. At least 120 golf courses in 29 states 

have been financed, at least in part, with tax-exempt bonds. About 5 

percent of municipal golf courses are connected to resorts or real 

estate developments. Over the past 10 years an increasing number of 

golf courses have been built as part of larger real estate developments. 

Some municipalities have issued tax-exempt revenue bonds for the 

construction of resorts with golf courses, lodging, and meeting 

facilities. 

• Convention centers. Over 300 government-owned convention centers 

have been identified by government finance experts. In addition, from 

2000 through 2004 municipalities borrowed, in 2004 dollars, a total of 

$11.1 billion in 236 issues related to convention centers. The amounts 

borrowed varied, ranging from $1.2 billion to $3.4 billion per year (see 

table 4 for annual figures). 

• Hotels. Government finance experts identified 39 hotel projects 

associated with convention centers or airports that were financed by

tax-exempt bonds. Selected government financial reports we examined 

disclosed 12 hotel projects that were financed with tax-exempt bonds 

in recent years (see borrowing details in table 6 on page 21). 

• Gaming-support facilities. According to government financial reports 

and a national gaming report, all but 2 states have some form of legal

gaming. Forty-one states and the District of Columbia reported assets 

and revenues related to lotteries. Their annual operating income ranged 

from $2 million to $2 billion. According to selected government 

financial reports, tax-exempt financing has been used for capital 

projects in states with significant private gaming industries. 

We are not making any recommendations in this report. 

For federal tax purposes state and local government bonds are classified 

as either “governmental bonds” or “private activity bonds.” In general, 

governmental bonds are used to build public capital facilities and serve the 

general public interest. Governmental bonds are tax-exempt and can be

issued for a variety of public facilities and projects. Tax exemption lowers 

Background 

 3

Municipal golf courses are courses owned by a tax-supported entity, such as a city, county, 

state, or park district. 

Page 5 GAO-06-1082 Federal Tax Policy
municipalities’ borrowing costs and provides higher after-tax yields to 

investors. Private activity bonds, on the other hand, provide financing to

private businesses or individuals and are either tax-exempt or taxable 

depending on two tests.4 Tax exemption is granted to certain qualified 

private activity bonds, such as those for certain housing projects and 

activities, but the borrowed amounts are limited and the interest earned by 

investors can be subject to alternative minimum tax. 

In addition, bonds issued by state and local governments can be structured 

as general obligation (G.O.) or revenue bonds. G.O. bonds, also known as 

full faith and credit obligations, are secured by revenues obtained from the 

issuer’s general taxing powers, including sales taxes, property taxes, and 

income taxes. Most G.O. bonds are used to build public infrastructure, 

such as school buildings, jails, police stations, and city halls, and are 

classified as governmental bonds for tax purposes. In contrast, revenue 

bonds are issued to finance specific projects or enterprises and investors 

get paid from the revenues generated by the financed projects. Revenue 

bonds can be either private activity bonds or governmental bonds for tax 

purposes. 

In addition to the limitations and restrictions placed on the issuance of

tax-exempt bonds by state and local governments, there are additional 

restrictions on tribal governments’ issuance of tax-exempt bonds. 

Specifically, I.R.C. §7871 (c) provides that tribal governments may use taxexempt bonds only if substantially all of the proceeds from those bonds 

are used to exercise an essential government function. In 1987, I.R.C. 

§7871 (e) was added to the I.R.C. to provide that “essential government 

function” shall not include any function not customarily performed by 

state and local governments with general taxing powers. With the 

exception of certain manufacturing activities, tribal governments are not 

eligible for the tax benefits of qualified private activity bonds. 

 4

Bond issues are taxable private activity bonds if (1) more than 10 percent of the proceeds

of the issued bond are to be used for any private business use and (2) if the payment on the

principal of, or the interest on, more than 10 percent of the proceeds of such issue is (under

the terms of such issue or and underlying arrangement) directly or indirectly secured by

any interest in property used or to be used for a private business use, or payments in 

respect to such property or if the payment is to be derived from payments (whether or not

to the issuer) in respect of property, or borrowed money, used or to be used for a private

business.

Page 6 GAO-06-1082 Federal Tax Policy
No regulations have been issued yet addressing what is or what is not an

essential government function since the provision in 1987 was added.5

Congress in the legislative history to I.R.C. § 7871(e) provided some 

examples, such as schools, roads, and government buildings. This limited 

direction for tribes’ use of tax-exempt bonds does not fully address the 

types of activities that state and local governments are financing, a 

principal criterion for determining an essential government function. 

We were unable to determine the number of rental housing facilities that 

were financed, constructed, or operated by state and local governments. 

According to experts in state and local government financing, affordable 

housing projects are commonly provided by state and local governments 

to low-income individuals. We found the following details on debt 

financing for multi-family housing. 

State and Local 

Governments Provide 

Substantial Financing 

for Housing 

From 2000 through 2004 municipalities borrowed, in 2004 dollars, a total 

of $46.4 billion in 3,557 bond issues for multi-family housing projects, 

according to Thomson Financial data. State and local governments 

allocated from about 6 percent to 10 percent from 2000 through 2004 of 

total bond issuances for housing. Of the municipal bonds issued over the 

period for housing, 33 percent to 45 percent went to multi-family 

dwellings. The bond issuances totaled from $7.2 billion to $12.2 billion in 

constant 2004 dollars. Table 1 shows nominal amounts of borrowings by 

category—single family and multi-family borrowings, and tax-exempt, 

taxable and amounts subject to alternative minimum tax. 

Table 1: State and Local Government Housing-Related Borrowings and Number of

Issues 

Dollars in billions. Numbers of issues sold in parentheses. 

2000 2001 2002 2003 2004

Total $20.3

(1,293) 

$22.6 

(1,367)

$23.6 

(1,245) 

$26.3 

(1,007)

$22.3 

(998)

Single-family $13.7

(566)

$14.9

(542)

$13.0 

(434) 

$14.4

(362)

$14.1

(449)

 5

On August 9, 2006, IRS published an advanced notice of proposed rule making regarding 

the definition of essential government function, and solicited comments by November 7, 

2006. 71 Fed. Reg. 45474. 

Page 7 GAO-06-1082 Federal Tax Policy
Dollars in billions. Numbers of issues sold in parentheses. 

2000 2001 2002 2003 2004

Multifamily $6.6

(727)

$7.7

(825)

$10.6 

(811) 

$11.9

(645)

$8.2

(549)

Tax-exempt $5.2

(436)

$7.5

(509)

$8.1 

(429) 

$12.3

(449)

$8.0

(420)

Taxable $3.3

(332)

$3.4

(291)

$2.9 

(232) 

$3.5

(176)

$2.0

(135)

Alternative minimum 

tax 

$11.7

(525)

$11.7

(567)

$12.7 

(584) 

$10.5

(382)

$12.4

(443)

Source: Thomson Financial. 

The magnitude of bond issuances suggests significant state and local 

government support for both single-family and rental housing in the form 

of multifamily dwellings. As can be seen in table 1, tax-exempt borrowings 

provided less than 50 percent of total borrowings for housing. The I.R.C 

includes housing financing as a “qualified private activity” subject to 

volume caps.

We were unable to determine the number of road infrastructure facilities

that have been constructed, financed, or operated by state and local 

governments. According to experts in state and local finance,

transportation and schools are the largest categories of capital projects 

financed by state and local governments. We found the following details 

on debt financings of road projects.

Transportation 

Facilities Often Are 

Publicly Financed by 

a Variety of Methods 

According to Thomson Financial data, from 2000 through 2004 

municipalities borrowed, in 2004 dollars, a total of $61.4 billion in 1,094 

issues for toll roads and highways. In 2002, debt financing represented 

about 10 percent of total state funding for highways. In addition to taxexempt bonds, transportation facilities received federal support in the 

form of highway credit programs and loans, and highway tax revenues.6

We were able to provide some details on debt financing of transportation 

facilities. 

 6

GAO, Transportation Infrastructure: Alternative Financing Mechanisms for Surface 

Transportation, GAO-02-1126T (Washington, D.C.: Sept. 25, 2002). 

Page 8 GAO-06-1082 Federal Tax Policy
Thomson Financial data indicate that while state and local governments 

allocated 9 percent to 13 percent of total bond issuances to transportation 

facilities in the period from 2000 through 2004, between 27 and 38 percent 

of those issues went toward toll roads and highways. These bonds 

averaged about $12 billion in constant 2004 dollars over the period from 

2000 to 2004. Table 2 shows the nominal amounts of borrowings by 

category—air, sea, and road facilities, and tax-exempt, taxable and 

amounts subject to alternative minimum tax. Categories in bold are closest 

to the types of facilities that are the subject of this report. However, some 

facilities of interest may have been bundled within the other categories. 

Table 2: State and Local Government Transportation-Related Borrowings and Number of Issues 

Dollars in billions. Numbers of issues sold in parentheses. 

2000 2001 2002 2003 2004

Total $26.7

(469)

$32.2

(562)

$45.0 

(557) 

$40.4

(546)

$32.4

(461)

Airports $7.4

(123)

$12.4

(149)

$10.1 

(128) 

$10.3

(162)

$7.0

(129)

Seaports $1.2

(27)

$1.2

(39)

$1.1 

(41) 

$1.3

(37)

$0.9

(24)

Toll roads and highways $10.2

(222)

$8.6

(259)

$14.5 

(241) 

$15.2

(201)

$10.1

(171)

Bridges $1.5

(11)

$2.3

(7)

$4.1 

(23) 

$3.0

(17)

$1.4

(13)

Tunnels $0.3

(2)

$0.1

(1)

$0.8 

(1) 

$0.0

(0)

$0.0

(0)

Parking facilities $0.5

(36)

$0.6

(42)

$1.0 

(55) 

$0.5

(40)

$0.7

(47)

Mass transit $5.1

(43)

$6.7

(62)

$13.7 

(67) 

$9.7

(75)

$10.6

(65)

Other transportation $0.6

(5)

$0.2

(3)

$0.01 

(1) 

$0.3

(14)

$1.7

(12)

Tax-exempt $20.2

(361)

$23.2

(447)

$35.6 

(435) 

$32.1

(438)

$27.2

(361)

Taxable $0.3

(24)

$0.7

(33)

$0.9 

(31) 

$1.6

(36)

$1.3

(32)

Alternative minimum tax $6.3

(84)

$8.3

(82)

$8.4 

(91) 

$6.7

(72)

$4.0

(68)

Source: Thomson Financial

Page 9 GAO-06-1082 Federal Tax Policy
We were unable to obtain the number of parking facilities constructed, 

financed, or operated by state and local governments. According to 

municipal finance experts parking facilities, like housing and 

transportation facilities, are commonly financed with tax-exempt bonds by 

state and local governments. We found the following details on debt 

financing for parking facilities. 

According to Thomson Financial data, from 2000 through 2004 

municipalities borrowed, in 2004 dollars, a total of $3.5 billion in 220 issues 

for parking facilities. Details on debt financing for parking facilities from 

Thomson Financial data are listed in the previous section on 

transportation facilities and in table 2. Total taxable and tax-exempt bond 

issuances for parking facilities ranged from $0.5 billion to $1 billion in 2004 

constant dollars, accounting for on average 2 percent of total (taxable and

tax-exempt) transportation bond issues. The data for parking facilities 

bond issues do not provide a breakdown between taxable and tax-exempt

bond issuances. 

Wide Prevalence of 

User Charges for 

Parking Suggest 

Customary Provision 

by State and Local 

Governments 

According to government finance experts, determining the use of taxexempt bonds to finance parking facilities can be difficult because a 

variety of capital projects are often combined into one bond issuance. In 

addition, state and local governments have relied on a combination of taxexempt and taxable financing to construct parking garages that are meant 

to promote economic development in specific districts. For example, the 

City of Virginia Beach built several parking garages in two tax increment 

financing (TIF) districts wherein the incremental real property taxes 

above a base level are used to pay the revenue bonds issued to build the 

garages. As of December 2005, the city had issued $34.9 million tax-exempt 

and $4.7 million taxable revenue bonds to build parking garages in the TIF

districts. In order to reduce the construction risk to the city, a private 

developer built the garages and the city’s Development Authority 

purchased them as they were built. 

User fees received by state and local governments for providing parking 

services are a direct indicator of the extent of their involvement in parking

facilities in the form of on-street metered parking, off-street parking 

garages, or both. According to 2002 Census of Governments data, about 73 

percent of the population of the United States lived in MSAs that reported

user charges on government-owned parking facilities. Table 3 lists the 

largest 171 MSAs by their level of parking user charges. Figure 1 shows the 

location of the largest 171 MSAs and their level of parking user charges. 

These 171 MSAs accounted for about 75 percent of the population in the 

United States in 2002 and include all MSAs with populations of 250,000 or

Page 10 GAO-06-1082 Federal Tax Policy
more. Ninety-two percent of the MSAs listed reported positive user 

charges, and 97 percent of the population in the largest MSAs lived in 

MSAs that reported positive user charges. The prevalence of user charges

suggests that most of the population is provided with some publicly 

supported parking by state and local governments. 

Table 3: Level of Parking User Charges in 171 Largest Metropolitan Statistical Areas 

User charge revenue (x) 171 MSAs MSA distribution

 Greater than $25 million 11 6%

 $25 million > x > $5 million 37 22%

 $5 million > x > $1 million 57 33%

 $1 million > x > $0 million 53 31%

 No user charge revenue 13 8%

Total MSAs 171 100%

Source: U.S. Census Bureau, 2002 U.S. Census of Governments.

Page 11 GAO-06-1082 Federal Tax Policy
Figure 1: Levels of Parking User Charges across Largest MSAs 

We examined selected government comprehensive annual financial 

reports in large MSAs, and found that some cities report their parking 

operations in business-type proprietary funds that disclose operating 

results and debt levels. For example, in 2005 the City of Miami Beach’s 

Parking Fund reported $30.5 million tax-exempt revenue bonds and $10.4 

million in income from operating the city’s 68 parking lots and garages. 

Page 12 GAO-06-1082 Federal Tax Policy
We did not find readily available data that identify community recreational 

facilities as a specific category and were unable to determine the number 

of these facilities financed, constructed, or operated by state and local 

governments. According to government finance experts, state and local 

governments play a large role in the financing and construction of a 

variety of recreational facilities. However, it is difficult to identify the 

specific amount of financing for these facilities because available 

information is presented in overlapping categories and single bond 

issuances can be used for more than one purpose. We found the following 

details on debt financing of different types of recreational public facilities. 

Governments Provide 

Financing for a Wide 

Variety of 

Recreational Facilities 

From 2000 through 2004 municipalities borrowed, in 2004 dollars, a total 

of $60.9 billion in 3,085 tax-exempt issues to build public facilities, 

according to Thomson Financial data. This general category includes 

several recreation-related facilities, including libraries and museums ($7.5 

billion in 470 issues); convention centers ($11.1 billion in 236 issues); 

theaters ($0.6 billion in 29 issues); parks, zoos, and beaches ($6.1 billion in

723 issues); stadiums and arenas ($5.3 billion in 119 issues); and other 

recreation facilities ($4.6 billion in 420 issues). Table 4 shows nominal 

amounts of borrowings by category—convention centers; parks, zoos, and 

beaches; other recreation; and other public facilities; and tax-exempt, 

taxable and amounts subject to alternative minimum tax. From 2000 

through 2004, state and local governments devoted between 2 percent and 

5 percent of total bond issuances to public facilities. Of the municipal 

bonds issued over the period for public facilities between 6 percent and 13 

percent were issued for facilities such as parks, zoos, and beaches, and 

between 5 percent and 11 percent were devoted to other recreational 

facilities. These bonds totaled from $0.6 billion to $1.7 billion in constant 

2004 dollars.

Table 4: State and Local Government Public Facilities-Related Borrowings and Number of Issues 

Dollars in billions. Numbers of issues sold in parentheses. 

2000 2001 2002 2003 2004

Total $9.3

(735)

$11.1

(749)

$15.5 

(850) 

$13.0

(686)

$9.4

(643)

Libraries and museums $1.0

(74)

$1.5

(101)

$1.2 

(103) 

$1.8

(99)

$1.7

(93)

Government offices $1.5

(131)

$1.7

(110)

$3.9 

(155) 

$2.6

(107)

$1.2

(43)

Fire stations $0.2

(120)

$0.3

(117)

$0.4 

(150) 

$0.2

(112)

$0.3

(104)

Page 13 GAO-06-1082 Federal Tax Policy
Dollars in billions. Numbers of issues sold in parentheses. 

2000 2001 2002 2003 2004

Jails and prisons $1.5

(69)

$1.4

(65)

$3.5 

(87) 

$2.7

(76)

$2.0

(116)

Police stations $0.2

(23)

$0.2

(25)

$0.3 

(24) 

$0.2

(21)

$0.2

(11)

Convention centers $2.0

(51)

$2.1

(56)

$3.3 

(47) 

$2.0

(43)

$1.2

(39)

Stadiums and arenas $1.2

(25)

$1.8

(31)

$0.8 

(22) 

$0.7

(21)

$0.5

(20)

Theaters $0.1

(2)

$0.1

(6)

$0.2 

(5) 

$0.3

(8)

$0.1

(8)

Parks, zoos, and beaches $0.8

(140)

$1.4

(154)

$1.0 

(165) 

$1.7

(129)

$1.1

(135)

Other recreation $1.0

(100)

$0.7

(84)

$0.9 

(92) 

$0.8

(70)

$1.0

(74)

Tax-exempt $8.7

(694)

$10.5

(721)

$15.2 

(823) 

$11.9

(647)

$8.8

(600)

Taxable $0.4

(36)

$0.5

(25)

$0.3 

(26) 

$1.0

(35)

$0.6

(42)

Alternative minimum tax $0.2

(5)

$0.1

(3)

$0.01 

(1) 

$0.01

(4)

$0.02

(1)

Source: Thomson Financial. 

Given that the recreational facilities category overlaps with some of the 

other categories, such as golf courses and convention centers, additional 

information relevant to recreational facilities is available in other sections

of this report. 

Similar to parking facilities, we used the 2002 Census of Governments to 

obtain an indirect indicator of the state and local governments’ support for 

community recreational facilities. However, this indicator is less precise 

than the Census indicator for user parking charges because Census 

defines park and recreational facilities to include many community 

recreational facilities, including swimming pools, marinas, golf courses, 

tennis courts, and museums. Also, determining the number and amounts 

of tax-exempt financings related to community recreational facilities was 

difficult because state and local governments can include these facilities 

with other capital projects in a single financing package. 

Page 14 GAO-06-1082 Federal Tax Policy
According to the Census data, all of the largest 171 MSAs reported positive 

user charges for parks and recreation. Thus, 75 percent of the population 

has access to some form of publicly provided recreational facility, as 

shown in figure 2. 

Figure 2: Levels of Parks and Recreation User Charges across Largest MSAs 

Page 15 GAO-06-1082 Federal Tax Policy
Numerous Municipal 

Golf Courses Exist, 

Some with Lodging 

Facilities 

According to National Golf Foundation data, in 2005 there were about 

16,000 public and private golf courses in the United States. Of those, about 

2,400 (15 percent) are municipal golf courses, that is, they are owned by 

state and local governments. Municipal golf courses do not include daily 

fee golf courses, about 9,000, that are not owned by a tax-supported entity

but provide at least limited public access. Table 5 shows the regional 

distribution of municipal golf courses. All states have municipal golf 

courses. 

Table 5: Regional Distribution of Municipal Golf Courses 

Number and type of municipal golf courses

Region Resort Real estate

Resort/real 

estate 

Just golf/ 

other

Park 

district Total

New England 0 0 0 99 1 100

Middle Atlantic 0 0 0 191 17 208

East North 

Central 3 13 0 457 6 479

West North 

Central 2 11 1 374 1 389

South Atlantic 10 12 0 244 9 275

East South 

Central 4 2 0 122 36 164

West South 

Central 2 5 0 254 11 272

Mountain 5 20 0 256 1 282

Pacific 8 6 0 243 0 257

Total 34 69 1 2240 82 2426

Source: GAO analysis of National Golf Foundation data. 

Three percent, or about 80, municipal golf courses have been constructed 

with different forms of lodging, ranging from cabins to resort hotels with 

convention facilities. In some cases, municipal resort golf courses have 

been built with resort hotels and facilities and have been constructed both 

as stand-alone courses and as part of park districts. These resort courses 

may vary significantly in different ways, including lodging and dining 

facilities and course design. Figure 3 shows the trend in nonpark 

municipal resort golf facilities. Over many years there has been a 

consistent increase in the number of nonpark municipal resort golf 

courses. In addition to the nonpark resort golf courses, there were an 

additional 24 resort golf courses inside park districts as of 2005. 

Page 16 GAO-06-1082 Federal Tax Policy
Figure 3: Cumulative Number of Nonpark Municipal Resort Golf Facilities 

According the National Golf Foundation, there are also close to 70 

municipal golf courses associated with real estate developments. These 

courses, which are owned by municipalities, have been built together with 

planning for private real estate abutting the course, or have been 

purchased by the municipality from private real estate developments that 

included golf courses. In some cases the private real estate development 

was planned in order to cover part of the costs of building the municipal 

course. Over the past 10 years an increasing number of golf courses have 

been built as part of larger real estate developments. Figure 4 shows the 

trend in municipal real estate development golf courses. 

Page 17 GAO-06-1082 Federal Tax Policy
Figure 4: Cumulative Number of Municipal Real Estate Development Golf Facilities 

We did not find the full extent of tax-exempt financing of municipal golf 

courses. According to data provided by Akin Gump Strauss Hauer & Feld 

LLP, a major law firm, at least 120 golf courses in 29 states have been 

financed, at least in part, with tax-exempt bonds. We identified, using 

National Golf Foundation data, over 25 of these tax-exempt financed 

courses as associated with resort or real estate facilities. According to 

these data many more of these courses have banquet facilities and 

conference centers. 

An illustration of the use tax-exempt bonds to build a municipal golf 

course is provided by the 27-hole municipal golf course in the City of 

North Charleston. In the late 1990s the city issued $11.1 million in 

mortgage revenue bonds to build a municipal golf course and $4.6 million 

in general obligation bonds to finance the construction of roads and 

infrastructure improvements in the surrounding area. In 2003 the city 

refunded the outstanding golf-related bonds by issuing $11.7 million in 

mortgage revenue bonds, for an estimated $1.6 million in debt service 

savings. In 2005 the municipal golf course had a $1 million operating loss, 

but the city expects that the course’s situation in the center of a residential 

and commercial development eventually will contribute over $200 million 

in taxable property value. 

Page 18 GAO-06-1082 Federal Tax Policy
Daily fee courses, while not explicitly owned by state or local 

governments could have been financed with municipal tax-exempt bonds. 

For example, the Maryland Economic Development Corporation 

(MEDCO) has issued about $176 million limited-obligation revenue bonds 

to build two resorts that feature a hotel, a conference center, and a golf 

facility. MEDCO owns the Hyatt Regency Chesapeake Bay Conference 

Center, with 400 hotel rooms, 35,000 square feet of meeting and banquet 

space, an 18-hole championship golf course and 150-slip marina. MEDCO 

also owns the Rocky Gap Golf Course and Hotel/Meeting Center, with an 

18-hole Jack Nicklaus signature golf course, a 243-acre lake, and a resort 

lodge. 

Some municipal finance experts believe state and local governments can 

also provide indirect support to private golf courses through lower taxable 

property values. Private golf courses may be subject to agricultural 

assessment rules, which provide a tax break on property taxes, given that 

golf courses also provide an open space. They also noted that there may 

be other cases where land apportioned off by state and local governments 

near residential property is transferred to private companies in order to 

build golf courses. 

Although the number of convention centers financed, constructed, or 

operated by state and local governments is not known, we were provided 

information on over 300 convention centers owned by state and local 

governments by Akin Gump Strauss Hauer & Feld LLP. According to 

government finance experts, most convention centers are financed with

tax-exempt bonds. We found the following details on debt financing of a 

number of different types of recreational public facilities. 

Public Financing Is 

Provided to 

Numerous 

Convention Centers 

From 2000 through 2004 municipalities borrowed in 2004 dollars $11.1 

billion in 236 issues for financing convention centers, according to 

Thomson Financial data. (See table 4 for details of debt financing of 

convention centers, in nominal amounts in billions.) The municipal bonds 

issued for convention or civic centers totaled from $1.2 billion to $3.4 

billion in constant 2004 dollars. Figure 5 shows the cumulative number of 

major new bond issues for convention centers over the past 8 years.7

 7

Since new bonds could be issued for the same convention center, the cumulative number 

of issuances does not show the cumulative number of convention centers financed by state 

and local governments. 

Page 19 GAO-06-1082 Federal Tax Policy
Figure 5: Cumulative Number of Major New Bond Issues for Convention Centers 

Cumulative number

Year

Source: Thomson Financial.

0

20

40

60

80

100

120

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

According to some bond finance and convention industry experts, 

convention centers have been mostly financed by city governments. 

Experts we interviewed said that in order to promote urban economic 

development, a growing number of cities have in recent years built 

convention centers and also built hotels nearby in order to draw more 

convention visitors to their communities. Even though convention centers

may operate at a financial loss, cities have financed them expecting to 

generate additional spending in related businesses, including restaurants 

and entertainment, and increased property values. 

According to lists we obtained from government finance experts, 39 hotels 

associated with convention centers or airports or golf courses that have

been financed with tax-exempt bonds have been identified.8

 These 

facilities may vary significantly in different ways. As table 6 shows, the 

value of tax-exempt bond financing for hotels totaled in the billions. 

According to selected government financial reports we examined, 12 

Different Sources 

Show Public 

Financing of Hotels 

and Related Facilities 

 8

The data sources on hotels provided by government finance experts overlapped and thus 

the data do not necessarily yield a comprehensive list of all the publicly financed hotels. 

Page 20 GAO-06-1082 Federal Tax Policy
hotels have been financed with tax-exempt bonds in recent years. Table 6 

shows the location of these hotels and bond financing details.

Table 6: Selected Hotels and Related Facilities Financed with Tax-Exempt Bonds 

Location Financing details and related facilities 

City of Bay City, 

Mich. 

In 2004 Wenonah Park Properties, a nonprofit corporation of the city, 

financed a hotel and conference center with about $15 million in taxexempt revenue bonds along with other financing sources. 

Cambridge, Md. In 2005 MEDCO had $173 million in bonds and notes outstanding, 

issued to finance the Chesapeake Bay Conference Center, a hotel 

with meeting and golf facilities. 

City of Denver,

Colo. 

In 2003 the Denver Convention Center Hotel Authority issued $354 

million revenue bonds to finance a hotel near the convention center. 

City of Houston, 

Tex. 

In fiscal year 2001 the city’s Convention and Entertainment Facilities 

Department issued $626 million in bonds to finance a new convention 

center hotel and a parking garage, expand the convention center, and 

refund existing debt. In 2003, the year of opening, the hotel reported 

$315 million in outstanding bonds. 

City of Myrtle 

Beach, S.C. 

In 2001 the Myrtle Beach Convention Center Hotel Corporation, a 

component unit of the city, issued $64 million revenue bonds. 

City of Omaha, 

Nebr. 

In 2002 the city issued $103 million tax-exempt convention center 

hotel revenue bonds. The hotel began operations in 2004. 

City of Overland 

Park, Kans. 

In 2001 the Overland Park Development Corporation, a component 

unit of the city, issued $92 million in revenue bonds to finance the 

construction of a convention center hotel. 

City of Phoenix, 

Ariz. 

In 2005 the Downtown Phoenix Hotel Corporation, a nonprofit 

corporation of the city, issued $320 million in tax-exempt revenue 

bonds and $29 million in taxable revenue bonds to finance a 

downtown hotel near the city’s convention center. 

City of 

Sacramento, 

Calif. 

In 1999 the Sacramento Hotel Corporation, a component unit of the 

city, issued $97 million in revenue bonds to build a hotel to support 

the city’s convention center expansion. 

Village of 

Schaumburg, Ill. 

In 2004 the village issued $239 million in general obligation bonds to 

finance several projects, including a convention center and attached 

hotel. 

County of 

Wayne, Mich. 

In 2001 the county issued $111 million airport hotel revenue bonds to 

finance an airport hotel and related improvements. 

City of 

Vancouver, 

Wash. 

In 2003 the City of Vancouver’s Downtown Redevelopment Authority, 

a component unit of the city, issued $68 million revenue bonds to 

finance a conference center and hotel capital project. 

Source: GAO analysis of financial reports of municipalities and documents from Orrick, Herrington, and Sutcliffe LLP; HVS 

International; Akin Gump Strauss Hauer & Feld LLP; and Piper Jaffray. 

Page 21 GAO-06-1082 Federal Tax Policy
We were unable to determine the number of state-owned gaming support 

facilities. According to government finance experts, it is common for 

states to issue large bond issuances for different capital projects. 

However, data are not available to determine the extent, if any, that these 

bonds have included facilities for public gaming activities and 

infrastructure projects that benefit private gaming enterprises. Facilities 

associated with lotteries are sometimes provided in some government 

buildings and in convenience stores with lottery ticket terminals. We 

found the following information on the prevalence of gaming throughout 

the states. 

State and Local 

Governments Support 

Gaming, but Extent of 

Public Financing Is 

Difficult to Estimate 

According to states’ financial reports and gaming studies all but 2 states—

Hawaii and Utah—have some form of legal gaming. Forty-one states and 

the District of Columbia reported assets and revenues related to lotteries. 

Some municipalities have provided tax-exempt and taxable financing to

build transportation infrastructure in localities that depend on private 

gaming enterprises to generate employment and gaming revenues to 

finance basic government functions.

The prevalence of lotteries is one indicator of state and local governments’ 

support of gaming facilities. Forty-one states and the District of Columbia 

have lottery systems, with annual operating incomes ranging from $2 

million to $2 billion and net assets from lotteries from -$12 million to $290 

million. Similar to other facilities, the number of state-owned gaming 

facilities that have been financed with tax-exempt bonds is difficult to 

estimate because a single bond issue may finance several capital projects, 

including lotteries’ offices and equipment. 

In lieu of or in addition to a state-sponsored lottery, some states allow for 

legalized private gaming, such as casinos. According to the American 

Gaming Association, in 2004 16 states had legal operational casinos and 

some states allowed gambling in the form of pari-mutuel activities, such as

horse or greyhound racing, and gaming machines.

9

 Seven of these states 

have also introduced variations in gambling activities, such as racetrack 

casinos or “racings,” which usually consist of slot machines associated 

with racetracks. Seven states have video lottery terminals (VLT), which 

are similar to slot machines. 

 9

These included stand alone casinos and casinos at racetracks. According to the American 

Gaming Association there are four more states that have legal racetrack casinos that are

not operational. 

Page 22 GAO-06-1082 Federal Tax Policy
State and local governments can issue tax-exempt bonds to finance the 

infrastructure that directly benefits private casinos or gaming facilities. We 

found three examples of tax-exempt financing related to gaming facilities. 

New Jersey’s Casino Reinvestment Development Authority (CRDA) relies 

on tax-exempt borrowings, casino parking fees, and investments to 

finance eligible projects. In 2004 CRDA issued $93 million in tax-exempt 

hotel room fee revenue bonds to finance Atlantic City casino expansion 

projects and provide funds to the New Jersey Sports and Exhibition 

Authority for horse racing purse enhancements. 

Another example of tax-exempt financing that benefits private casinos is 

the monorail in Las Vegas. The monorail was financed with a combination 

of tax-exempt and equity funds and provides seven stations - MGM Grand,

Bally’s/Paris, Flamingo, Harrah’s/Imperial Palace, Las Vegas Convention 

Center, Las Vegas Hilton, and the Sahara.10

In 2005, California’s Del Mar Race Track Authority sold about $50 million 

in tax-exempt bonds to refund existing debt and improve facilities at the 

horseracing track. In addition to concessions and racetrack revenues, the 

bonds will also be backed by satellite-wagering receipts. 

As agreed with your office, unless you publicly release its contents earlier, 

we plan no further distribution of this report until 30 days from its date. At 

that time, we will send copies to interested congressional committees, the 

Secretary of the Treasury, the Commissioner of the Internal Revenue

Service, and other interested parties. We will also make copies available to 

others upon request. The report will also be available at no charge on the 

GAO Web site at http://www.gao.gov. 

 10GAO, Highways and Transit: Private Sector Sponsorship of and Investment in Major

Projects Has Been Limited, GAO-04-419 (Washington, D.C.: Mar. 25, 2004) describes

financing of the Las Vegas monorail project.

Page 23 GAO-06-1082 Federal Tax Policy
If you or your staff have any questions about this report, please contact me 

at (202) 512-9110 or brostekm@gao.gov. Contact points for our Office of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix II. 

Sincerely yours, 

Michael Brostek 

Director, Tax Issues 

Strategic Issues 

Page 24 GAO-06-1082 Federal Tax Policy
Appendix I: 

Methodology 

Objective, Scope, and 

Page 25 GAO-06-1082

Appendix I: Objective, Scope, and 

Methodology 

The objective of this report was to provide information on state and local

governments’ financing, construction, and operation of the following eight

types of facilities: 

1. Rental housing 

2. Road infrastructure 

3. Parking garages and parking lots 

4. Community recreational facilities 

5. Golf courses 

6. Conference centers 

7. Hotel and tourist accommodations 

8. State-owned gaming support facilities 

We performed an extensive review of possible data sources and did not 

find a comprehensive, reliable source of data for the above facilities. We 

provide instead limited data on the number and amount of financings of 

broader categories of facilities, describe tax-exempt financings of selected 

state and local governments, and provide other available indicators of 

public support. The following provides detailed descriptions of the data

sources, limitations of the data sources we used, and the links between the 

information and the eight facilities in the original request. 

We used a recognized source for bond information, Thomson Financial

data contained in the Bond Buyer Yearbooks to provide details on the 

bond issuances for single- and multifamily housing according to the 

category provided in the yearbooks as a related category to rental housing. 

This data source provides 2000-2004 aggregate values and the number of 

bonds issued. However, there are a number of limitations to these data.

The category for multi-family housing could contain more than just rental 

housing, although bond experts have suggested that is unlikely. Because 

municipalities can issue large combined bond issuances some bond issues 

related to housing or rental housing could be contained in other 

categories, thus the information provided relies on the categorization of 

bond issues in the categories listed. The breakdown of bond issuances did 

not allow us to determine the amount of multifamily housing issuances 

Rental Housing 

Federal Tax Policy
Appendix I: Objective, Scope, and 

Methodology 

that were tax-exempt, only the amount of total housing issuances that are 

tax-exempt for the years covered. 

This data source only provides information on a particular method of 

housing finance and therefore does not provide information on the total 

government rental housing expenditures; the number of rental housing 

units constructed, financed, or owned by state and local governments; or 

other forms of government financing for rental housing. However, the 

magnitude of debt financing on multifamily housing is suggestive of 

government provision of rental housing. Furthermore, we do not address 

the ultimate purpose of the housing projects financed by state and local

governments, although bond experts stated these were almost always 

designed to provide affordable housing to lower-income individuals. 

As with the rental housing category we used Thomson Financial data

contained in the Bond Buyer Yearbooks to provide details on the bond 

issuances for a variety of transportation categories, including toll roads 

and highways, bridges, and tunnels, according to the category provided in

the yearbooks as a related category to road infrastructure. This data 

source provides 2000-2004 aggregate values and the number of bonds 

issued. However, there are a number of limitations to these data. Because

municipalities can issue large combined bond issuances some bond issues 

related to road infrastructure, such as capital, could be contained in other 

categories—for example, economic development—and thus the 

information provided relies on the categorization of bond issues. The 

breakdown of bond issuances did not allow us to determine the amount of

toll road and highway issuances that were tax-exempt, only the amount of

total transportation issuances that are tax-exempt for the years covered.

Road Infrastructure 

This data source only provides information on a particular method of 

transportation finance and therefore does not provide information on total 

government transportation expenditures; the number of transportation 

facilities constructed, financed, or owned by state and local governments; 

or other forms of government financing for transportation. Particularly 

with transportation finance, state and local governments rely on other 

financing methods, including general funds and tolls. Furthermore, we do 

not address the ultimate purpose of the transportation projects financed 

by state and local governments or where they are constructed.

Page 26 GAO-06-1082 Federal Tax Policy
Appendix I: Objective, Scope, and 

Methodology 

We used three main sources to provide information addressing state and

local governments’ construction, operation, and financing of parking 

garages and parking lots. We use Thomson Financial data on bond 

issuances, the U.S. Census Bureau’s (Census) 2002 U.S. Census of 

Governments user charges, and selected comprehensive annual financial 

reports to provide some case studies.

Parking Garages and 

Parking Lots 

We used Thomson Financial data, contained in the Bond Buyer Yearbooks, 

to provide details on the bond issuances for parking facilities according to

the category provided in the yearbooks as a related category to parking 

garages and lots. This data source provides 2000-2004 aggregate values and 

the number of bonds issued. However, there are a number of limitations to 

these data. Because municipalities can issue large combined bond 

issuances some bond issues related to parking garages and lots could be 

contained in other categories, such as economic development, thus the 

information provided relies on the categorization of bond issues. The 

breakdown of bond issuances did not allow us to determine the amount of

parking facilities issuances that were tax-exempt, only the amount of total

transportation issuances that are tax-exempt for the years covered. 

This data source only provides information on a particular method of 

parking facilities financing and therefore does not provide information on 

total government parking expenditures; the number of parking facilities 

constructed, financed, or owned by state and local governments; or other 

forms of government financing for parking. Furthermore, we do not 

address the ultimate purpose or location of the parking facilities financed 

by bond issuances. 

We used the 2002 Census of Governments to provide user charges for 

parking facilities for the top 171 metropolitan statistical areas (MSA). 

There are some limitations to the use of these charges. User charges 

received by municipalities for parking do not provide any information on 

the number of existing facilities or the number of parking facilities 

constructed or financed by state and local governments. Since the data

rely on user charges this source may not be representative of total parking 

provide nationally, as it would not include free public parking. We also do 

not provide total public expenditures on parking facilities. 

There are also some limitations in the definition of the parking facilities 

category. The Census category defines parking as the “provision, 

construction, maintenance, and operation of local government public 

parking facilities operated on a commercial basis.” These facilities include 

parking meters, on-street parking, and parking lots, but exclude parking 

Page 27 GAO-06-1082 Federal Tax Policy
Appendix I: Objective, Scope, and 

Methodology 

facilities for the exclusive use of government employees and parking areas 

connected to specific types of facilities, such as those for a public sports 

stadium, which are reported with the function of the facility involved, such 

as parks and recreation. The user charges, therefore, represent revenue

from on-street and off-street parking meters and charges and rentals from 

locally owned parking lots or public garages. 

Lastly, we used the selected state and local government financial reports 

of cities and counties located in large MSAs that contained detailed 

information to provide specific examples of parking facilities that have 

been financed by state or local governments. As these are examples they 

cannot be generalized to state and local financing, construction, and 

operation of parking facilities. 

We used the 2002 Census of Governments to provide user charges for 

parks and recreation facilities for the largest 171 MSAs. Community 

recreation facilities easily overlap into a numerous other categories, and 

we did not identify any data that specifically focused on this category. 

Community 

Recreational Facilities 

There are some limitations with the use of user charges. User charges 

received by municipalities for parks and recreation do not provide any 

information on the number of existing facilities or the number of parks 

and recreational facilities constructed or financed by state and local 

governments. Since the data rely on user charges this source may not be 

representative of the total park and recreational facilities provided 

nationally, as it would not include free facilities. We also do not provide 

total public expenditures on parking facilities. 

There are also some limitations in the definition of the park and 

recreational facilities category. The census category defines park and 

recreational facilities as the “provision and support of recreational and 

cultural-scientific facilities maintained for the benefit of residents and 

visitors.” This category includes a variety of facilities, such as golf courses, 

public beaches, swimming pools, parks, camping areas, recreational piers 

and marinas, but excludes any recreational facilities operated as part of a 

school system and marinas for commerce. It would also include support of 

private facilities; galleries, museums, zoos, and botanical gardens; 

auditoriums, stadiums, recreational centers, convention centers, and 

exhibition halls; community music and drama facilities; and celebrations, 

including those in public support of cultural activities. User charges 

represent revenue of facilities operated by a government; auxiliary 

facilities in public recreation areas (refreshment stands, gift shops, etc.); 

Page 28 GAO-06-1082 Federal Tax Policy
Appendix I: Objective, Scope, and 

Methodology 

lease or use fees from stadiums, auditoriums, and community and 

convention centers; and rentals from concessions at such facilities. 

We used data from the National Golf Foundation to provide details on the 

number and form of municipal golf courses in the United States. As 

verification, we interviewed those who maintain the database about their 

methodology for building and maintaining the database. A foundation 

representative considered the database to be largely comprehensive, as 

the foundation has measures in place to ensure its list includes all golf 

courses, and did not express any concerns regarding the reliability of the 

data. 

This data source did limit the type of information we could provide. Data 

were not available on the public financing of golf courses, via tax-exempt 

bonds or other methods, or on any aid provided by state and local 

governments to privately owned public golf courses. While the database 

may be largely comprehensive, at any one time it may not include every 

single golf course in the United States. Since municipalities can engage in 

a variety of joint public and private golf courses establishments, the data 

may not be representative of the total number of golf courses constructed 

or originally financed by state and local governments. 

We also used data on high-end golf courses provided by Akin Gump 

Strauss Hauer & Feld LLP to provide estimates of the number of golf 

courses financed with tax-exempt bonds. As verification, we interviewed 

the official providing the data about the methodology for determining the 

tax-exempt financing and golf course listings. 

We used two sources of data to provide information on the financing and 

ownership of convention centers: bond issuance data and data on the 

number of government-owned convention centers. 

Golf Courses 

Conference Centers 

We used Thomson Financial data contained in the Bond Buyer Yearbooks 

to provide details on the bond issuances for a variety of public facility 

categories, including convention centers; parks, zoos, and beaches; and 

other recreation, according to the categories provided in the yearbooks as 

related to conference centers. This data source provides 2000-2004

aggregate values and the number of bonds issued. However, there are a 

number of limitations to these data. Because municipalities can issue large 

combined bond issuances some bond issues related to convention centers, 

could be contained in other categories, such as economic development, 

Page 29 GAO-06-1082 Federal Tax Policy
Appendix I: Objective, Scope, and 

Methodology 

thus the information provided relies on the categorization of bond issues 

into the categories. The breakdown of bond issuances did not allow us to 

determine the amount of convention center issuances that were taxexempt, only the amount of total transportation issuances that are taxexempt for the years covered. 

This data source only provides information on a particular method of 

public facilities financing and therefore does not provide information on 

total government public facilities, and thus convention center, 

expenditures; the number of public facilities constructed, financed, or 

owned by state and local governments; or other forms of government 

financing for public facilities. Furthermore, we do not address the ultimate 

purpose of the public facilities projects financed by state and local 

governments or where they are constructed. However, bond experts have 

stated that state and local governments finance convention centers to 

attract outside revenue and stimulate economic development through 

tourism. 

We also relied on a list of government-owned convention centers provided 

by Akin Gump Strauss Hauer & Feld LLP. We use this list as an estimation 

of the number of government owned convention or civic centers. As 

verification, we interviewed the responsible contact about the 

methodology and obtained financing data on selected observations using 

comprehensive annual financial reports (CAFR). 

We used four separate data sources to provide a combined listing of the 

number of hotels financed by tax-exempt bonds that have been identified

by experts in the field of government finance. The individual lists came 

from Orrick, Herrington & Sutcliffe LLP; HVS International; Piper Jaffray; 

and Akin Gump Strauss Hauer & Feld LLP. Each of these data sources 

provided a listing of hotels financed with tax-exempt bonds along with 

estimates of the amount of financing. Because these lists were produced at

different times and multiple bonds can be issued for single projects, the 

estimates of facilities from these lists may not represent all facilities 

financed with tax-exempt bonds or include all the bond issuances prior or 

since the date the data source. As verification, we conducted interviews to 

assess the methodologies for determining the lists and provide a list of 

hotels and their financing structure, which we determined from looking at

selected government financial reports. The combined estimate from the 

lists may also not represent every hotel that has been financed in part or

whole by state and local governments, but rather provide the number of 

identified hotels financed with tax-exempt bonds. 

Hotels and Tourist 

Accommodations 

Page 30 GAO-06-1082 Federal Tax Policy
Appendix I: Objective, Scope, and 

Methodology 

We used three sources of data to provide limited information on state and

local governments’ support of gaming facilities: state lottery data, survey 

data on private casino gaming, and specific examples of government aid in 

connection with private gaming. 

State-owned Gaming 

Support Facilities 

We used financial data on lotteries from state CAFRs to provide the 

number of states with lotteries and the capital assets for those lotteries. 

We use the level of capital assets for state lotteries as an indication of the 

financing of state-owned gaming facilities. However, there are a number of 

limitations to these data. The asset data do not provide information on 

other state-owned gaming facilities. Because government facilities may 

have multiple uses the asset figures may not represent the actual portion

of assets devoted to lottery use. These data may also not include all forms 

of state-owned gaming facility assets, such as state gaming terminals. 

We used information from the American Gaming Association’s 2005 

Survey of the States to provide contextual information on the number of 

states with legalized gaming. As verification we reviewed data from the 

source listed in the survey for selected states. The survey data also provide 

the number of states with publicly run video lottery terminals (VLT) at 

racetrack casinos. This data source does not provide any information on 

state and local expenditures related to either the public VLTs or private 

gaming facilities or the number of state-owned gaming support facilities. 

We used gaming articles identified through the literature searches on the 

Internet and in finance and bond journals and testimony from bond 

finance experts including officials from the Government Finance Officers 

Association, and the Bond Market Association, to elaborate on examples 

of states’ financing of projects directly related to or aiding private gaming.

As these data provide examples they cannot be generalized to total state 

and local aid to private gaming. 

We conducted our work from February 2006 through August 2006 in 

accordance with generally accepted government auditing standards. 

Page 31 GAO-06-1082 Federal Tax Policy
Appendix II: 

A

GAO Contact and Staff 

cknowledgments 

Page 32 GAO-06-1082

Appendix II: GAO Contact and Staff 

Acknowledgments 

GAO Contact Michael Brostek (202) 512-9110 or brostekm@gao.gov 

In addition to the contact named above, Jose Oyola, Assistant Director; 

Robert Dinkelmeyer; Jennifer Gravelle; Cheryl Peterson; and Walter Vance 

made key contributions to this report. 

Federal Tax Policy

Acknowledgements 

(450468) 
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