A state bonding plan would be the easiest and cheapest way to pay for the removal of asbestos from Utah's schools, a financial adviser told lawmakers this week.

But state officials are unsure what such financing would do to the state's bonding limit and to tax rates. About $50 million is needed to remove asbestos from the state's schools.Larry Denham, president of Smith Capital Markets, told members of the capital facilities bonding subcommittee the state should either issue general obligation or revenue bonds that school districts could sell. Because they are backed by the state, the bonds would be issued with an interest rate of about 6 percent.

Alternatively, school districts could form a non-profit building authority to issue revenue bonds. Schools also have access to a state bonding pool, but would have to pay a high interest rate if they use that money.

School districts have until Oct. 12 to submit a plan to the federal government detailing which buildings are tainted with the toxic substance and how it will be removed. If the deadline is not met, school districts face fines of $5,000 a day.

In addition to schools, the state must remove asbestos from other buildings it owns. Work on the six-story State Office Building behind the capitol will begin in two weeks, officials said.

Scott Robertson, vice president of Drexel Burnham Lambert, said schools should borrow money from the state to avoid having to get voter approval. School districts can't issue debt without an vote of the public, he said.

Robertson recommends the state allow school districts to raise tax rates, provided the money is used only for asbestos removal and the rate is lowered again when the removal is complete.

Educators have asked that a portion of the state's $110 million surplus be used for the cleanup, but no money was proposed in Gov. Norm Bangerter's plan for spending the money.

Members of the subcommittee made few comments on the proposals, except to say financing hinges on whether voters pass three tax-limitation initiatives in November.

The subcommittee also heard an update on Salt Lake County's plans to build a new basketball arena downtown. Although no decision were made, county officials have made it clear they do not want property taxes raised to fund construction of the facility.