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Capital finance in institutions of higher education is analyzed in light of changes in the Tax Reform Act of 1986 affecting the ability of institutions to finance capital projects and the likelihood of changes in the government's view of tax-exempt financing. The options for colleges and universities are analyzed in the following areas: (1) conventional alternatives (proactive consideration of the term and security structure of debt, leasing as an alternative to traditional bond financing, understanding the taxable municipal market, credit support, private placements, credit market developments, technique developments, and following professional issues to anticipate problems and seize opportunities); (2) innovative alternatives (address your institution's credit standing; review new sources of state assistance; consider emerging corporate finance concepts; and selectively consider foreign-dominated debt or overseas issuances); and (3) ambitious alternatives (corporate spinoffs and forming systems). Developing an action plan is also discussed. (KM)