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April 8, 2013

RE: Washington Watch Update on Recent and Pending Action

Dear Mayor:

With Congress returning to Washington from the Passover/Easter Recess, here is a report on some key municipal issues.

Senate Supports Marketplace Fairness

Just before departing Washington for the two week recess, the Senate passed an amendment to the FY2014 Budget Resolution by a vote of 75 – 24 that puts the Senate on record as supporting the Marketplace Fairness Act. Although the vote was only a test and does not have the force of law since the Budget Resolution is a non-binding document, the amendment is a good method to show that the Senate has 60+ votes needed to pass the actual legislation later this year.

Senator Menendez voted in favor of the amendment; while Senator Lautenberg did not vote. Be sure to thank Senator Menendez and reach out to Senator Lautenberg, asking for his future support.

While the Internet creates exciting new marketplaces, it has also put traditional retail outlets at an unfair disadvantage because of outdated and inequitable tax and regulatory environments. The Supreme Court's decision in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), left state and local governments unable to adequately enforce their existing sales tax laws on sales by out-of-state catalog and online sellers. The Court, however, explicitly stated that Congress had the constitutional authority to enact legislation overruling its decision. The Marketplace Fairness Act would overrule the Court’s decision and enable local and state governments to collect taxes already owed on Internet and mail order sales amounting to $23 billion annually.

House Workforce Bill Bad for Municipalities

A bill, that would seriously undermine several key aspects of the Workforce Investment Act (WIA), passed the House on March 15, over strong objections from NLC, the U.S. Conference of Mayors, the National Association of Counties, the National Association of Workforce Boards, the National Skills Coalition and other stakeholder organizations. If it becomes law, H.R. 803, the Supporting Knowledge and Investing in Lifelong Skills or SKILLS Act, would:

  • grant governors and state workforce boards total authority over workforce development funds;
  • allow governors and state workforce boards to eliminate local workforce development areas without consulting local elected officials;
  • establish new workforce development areas or single state workforce development areas without consulting local elected officials;
  • eliminate any role for local elected officials and business leaders (while requiring that elected officials are fiscally liable for funds spent in their local areas);
  • eliminate or allow governors to consolidate many targeted programs, without providing the critical assistance needed by vulnerable populations such as migrant workers, veterans, low income adults and youth, adults with literacy and language needs, people with disabilities, ex-offenders, and others with significant barriers to employment;
  • eliminate all youth program funding; and
  • permit governors to direct all SKILLS Act funds to any activities they wish so long as they can nominally be described as workforce related.

In addition, the bill would freeze funding for the next seven years, making it impossible for the federal government to adjust funding based on changing economic circumstances.

In anticipation of House action, NLC President Marie Lopez Rogers, Mayor, Avondale, AZ, sent a letter to House leadership that criticized the bill, which Rep. John Tierney (D-MA) read from the floor and other referenced during the floor debate. "We cannot . . . support reauthorization [of the Workforce Investment Act] that fails to secure the delicate governing balance currently crafted in WIA,” President Rogers said. “Furthermore, we cannot support efforts which may reduce access to education and training for our nation’s most vulnerable workers by eliminating designated funding for disconnected youth, and permitting the use of critical WIA funding for purposes other than workforce development activities.”

NLC will continue to oppose these changes to the program as the legislation heads to the Senate.

Water Resources Bill Advances in Senate

Prior to the Recess, the Senate Environment and Public Works (EPW) Committee unanimously passed S. 601, the Water Resources Development Act (WRDA), which would authorize 18 new U.S. Army Corps of Engineers (Corps) flood protection, navigation and ecosystem restoration projects while instituting a number of reforms to the process. The legislation could reach the Senate floor for a vote as early as next month.

Sponsored by Senators Barbara Boxer (D-CA), chair and David Vitter (R-LA), ranking member, the legislation contains two pilot programs that would expand the role of local governments in WRDA projects. The first is a provision that would allow local and state governments to take over as project manager for Corps projects.

Second, the legislation includes a five year pilot program to provide additional water infrastructure financing opportunities for local governments. Known as the Water Infrastructure Finance and Innovation Act (WIFIA, modeled after the successful TIFIA program), the bill authorizes $50 million annually to both the U.S. Environmental Protection Agency (EPA) and Corps for flood control, water supply and wastewater projects. The program would allow local governments to receive loans and loan guarantees at U.S. Treasury rates for projects such as pipe replacement or rehabilitation, new or upgraded treatment plants, CSO and wastewater projects, reuse, desalination, capital projects to improve energy efficiency, and new water supply projects over $20 million.

In the House, the chairman and ranking members of both the Transportation and Infrastructure Committee and the Subcommittee on Water Resources and Environment have begun work on similar legislation. Committee chairman Bill Shuster (R-PA) has stated that passing a WRDA bill is the committee’s first priority.

Court Deals a Blow to Residential PACE Programs

In March, the U.S. Court of Appeals (Court) for the Ninth Circuit overturned a District Court ruling and dismissed a case against the Federal Housing Finance Agency (FHFA), which was undergoing a court-ordered rulemaking procedure on Enterprise Underwriting Standards for Property Assessed Clean Energy (PACE) programs.

In the case, the Court held that FHFA acted within its role as “conservator” of Fannie Mae and Freddie Mac (as opposed to a role of “regulator”) when it issued a decision to cease purchasing mortgages on PACE properties, and that therefore, the Court did not have jurisdiction to hear the case. Under the Housing and Economic Recovery Act of 2008, any action the Agency takes in its role as a “conservator” cannot be challenged in court. The lower court had ruled that FHFA was acting as a “regulator” and could therefore be required to undergo a rulemaking process.

The FHFA continues to object to local governments holding the first lien on PACE homes to ensure repayment of public funds if the home goes into foreclosure, calling this a significant risk to the mortgage financier.

NLC continues to urge Congress to support local authority to implement residential PACE programs and contends that participation in the PACE program does not affect the safety and soundness of mortgages.

If you have any questions, contact Jon Moran at 609-695-3481, ext. 121 or

Very truly yours,

Janice S. Mironov                                                              William G. Dressel, Jr.
President, NJ League of Municipalities                           Executive Director
Mayor, East Windsor Township




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