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March 4, 2014

Re:  Update on Developments on Municipal Issues in Our Nation’s Capital

I. House Considers Flood Insurance Bill
II. President Announces $600 Million in TIGER Grants
III. House Judiciary Committee to Hold Marketplace Fairness Hearing
IV. House Ways and Means Chair Creatively Caps Municipal Bond Exemption in Draft Tax Reform Plan
V. NLC Urges Organizations to Sign Letter Supporting Greater Federal Investment in Housing and Transportation

Dear Mayor:

Here is an update on some significant policy developments on the Federal level.  We appreciate the work of the staff at the National League of Cities (NLC) for keeping us posted and for representing New Jersey municipalities in Washington.

I. House Considers Flood Insurance Bill to delay the Biggert-Waters Act

The U.S. House of Representatives is expected to consider a modified version of the Homeowner Flood Insurance Affordability Act of 2014 (H.R. 3370) this week. We support this bill, which will help ensure that flood insurance rate increases do not adversely impact local communities, while promoting the solvency of the National Flood Insurance Program (NFIP). The amended bill will be considered under a procedure that will require a 2/3 majority vote to pass and does not allow for any amendments. Please call your Congressman and urge them to vote YES on H.R. 3370.

H.R. 3370 contains measures to stop, slow or reverse skyrocketing flood insurance premium rate increases for some properties called for by the Biggert-Waters Act of 2012 (BW-12). BW-12 aimed at assuring the solvency of the deeply indebted National Flood Insurance Program (NFIP), and requires FEMA to adjust flood insurance premiums to reflect true flood risk and phase out subsidies for properties built before the community adopted its first Flood Insurance Rate Map (FIRM).

Assuming the House bill does pass, it will need to be reconciled through a conference committee with S. 1926, a different version of the bill by the same name that the Senate passed earlier this year. The Senate measure calls for a four year delay in the rate increases pending the completion of the affordability study.  For more please see our February 26 Dear Mayor Letter.

II. President Announces $600 Million in TIGER Grants

Last week, President Obama announced a new round of federal Transportation Investments Generating Economic Recovery (TIGER) grants totaling $600 million, as part of a broader four-year transportation program. These grants allow municipalities across the nation to leverage federal government seed money and pair it with local resources to transform their communities. Initially created as part of the American Recovery and Reinvestment Act of 2009 (ARRA), the previous five rounds of the program have funded 270 projects across all 50 states.

We welcome this program for its continued commitment to modernize and expand our nation's infrastructure that is so critical to the economic health of our nation. As the main owners and operators of roads, bridges and transit systems around the nation, local officials welcome the Administration's recognition of the need to prioritize city voices in future decision-making as we rebuild our national transportation network.

Applicants can begin applying for the TIGER grants on April 3 and must submit final applications by April 28, 2014. Up to $35 million of the program may be awarded for planning grants.  (Read more about the current round of funding and upcoming informational webinars on the Department of Transportation's website )

III. House Judiciary Committee to Hold Marketplace Fairness Hearing

The House Judiciary Committee has scheduled a long-awaited hearing on March 4 to consider the issue of marketplace fairness, which has long been a top legislative priority for the League and for local and state governments all around the Nation. The hearing, titled "Exploring Alternative Solutions on the Internet Sales Tax Issue," is a response to previous calls by the committee chairman for "fresh approaches" to marketplace fairness legislation.

We will continue to support the Marketplace Fairness Act as passed by the Senate and introduced in the House of Representatives. It is needed to level the playing field between main street retailers, which collect local and state taxes on sales, and the giants of internet commerce, which often fail to do so.  

IV. House Ways and Means Chair Creatively Caps Municipal Bond Exemption in Draft Tax Reform Plan

House Ways and Means Chairman Dave Camp unveiled his long anticipated draft plan to reform the U.S. tax code. The plan would simplify the tax code by collapsing the seven existing income tax brackets for individuals to two and lowering top individual and corporate income tax rates. To remain revenue neutral despite lowering tax rates, the plan would shrink or eliminate a host of tax expenditures and impose a surtax on wealthy individuals and certain large businesses. The League of Municipalities has joined with the National League of Cities to oppose changes to certain tax expenditures important to local citizens. These include proposals to eliminate: the interest earnings exemption on municipal bonds; deductibility for state and local taxes; the home mortgage interest deduction; and the earned-income tax credit.

Although the plan would not specifically cap or eliminate the tax-exemption for interest earned on municipal bonds, it would apply an additional 10 percent surtax on income for high earning individuals making over $450,000 a year, including income that is otherwise tax exempt, such as municipal bonds. The plan would also eliminate private activity bonds, which are essential for financing the construction of schools, hospitals, and affordable housing.

In addition to bonds, to remain revenue neutral, the draft plan calls for rolling back taxpayer protections against double-taxation by eliminating the federal deduction for state and local government tax payments. Eliminating the deduction pays for almost 20 percent of the rate reductions in the draft plan by shifting local dollars to the federal level. Changes to the mortgage interest deduction and the earned-income tax credit would also shift local dollars back to the federal government.

As far as the outlook for the plan, it's likely too ambitious to be considered this Congressional election year. However, the plan's 10 percent surtax on tax-exempt income for high earners is another sign that the tax exemption for municipal bonds remains at risk.

  • NLC Urges Organizations to Sign Letter Supporting Greater Federal Investment in Housing and Transportation

V. NLC Urges Organizations to Sign Letter Supporting Greater Federal Investment in Housing and Transportation

For the third year in a row, NLC is leading a coalition of the nation's largest housing and transportation advocates, and other local government groups, to spearhead a letter to Congress urging increased funding for the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Transportation (DOT) in the federal budget.

The letter urges Congressional Appropriators to "increase the 302(b) allocation to the Subcommittee on Transportation, Housing and Urban Development, and Related Agencies (THUD) to the highest possible level in fiscal year (FY) 2014." The language of the request reflects the federal budgeting process of allocating all federal funding through 12 categories which are represented by the 12 Appropriations Subcommittees. Although each subcommittee funds programs important to municipalities, a low allocation to the THUD Subcommittee typically results in a zero-sum game for local governments as housing and transportation interest groups compete for funding for their specific priorities. A higher allocation ensures sufficient funding for both transportation and housing priorities, including CDBG and public transit grants.

As the letter points out, "since FY 2010, the combination of budget cuts and sequestration have reduced the THUD allocation by over 25%. The devastating and wasteful impact of these cuts appear in countless metrics, from $101 billion in wasted fuel and lost productivity resulting from traffic congestion on 42% of America's major highways, to stalled transportation projects that have left 45% of American households without access to public transit; from 70,000 low-income families losing rental assistance opportunities since 2012, to risking recent progress in reducing chronic homelessness by reducing overall support for the production and preservation of affordable housing."

Last year, a similar letter was signed by 188 national groups and 2,234 state and local groups, including many cities and towns. Many credit the letter for helping the Senate hold the line against even steeper cuts often sought by the House.

Please consider adding your municipality’s support to this effort at Add your organization to the letter » and copy the League.

We will keep you posted on any further developments on these, or other municipal issues. If you have any questions, please contact Jon Moran at 609-695-3481, ext. 121 or jmoran@njslom.com

Very truly yours,

William G. Dressel, Jr.
Executive Director

 

 

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