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January 31, 2011 

RE: Federal Update for January, 2011

I. NLC Sets Federal Legislative PrioritiesII. NLC Calls for Full Funding for CDBG in FY 2012 Budget
III. Transportation Authorization Remains Front and Center in New   Congress
IV. NLC Urges SEC to Reject Floating Net Asset Value for Money Market Funds           
V. Additional Resources Address Lingering Street Sign Concerns           
VI. President Focuses on the Future in State of the Union Address           
VII. Message to Congress: Leave Public Pensions Alone           
VIII. Nationwide Public Safety Broadband Network Bill Reintroduced           
IX. NLC Calls on Federal Agencies to Implement Stormwater Fee Law
X. Proposed SEC Financial Advisor Regulations    

Dear Mayor:

The National League of Cities is the oldest and largest national organization representing municipal governments throughout the United States. Newly elected municipal officials should know that on all Federal issues—legislative, regulatory and judicial—the New Jersey League of Municipalities works closely with the National League of Cities (NLC). Its mission is to strengthen and promote municipalities as centers of opportunity, leadership and governance.

Based on information provided by the Federal Relations staff of the National League of Cities and recent Press reports, here is an update on some crucial developments in our nation’s Capital.

NLC Sets Federal Legislative Priorities
Earlier this month, NLC President James E. Mitchell, Jr., council member, Charlotte, N.C., led a delegation of NLC officers and board members to the White House to meet with senior Obama administration officials and share top priorities for municipalities.

The White House meetings took place as part of NLC's annual leadership planning meeting held each January. At the meeting, held in Washington, D.C., this year, NLC officers and board members heard from experts on the state of the economy, the potential impacts of the growing federal and state deficits on cities, and the prospects for legislative action in the new Congress.

As a result of their discussions, the NLC board of directors set the 2011 legislative priorities for the organization, "NLC's Agenda for Economic Growth," which calls on Congress and the administration to: authorize a new federal surface transportation program; continue to take action to create jobs; protect level funding ($4 billion) for the Community Development Block Grant Program in the FY 2012 budget; and enact comprehensive immigration reform.

NLC Calls for Full Funding for CDBG in FY 2012 Budget
Serious discussions are taking place inside the Obama Administration regarding the proposed federal budget for fiscal year 2012. Although not confirmed, Washington sources have indicated that the Community Development Block Grant (CDBG) is facing a possible cut of up to 25 percent (which equates to $1 billion) in the President's Budget. Final decisions on the President's budget are likely to be made soon with the unveiling of the budget set for mid-February.
See our January 6 letter on this at for more details.

Transportation Authorization Remains Front and Center in New Congress
As the 112th Congress gets underway, transportation leaders in the House and Senate are taking steps to restart the authorization debate. The current federal program expired in September 2009 and has been kept alive via a series of short-term extensions as Congress tries to reach consensus on a new program.

In the House, Representative John Mica, Chair of the Transportation and Infrastructure Committee, has said he hopes to move a transportation authorization bill sometime this year. Earlier this month, Chairman Mica announced his intention to hold field hearings outside of Washington, D.C. to learn more about local transportation concerns. We will keep you informed of such events when more details become available.

In the Senate, Environment and Public Works Committee Chair Sen. Barbara Boxer announced last week that she is working to find areas of agreement with both Sen. James Inhofe, the ranking Republican on the Committee, and Representative Mica on a new transportation bill. Transportation authorization is also on the Administration's radar, as the U.S. Department of Transportation has been working with the White House to flesh out priorities for a new bill, as well.
The authorization of a new transportation program is a top priority for 2011 for NLC. In support of a new program, NLC has called for a comprehensive federal surface transportation program that requires collaboration between states and local governments, supports multi-modalism and local decision making, invests in outcome oriented solutions, and involves a strong federal role in transportation. 

NLC Urges SEC to Reject Floating Net Asset Value for Money Market Funds
NLC has joined eleven other groups representing municipal issuers and borrowers in filing comments opposing further consideration by the Securities and Exchange Commission (SEC) of a recommendation to adopt a floating Net Asset Value (NAV) for money market funds. The President's Working Group on Financial Markets recommended the floating NAV in a report it issued in October 2010.

Currently, the SEC's Rule 2a-7 on money market funds requires funds to maintain a stable NAV of $1 per share. A few funds, however, were unable to do so in September 2008, when the Lehman Brothers bonds they owned defaulted following that firm's collapse, and fund investors rushed to sell their shares. The report opines that a floating NAV would "help remove the perception" that mutual funds are risk-free and induce investor incentives to flee distressed funds.
NLC urged the SEC not to consider the idea, arguing that a fixed NAV is the "hallmark" of money market funds. A floating NAV would harm local governments that both invest in such funds for cash-management purposes and issue short-term debt purchased by such funds. Money market funds are the largest investor in short-term municipal bonds, holding 65 percent of the $500 billion of outstanding debt. If the SEC were to adopt a floating NAV, municipalities would lose a safe option for their own short-term investments as required by internal investment policies, as well as a source of capital funds for infrastructure and other capital projects.  

Additional Resources Address Lingering Street Sign Concerns
NLC continues to field questions about changes to the Federal Highway Administration (FHWA) rules on street signs that have received a lot of recent media attention and sparked concern over additional costs to cities. The changes to the FHWA's Manual on Uniform Traffic Control Devices (MUTCD), which compiles national standards for traffic control devices, sparked a series of media reports over updates to street sign lettering and size that went into effect last fall and that impact all cities with street signs. In early December, U.S. Department of Transportation Secretary Ray LaHood reopened the comment period for additional public input and comments were due on January 14. We'll update you if the FHWA recommends further changes based on comments they receive. Additional resources on the specific changes required under the current rule are available from the American Traffic Safety Services Association (ATSSA) at their website: 

President Focuses on the Future in State of the Union Address
Just last week, the President delivered his State of the Union address. In the speech, the President spoke of the need to maintain America's leadership in a rapidly changing world so our economy would be competitive — growing and working for all Americans. To do so, he put forward a plan calling for new investments in innovation; redefinition of the role of the federal government in education; new efforts to repair and rebuild America's infrastructure; government reform; and efforts to reduce the federal deficit.

In his response to the speech, NLC President James Mitchell, council member Charlotte, N.C., cautioned that while municipalities share the President's vision for a winning future, federal budget cuts and freezes must be made responsibly and should not come at the expense of proven federal investments in communities such as the Community Development Block Grant Program and federal transportation programs that have helped keep our communities competitive.

Message to Congress: Leave Public Pensions Alone
Last week, in a briefing sponsored by Senate Health, Education, Labor, and Pensions Committee Chair Tom Harkin and Ranking Member Mike Enzi and attended by over 80 staff from the Senate HELP, Finance, and Special Committee on Aging Committees, NLC President James Mitchell, along with representatives from the Maryland and Nevada state governments urged the Senate not to pass new laws that would undermine the nation's state and local public pensions.
In his remarks, Mitchell told the group that federal interference with state and local pensions would create problems where none exist; he noted that most state and local pension plans throughout the United States are adequately funded and that overall pension costs-which are less than one percent of the state's budget in Mitchell's home state of North Carolina and only 3.8 percent nationally-are not contributing to state and local fiscal problems.

Nationwide Public Safety Broadband Network Bill Reintroduced
On Tuesday, Senator Jay Rockefeller (D-WV) introduced the Public Safety Spectrum and Wireless Innovation Act (S. 28), which NLC is supporting. The legislation, first introduced last year, calls for the establishment of a framework for the deployment of a nationwide, interoperable wireless broadband network for public safety and reallocate 10 megahertz of spectrum, also known as the "D-Block," to public safety.

The White House also signaled its support this week for the reallocation of the D-Block to public safety as the centerpiece of a larger plan to create a nationwide interoperable public safety communications network and expand broadband access nationwide. 

NLC Calls on Federal Agencies to Implement Stormwater Fee Law
As part of a new law requiring federal agencies to pay local pollution fees associated with stormwater runoff, the U.S. Department of Justice (DOJ) and the U.S. Environmental Protection Agency (EPA) are currently drafting implementation guidance for all federal agencies.
Late last week, NLC, the National Association of Counties and the U.S. Conference of Mayors, sent a joint letter to DOJ and EPA urging them to expedite the rule making process for the law and to:

  • instruct all federal agencies to pay stormwater bills in the same way that all other utility bills are paid, using the same budget accounts that provide funds to pay other utility services;
  • require federal agencies to pay any outstanding stormwater charges that are owed to local governments; and
  • specifically include stormwater fees that are calculated on the "amount of impervious surface" as a legitimate basis for charge.

Proposed SEC Financial Advisor Regulations
Last month, the Securities and Exchange Commission (SEC) released new proposed rules to implement the municipal advisor registration requirement found in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public-Law 111-203, 124 Stat. 1376 (2010). Comments in response to the proposed rules, which NLC will be filing, are due on February 22, 2011. To view the proposed rules, click here.

Under the Dodd-Frank law, the registration requirement applies to all municipal advisers who provide advice to "municipal entities" and other borrowers involved in the issuance of municipal securities. The advice may be related to derivatives, guaranteed investment contracts, "investment strategies," or the issuance of municipal securities. It also applies to advisers who solicit business from a state or local government for a third party.

As drafted the rule would exempt municipal elected officials and staff from the registration requirement. Not excluded, however, are appointed volunteer members of local government boards or other citizen volunteers. The rulemaking's reach would thus subject citizen board members and other volunteers to federal SEC fiduciary duty, pay-to-play, and other rules, and reporting requirements.

Many states and cities already have statutory provisions concerning the fiduciary responsibility of volunteer board members of their authorities. NLC's position is that the proposed rule would only serve to micro-manage local governments and impose duplicative redundant regulatory burdens as an answer to unsubstantiated and undefined issues. Practically for cities, registration with its associated costs and burdensome paperwork requirements will have a chilling effect on local governments' ability to obtain the highest quality volunteer participation for their municipal entities. 

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

Very truly yours,


William G. Dressel, Jr.
Executive Director 


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