March 17, 2008

Re:      Federal Update For Period Ending March 14, 2008

Dear Mayor:

With all the information we’ve received on the State Budget, we missed mailing our last Federal Update. Accordingly, this will cover developments up to February 29, 2008 and through March 14.  Again, we extend our thanks to the Federal Relations Staff at the National League of Cities for their advocacy and reporting on all of these issues.

Senate Majority Leader Reid Pushes Bill to Address Housing Crisis
On February 28, Senate Majority Leader Harry Reid (D-NV) failed to get the votes needed to advance legislation that would address the housing crisis, a top NLC legislative priority. The Foreclosure Prevention Act of 2008, S. 2636, would: (1) help families avoid foreclosure; (2) help communities hardest hit by foreclosure; and (3) help homebuyers avoid risky mortgages that could result in foreclosure in the future. To help families keep their homes, the bill would increase funds to support pre-foreclosure counseling by $200 million, would allow State Housing Finance Agencies to issue bonds to refinance sub- prime loans, and would allow bankruptcy judges to modify mortgage terms on principal residences. To help communities, the bill would distribute an additional $4 billion in Community Development Block Grant (CDBG) funds to localities hardest hit by foreclosure for the purpose of purchasing foreclosed properties to rehabilitate, rent, or resell on the market. To help homebuyers, the bill simplifies and strengthens loan disclosure requirements under the Truth In Lending Act. The lending industry and the Administration oppose the legislation. The Administration issued a veto threat over the bankruptcy provision, stating that “amending the bankruptcy code in this manner would undermine existing contracts, leading to contraction in mortgage credit availability and affordability.” The White House also opposes the increase in CDBG funding. According to Senate staff, negotiations are ongoing, and the bill could be reconsidered as early as this week.

Senate Committee Urges Congress to Restore Byrne JAG Funds
In the continuing effort to restore funding to the Byrne Justice Assistance Grant Program (Byrne JAG), an NLC legislative priority, the Senate Judiciary Committee’s Subcommittee on Crime and Drugs, chaired by Sen. Joe Biden (D-DE), held a hearing this week and called for the restoration of funding for this program through an amendment to any supplemental appropriations this year. Byrne JAG funds are used to support a wide array of public safety programs, ranging from after school programs for at-risk youth to multi-jurisdictional drug task forces. In FY 2007, the program was funded at $520 million. For FY 2008, Congress appropriated only $170.4 million for the program.

House Approves Renewable Energy Tax Package
On Wednesday, February 27, the House passed the Renewable Energy and Energy Conservation Tax Act of 2008 (H.R. 5351) by a vote of 236-182. The bill would provide tax incentives for the production of renewable energy and energy conservation. The roughly $18 billion plan to extend and create new alternative energy tax breaks and to offset the costs by repealing tax incentives for major oil companies is similar to measures the House approved last year as part of the comprehensive energy reform bill. Last year the Senate failed to obtain the necessary 60 votes to end debate on the provisions, and they were subsequently removed from the energy bill that was signed by President Bush in December 2007. The Senate may reconsider the renewable energy tax measures this session as part of its budget process. The White House has threatened to veto the House passed bill.

NLC Leaders Urge Congress to Fund Energy Block Grant Program
More than 400 NLC leaders signed onto a letter urging Congress to fund the Energy Efficiency and Conservation Block Grant program that was enacted as part of the Energy Independence and Security Act of 2007. According to the letter, “The nation’s energy crisis continues to challenge our country with the threat of climate change, rising energy prices, and the depletion of natural resources. The Block Grant program provides an important element in a new partnership among cities, states, and the federal government to respond to these challenges making our country more energy efficient and energy independent, and strengthening our economy.” This week, the letter will be delivered to House and Senate Appropriations Committee members, House Speaker Nancy Pelosi (D-CA), and Senate Majority Leader Harry Reid (D-NV).

House and Senate Adopt Budget Resolutions
The House and Senate each adopted their respective budget resolutions last week, non-binding blueprints for the FY’09 federal budget. The House would provide $22 billion more in domestic discretionary spending than the President, rejecting most of the President’s proposed cuts—especially for public safety, while the Senate proposes restoration of $18 billion. The passage of the budget resolutions clears the way for the annual appropriations process to move forward.

Frank and Dodd Announce Proposals to Stem the Rise in Foreclosures
On March 13, Rep. Barney Frank (D-MA) and Sen. Christopher Dodd (D-CT) unveiled proposals to stem the significant rise in mortgage foreclosures by allowing the Federal  Housing Administration to insure and guarantee refinanced mortgages that have been significantly written down by mortgage holders and lenders. According to a summary, Frank’s proposal would provide up to $300 billion in new loan guarantees for “at risk” borrowers to refinance. Lenders would be required to write down a loan’s principal amount – to no more than a home’s current market price – before the FHA would back the revised loan; additionally, the new loan would have to be made on terms that a borrower could repay. Frank estimates that his proposal could potentially refinance between one to two million loans, protect neighborhoods, and help stabilize the housing market, all of which are legislative priorities for NLC.

Frank Holds Hearing on Municipal Bond Market Turmoil
On March 12, at a House Committee on Financial Services meeting, attended by NLC President Cynthia McCollum, Council member, Madison, Alabama, and Second Vice President Ron Loveridge, Mayor, Riverside, California, federal lawmakers and market participants debated options for resolving the current turmoil in the municipal securities market. During the hearing, Committee Chairman Barney Frank (D-MA), blasted the municipal bond insurers for acting on “grievous misjudgments” by exposing themselves to sub prime mortgage risk that has led to “unfair excessive costs” for issuers, including local governments. Testifying at the hearing were state treasurers, municipal bond insurers, the Connecticut Attorney General, and ratings agency representatives. Although the Committee did not reach consensus on any of the options debated, there was agreement that something must be done quickly. “This has got to be fixed,” Frank said. “We cannot tolerate a situation where elected officials trying to build schools and comply with federal mandates from the federal government to improve the treatment of sewage and build highways…are charged much more than they should be charged.” NLC, along with five other issuer groups, sent the Committee an eight page letter, which Rep. Paul Kanjorski (R-PA), Chairman, Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, House Committee on Financial Services, submitted into the record. The letter outlined the groups’ concerns with the market and solutions to be explored.

National Infrastructure Bank Proposals Gain Momentum
After years of discussion about a national infrastructure bank that could issue taxable tax-credit bonds to fund infrastructure projects, House and Senate leaders are vowing to move quickly on legislation that would create a national infrastructure bank to develop public-private investments for large transportation and water projects. Senators Christopher Dodd (D-CT) and Chuck Hagel (R-NE) introduced S.1926, the National Infrastructure Bank Act of 2007, last summer and on March 11 held a hearing on the bill before the Senate Banking, Housing, and Urban Affairs Committee, which Dodd chairs. According to Sen. Dodd, the bill would use “limited Federal resources, it would leverage the significant resources and innovation of the private sector. It would tap the private sector’s financial and intellectual power to meet our nation’s largest and most critical structural needs.” On March 12, House Speaker Nancy Pelosi (D-CA) announced she also wants the House to take up infrastructure development legislation quickly.

NAPA Releases Transportation Finance Report
Earlier this week, the Intergovernmental Forum on Transportation Finance, a body convened by the National Academy of Public Administration on behalf of six national associations: National League of Cities, National Governors Association, National Association of Counties, National Conference of State Legislatures, The Council of State Governments, and International City/County Managers Association, released a report, “Financing Transportation in the 21st Century – An Intergovernmental Perspective.” The report highlights the integrated role of all levels of government and the private sector in developing and maintaining our national transportation network, a top legislative priority for NLC. According to the report, “All levels of government must work together to set system-performance goals and provide the financial means to meet those goals.”

FAA Reauthorization Stalled
Senate leaders remain skeptical that the Senate will be able to reconcile internal differences and pass an airport reauthorization bill before the end of this year, despite the fact that the federal airport programs expired in September 2007 and are running on short term extensions. The House passed a reauthorization bill last year, but the Senate remains mired in the controversy between industries over who should bear the greater cost for modernizing the air traffic control system. NLC joined 30 organizations in urging Congressional action on a reauthorization bill that funds programs providing grants to municipal airports, such as the airport improvement grants program. NLC also has supported an increase in the ceiling on the airport Passenger Facility Charges to $7.00 from the current $4.50, which is contained in the House passed reauthorization bill.

Immigration Proposals Being Discussed
House Members are threatening to use a procedural motion to bring an immigration enforcement-oriented bill to the House floor. The bill, the Secure America with Verification and Enforcement (SAVE) Act, HR 4088, sponsored by Rep. Heath Shuler (D-NC), has gained the support of 93 Republicans and 48 Democrats. The legislation would authorize more technology at the border, the hiring of 8,000 additional border agents over five years, and a mandatory verification system for employers. In addition, House leaders are considering legislation to issue more visas for summer workers, an issue that cuts across ideological lines. The H2B visas give foreign workers non-immigrant status to work seasonable jobs that can’t be filled by Americans. In 1990, Congress capped the visas at 66,000 annually, but the demand routinely exceeds that number. In fiscal year 2006, Congress allowed an additional 50,000 workers to be admitted. These proposals put Congress back into the middle of the immigration debate in an election year, and the outcome is unclear.

Congress will be in recess for the remainder of the month of March. The next edition of the Federal Relations Update will be published soon after April 11, 2008.

Very truly yours,

William G. Dressel, Jr.
Executive Director