Dear Mayor:

Congress expects to wrap up the 1st Session of the 110th this week with much of the schedule devoted to contentious negotiations on the spending bills.  While we've enjoyed support in the House and Senate for level funding or modest increases to federal programs important to cities and towns, we will continue to lobby hard for continued support as difficult spending choices get made.

Budget Stalemate Continues
The stalemate between the Congress and the White House over fiscal 2008 spending levels continues. The fiscal 2008 year began on Oct. 1, and so far, the Defense appropriations bill is the only one of the 12 fiscal 2008 spending bills signed into law. On Dec. 14, President Bush signed a third continuing budget resolution to keep government operations running through Dec. 21.  To break the stalemate between the Democrat congressional leadership and the President over the remaining spending bills, the Democrats have decided to move forward with an omnibus spending bill that is closer to the President’s proposed overall spending level of $933 billion. While this amount is $22 billion less than the Democrats’ spending plan, leadership has indicated that the omnibus will reflect their spending priorities, not the President’s. As they make difficult choices, NLC is urging Congress to protect spending levels for programs important to municipalities. The House vote on the omnibus package is expected early next week.

Senate Defeats Eminent Domain Amendment
On Dec. 13, the Senate defeated an amendment (37-58) by Sen. Larry Craig (R-ID) that would have preempted state and local land use laws by prohibiting any state or local government from exercising eminent domain authority over any “farmland or grazing land for the purpose of a park, recreation, open space, conservation, preservation view, scenic vista or similar purpose.” With opposition from NLC, state municipal leagues, elected officials, other local government groups, the amendment failed to get the 60 votes needed to continue consideration of the amendment, and Sen. Craig withdrew it. Under the Craig amendment, which was offered to H.R. 2419, the Farm Bill, if a state or local government were to use the power of eminent domain for these public purposes, even if such action was completely in accordance with the Supreme Court’s decision in Kelo, its own statutes, ordinances, and regulations, the state or local government could lose all federal funding for a period of five years.

Sen. Reid Withdraws Mandatory Collective Bargaining Amendment
On Dec. 13, in response to opposition from NLC, other public interest groups, state municipal leagues, and others, without a vote, Sen. Reid withdrew the amendment that would add S. 2123, the mandatory collective bargaining bill, to the Farm Bill (H.R.2419). During Sen. Reid’s floor speech, he expressed his intention to take up the legislation in the future. NLC will continue to oppose the legislation.

Senate Housing Finance Reform Bill Introduced
Senate Banking, Housing, and Urban Affairs Committee Chairman Chris Dodd (D-CT) has introduced legislation to curb abusive and predatory mortgage lending practices that are driving the current foreclosure crisis and have created a credit crisis that is spreading beyond the housing market. The bill, the Homeownership Preservation and Protection Act of 2007, S. 2452, follows recent House and Administration actions taken to protect homebuyers and increase confidence in the housing market. In November, the House passed H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, and earlier this month, the President announced that the Federal Reserve will introduce new mortgage lending rules designed to help ensure consumers are qualified for the loans they are offered. Similar to the House bill, the Senate bill, which NLC is supporting, establishes new protections for and duties to homebuyers by the lending community and is expected to be considered early next year when Members return for the second session of the 110th Congress. To view a summary of the bill, click here: http://dodd.senate.gov/index.php?q=node/4167#p2.

President and Mortgage Lenders Announce Help for Homeowners
President Bush has announced an agreement among the major mortgage financial institutions that will lead to relief for some homeowners facing foreclosure due to rising interest rates on subprime adjustable-rate mortgage loans. Under the agreement, called “The Hope Now Plan”, mortgage lenders and servicers will begin to proactively identify homeowners likely to default on their subprime adjustable rate mortgages and will freeze interest rates at the pre-adjustment level for five years for families meeting certain eligibility requirements. The Plan received a lukewarm response from Capitol Hill with some Members suggesting that it was too little too late. According to an analysis by Barclays Capital, of the 2.2 million subprime adjustable rate mortgages that are expected to reset in 2008, only 240,000 would be eligible for a mortgage rate freeze under the agreement. For more information regarding the Plan, click here:
http://www.nlc.org/articles/articleItems/Vol30No48121007/HopeNowagreement.aspx

House, Senate Pass Comprehensive Energy Package
After weeks of negotiations, leaders in the Senate and House of Representative reached agreement on a historic and comprehensive energy bill aimed at moving the United States toward greater energy independence and security. The House passed the Energy Independence and Security Act (H.R. 6) by a vote of 235-181 on Dec. 6. The bill would require cars, light trucks and SUVs sold in the United States to achieve a fleetwide average of at least 35 miles per gallon by 2020 and would require 36 billion gallons of ethanol and other biofuels to be blended with gasoline by 2022. The bill also includes a new $10 billion Energy Efficiency and Conservation Block Grant program. After two cloture votes in the Senate to limit debate failed, Senate leaders were forced to remove the tax incentives, a renewable electricity mandate, and the Davis-Bacon law wage provisions in the bill, which had drawn a veto threat from the President. Last night, the Senate passed the bill 86-8. The Senate passed version now heads back to the House, which is expected to approve the measure next week. The White House has indicated that it will sign the bill.

House and Senate Continue to Disagree Over AMT Offsets
Last week, the House passed modified legislation providing a one-year patch to the alternative minimum tax (AMT) and providing spending offsets. The passage of H.R. 4351 (the Modified AMT bill) sets up a showdown with Senate lawmakers, who earlier this month passed an AMT one-year patch without spending offsets. The issue of offset mechanisms to pay for the $55.7 billion cost for the one-year fix to the AMT has been an ongoing source of debate between the House and the Senate. The AMT, which is not indexed for inflation, will reach 21 million more Americans in 2007 than it did in 2006 without the one-year patch. In an effort to prevent such a widespread impact upon American households, the House passed The Temporary Tax Relief Act of 2007, H.R. 3996, last month. In addition to creating a one-year AMT patch, that version of the bill extended several expiring tax provisions for one year and provided offsets. When the Senate considered H.R. 3996, it severed the AMT one-year patch from the other expiring tax provisions and passed an AMT fix without any tax increases or spending decreases to offset the multi-billion dollar impact of the provision. Rather than consider the amended H.R. 3996, last week, House Ways and Means Chairman, Rep. Charlie Rangel (D-NY), decided to introduce the Modified AMT bill that would create a one-year AMT patch and extend the child tax credit only. Consistent with the House pay-as-you-go budget rules, Chairman Rangel included offset mechanisms in the Modified AMT bill to pay for the fix and the tax credit extension. The Administration issued a veto threat against the House’s modified AMT legislation citing what it considers to be the inappropriateness of imposing a tax increase on one group of taxpayers to protect 21 million additional taxpayers from the reach of the AMT. While the House and the Senate continue to disagree on whether offsets are required, there is a growing sense of urgency for a patch to be approved by year’s end. The Internal Revenue Service (IRS) has already stated that the failure to enact an AMT patch in a timely manner will result in a delay of refunds for millions of Americans.

House Passes Second Terrorism Risk Insurance Extension Bill
The House has passed a modified version of its original bill to extend the Terrorism Risk Insurance Act (TRIA), which is set to expire at the end of this year. TRIA was first passed in 2002 following the September 11th terrorist attacks to provide insurance coverage for terrorism events, which private policies widely exclude from coverage. The modified bill includes concessions to the less expansive TRIA extension approved by the Senate last month. Earlier this fall, the House passed a bill, H.R. 2761, that would have extended the program for 15 years and expanded the program to nuclear, biological, chemical, and radiological attacks and lowered the threshold triggering coverage from $100 million to $50 million. The modified version passed last week contains a 7-year term to match the Senate version of its TRIA extension but still has a lower amount ($50 million) to trigger coverage than the Senate version ($100 million). Both the modified House and Senate versions reject expanding the program to nuclear, biological, chemical, and radiological attacks and extend coverage to domestic, as well as foreign, acts of terrorism. The Administration has issued a veto threat against the modified House version of the legislation but has indicated that the Senate version would be acceptable. The modified version of the House bill will now proceed to the Senate for consideration. If an agreement cannot be reached by the end of the year, a short-term extension of the current law may be considered.

DHS Issues Guidance on Grants for Real ID Licenses
The Department of Homeland Security has issued guidance and applications for $35 million in state grants to meet the new rules for standardized driver’s licenses under the Real ID Act, which DHS estimates will cost states billions of dollars. States can use up to 20 percent of State Homeland Security Grants, which totaled $509 million in fiscal 2007, for implementing Real ID licenses. More information is available at http://www.dhs.gov/xnews/releases/pr_1197580232137.shtm.

Streamlined Sales Tax Governing Board Adopts Alternative Sourcing Rule
The Streamlined Sales Tax Governing Board, comprised of the 22 states that have fully or partially complied with the Streamlined Sales and Use Tax Agreement (Agreement), met in Dallas, Texas, last week. The main agenda item was a discussion of a proposed sourcing amendment recommended by the Sourcing Task Force. Earlier this year, the Board directed the Sourcing Task Force to arrive at a solution to the problem that many states are having in switching to the Agreement’s destination sourcing requirement. Under destination sourcing, the jurisdiction where a product is delivered is authorized to collect the sales tax. Several origin-based sourcing states, which classify the location of the seller’s business as the jurisdiction entitled to the sales tax, have been unable to find political and fiscal solutions to convert from their current sourcing system to the Agreement’s destination sourcing requirement. After many months of discussions, the Sourcing Task Force proposed an amendment to the Agreement that would allow origin-based states the option of sourcing intrastate sales to the location of the vendor while sourcing interstate sales to the location of the purchaser. The Board approved the amendment unanimously. The amendment allows those states that are in substantial compliance with all other provisions of the Agreement other than destination sourcing to elect to source sales pursuant to the alternative sourcing rule. These states will be considered associate member states until January 1, 2010, at which time if five or more states have also adopted the alternative sourcing rule, then those associate member states will become full members of the Board.

                                                                        Very truly yours,

                                                                        William G. Dressel, Jr.
                                                                        Executive Director