Federal Relations Update

March 22, 2013
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March 22, 2013

Senate Supports Marketplace Fairness
Lars Etzkorn, etzkorn@nlc.org, 202.626.3173

Just before departing Washington for a 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.

Here’s a link to the roll call vote. Be sure to thank those Senators who supported the amendment and continue to lobby those who voted against the amendment.

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creates exciting new marketplaces, it has also put traditional retail outlets at an unfair disadvantage because of outdated and inequitable tax and regulatory environments.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.

NLC will continue to partner in the coming weeks with House and Senate champions for the legislation to see that it becomes law.

Tax Exemption Still Under Attack
Stephanie Crandall, crandall@nlc.org, 202.626.3030 and Lars Etzkorn, etzkorn@nlc.org, 202.626.3173

Municipal bonds were front and center in both chambers of Congress last week. As Congress and the Administration continue to look for ways to find revenues to reduce the deficit or fund new programs, eliminating or capping the tax exemption on interest earned on municipal bonds remains a viable option to some in Washington.

The House Ways and Means Committee held a hearing on tax reform and tax provisions affecting state and local governments. The Committee examined the uses of tax-exempt municipal bonds and the local impacts if the bond exemption were capped or eliminated. Several Committee members who formerly served as local elected officials, including Reps. Kenny Marchant (R-TX; Carrolton mayor and city council), Richard Neal (D-MA; Springfield mayor and city council), Bill Pascrell, Jr. (D-NJ; Paterson mayor) and Tom Reed (R-NY; Corning mayor), underscored the importance of this financing tool to communities and argued that these proposals would unfairly shift costs to local residents through tax or rate increases. NLC submitted testimony for the record.

Besides the House hearing, the Senate began considering the FY 2014 Budget Resolution. The Resolution contains language that that could support either a 28 percent cap or the total elimination of tax exempt financing. In opposition to that language, NLC and a coalition of more than 50 groups representing local and state governments, housing, transportation, infrastructure and private industry sent a letter to Senate leadership urging support for the tax-exempt status of municipal bonds.

The Senate eventually passed the Resolution. However, it is non-binding, so there's still time to lobby your members of Congress to oppose changes to the exemption. For sample letters, resolutions and op-eds cities can use to lobby members, go to NLC’s website.

House Workforce Bill Bad for Cities
Neil Bomberg, bomberg@nlc.org, 202.626.3042

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
Carolyn Berndt, berndt@nlc.org, 202.626.3101

Last week, the Senate Environment and Public Works (EPW) Committee unanimously passed S. 601, the Water Resources Development Act (WRDA)that 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. NLC supports the bill. 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 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. To read more, click here.

Court Deals a Blow to Residential PACE Programs
Carolyn Berndt, berndt@nlc.org, 202.626.3101

On Tuesday, 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. To read more, click here.

EPA Holds Consultation on Discharge Standards for Armed Forces Vessels
Carolyn Berndt, berndt@nlc.org, 202.626.3101

Last week, NLC participated in a federalism consultation briefing with the U.S. Environmental Protection Agency (EPA) and the U.S. Department of Defense (DoD) on a forthcoming rulemaking to establish uniform national discharge standards for vessels of the Armed Forces (e.g., Navy, Coast Guard, Marine Corps, Air Force). These new national standards will preempt existing state law discharge standards that otherwise would apply to a vessel of the Armed Forces. Therefore, once the discharge standards are established, existing state or local regulations for the discharges will be nullified, and future state or local regulatory action will be preempted. Almost all states, and many more local governments situated therein, currently have vessels of the Armed Forces operating in waters subject and adjacent to their jurisdictions.

As background, in May 1999, EPA and DoD jointly published a first phase of these regulations in order to identify the discharges that would require pollution control. In that rulemaking, EPA and DoD concluded that 25 out of 39 possible discharges from a vessel of the Armed Forces would require pollution control. EPA and DoD are now working on the second phase of the rulemaking and will develop performance standards for 11 of the 25 discharges identified. EPA and DoD will address the remaining 14 discharges in a separate rulemaking. EPA plans to propose a rule for the first 11 discharges in summer 2013. Upon completion, a rulemaking for the remaining 14 discharges will follow and is likely to begin in summer 2014. The federalism presentation can be viewed here.

As NLC reviews the information and the impact on local governments, it would helpful to hear from state leagues or local governments on specific state laws or local regulations that would be preempted under this rulemaking. Please send any information or feedback to Carolyn Berndt at Berndt@nlc.org.
In This Issue

Senate Supports Marketplace Fairness

Tax Exemption Still Under Attack

House Workforce Bill Bad for Cities

Water Resources Bill Advances in Senate

Court Deals a Blow to Residential PACE Programs

EPA Holds Consultation on Discharge Standards for Armed Forces Vessels

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