Federal Update Affecting Cities

Senate Stalled, Not Deadlocked, on Housing Bill
The Housing and Economic Recovery Act, H.R. 3221, a landmark federal housing reform and foreclosure prevention bill, was on track to pass the Senate by a veto-proof margin last week. Consideration came to an abrupt halt after a dispute on an amendment offered by Senator John Ensign (R-NV) that would extend several energy tax breaks.

Underlying the dispute is the fact that House and Senate leaders are still negotiating how to pay for the bill. Unlike the Senate, the House pay-go rules require that new non-emergency spending not add to the federal deficit. The Ensign amendment, which contains no offsets, would likely fail the pay-go rules and could ultimately doom the entire bill.

In addition to Sen. Ensign’s amendment, another pay-go issue to be addressed is the one-time allocation of nearly $4 billion in additional Community Development Block Grant (CDBG) funds to cities and states to help stabilize neighborhoods affected by high foreclosure rates. Although the CDBG funding under the bill contains no offsets, the Senate has designated these funds as “emergency spending,” so no off-set is required. However, it isn’t clear if a majority of the House members will accept the “emergency spending” designation, particularly the fiscally conservative “Blue-Dog” Democrats who are organized around the principal of fiscal discipline.

House Financial Services Chairman Barney Frank (D-MA) has stated he would not object to eliminating the CDBG funding if keeping it in jeopardizes passage of the overall bill. NLC and other local government and housing groups are strongly urging House and Senate members to retain the CDBG funding in the bill and are lobbying Blue-Dog Democrats for their support. A list of Blue-Dog Democrats can be found at: www.house.gov/ross/BlueDogs/. The Senate is expected to resume action on the bill next week.

Work on Spending Bills Gets Underway
Before returning home for the July Fourth recess, House and Senate committees began action on the FY 2009 spending bills. While Congress is in the early stages of the appropriations process that will fund federal programs for FY 2009 and may not complete the process until after a new President is in office, funding recommendations emerging from Senate and House appropriations committee are, so far, generally favorable for federal programs important to cities and towns. The process resumes when Congress returns to the Washington the week of June 7th. We are a long way from the finish line, but the following are our general observations of committee work to date on programs important to cities and towns:

Crime Prevention Programs
House and Senate appropriators are rejecting the President’s proposed $1 billion cuts in funding for local crime prevention and law enforcement activities, including the elimination of the Community Oriented Policing Services (COPS) program and the consolidation of virtually all federal public safety and crime prevention grant programs important to local governments.

Housing and Community Revitalization Programs
The House Appropriations Subcommittee on Transportation and Housing and Urban Development is recommending an allocation of $66.7 billion for transportation programs and $41.5 billion for housing programs, rejecting the majority of the Administration’s proposed cuts in the programs (including CDBG) and reflecting the impact of the skyrocketing home mortgage defaults by shifting priorities to affordable rental housing programs. The Subcommittee has not addressed the anticipated shortfall in the Highway Trust Fund.

Energy Programs
The House Appropriations Committee has approved funding for energy programs, including an initial commitment of $295 million to support the startup of the Energy Efficiency and Conservation Block Grant program, an increase in renewable energy program and rejected elimination of the weatherization assistance program.

Environmental Programs
The House Appropriations Subcommittee on Interior, Environment and Related Agencies rejected proposed cuts in programs important to cities and towns by keeping most programs at current levels and increasing funding for the Clean Water State Revolving Fund.

Homeland Security Programs
The House and Senate Appropriations Committees both rejected the cuts for state and local homeland security grants recommended by the President.

Labor, Health and Human Services, and Education Programs
The Senate Appropriations Committee and the House Appropriations Subcommittee on Labor, Health, Human Services and Education are recommending funding increase es in many of the programs that are important to cities in a wide range of human services, education and workforce programs.

Bill Would Require Uniform Treatment of Municipal, Corporate Bonds
House Financial Services Chair Barney Frank (D-MA) and House Ways and Means Subcommittee Chair Richard Neal (D-MA) have introduced legislation to require rating agencies to provide equal treatment for municipal bonds. The Municipal Bond Fairness Act, H.R. 6308, which NLC supports, will eliminate the ability of the rating agencies to use separate standards for municipal bonds and other bonds. The practice of using a separate scale for corporate bonds and municipal bonds that the industry has employed for many years has in many cases caused high quality general obligation bonds to be rated lower than comparable corporate bonds. This legislation would eliminate that unfair situation by requiring those credit rating agencies that choose to seek designation as a nationally recognized statistical rating organization (NRSRO) to use rating symbols consistently for every security to which they are assigned. Although it has been introduced and may get a hearing, the legislation is unlikely to get floor action this year.

House Reauthorizes Byrne Justice Assistance Grant Program
On June 25, the House of Representatives voted 406-11 in support of H.R. 3546, which reauthorizes (but does not appropriate money for) the Edward Byrne Memorial Justice Assistance Grant Program (Byrne JAG). The reauthorization bill provides up to $1.1 billion per year through 2012 for funding local crime prevention, drug task force, and anti-gang initiatives. The House bill is identical to the version the Senate passed by unanimous consent last year.

The President has called for the elimination of the program, but has not indicated whether he will sign or veto the bill.

COURTS

Sixth Circuit Rules Against Local Governments
As reported last week, the U.S. Court of Appeals for the 6th Circuit denied our request for relief from a federal rule that preempts local government control in the video franchising process. Instead, the Court upheld an FCC rule issued in March 2007 that severely restricts the ability of local governments to protect their citizens, rights of way, community channels and public safety networks in the franchise process.

A coalition of other national groups argued that the FCC did not have statutory authority over the local franchise process. The 6th Circuit three-judge panel unanimously disagreed and determined that the FCC has authority over the state and local regulators who authorize new video franchises in their markets. The judges also ruled that the FCC “did not engage in arbitrary and capricious rulemaking” when it adopted the rule, which, among other things, imposed a “shot-clock” of 90 or 180 days by which local franchise authorities must act on new applications for cable franchises regardless of local circumstances and limited local governments’ ability to ensure that all of their citizens benefit from competition and advances in telecommunications technology – not just a chosen few.

In a response to the decision, FCC Chairman Kevin Martin said the court “recognized and unanimously supported the Commission’s authority.” Commissioner Jonathan Adelstein, who voted against the rule, said in a written statement that “the FCC apparently has more expansive authority than many believed. The good news is that we can use our authority to promote competitive video offerings, while also protecting consumers and public access.”

Coalition members, which include NLC, NATOA, USCM, and NACo, are reviewing the case and discussing our options.