November 9, 2007

RE:     FEDERAL UPDATE - For Period Ending November 9, 2007

Dear Mayor:

This is the latest bi-weekly update on action in our Nation’s Capital from the National League of Cities (NLC).

Spending Bills Head to the President
Next week, House and Senate leaders expect to send three 2008 spending bills to the President. One bill funds the Departments of Labor, Health and Human Services, and Education (L-HHS); the second bill will fund the Departments of Transportation and Housing and Urban Development (THUD). The third will fund the Department of Defense and would include a continuing resolution (CR) that would fund the federal government beyond Nov. 16, when a current stopgap spending law expires. The current fiscal year began on Oct. 1, but these three measures are the first 2008 spending bills that will be sent to the President. The L-HHS bill includes modest increases for No Child Left Behind, special education, the Low Income Home Energy Assistance Program, and health programs important to cities and towns. Those increases would come at the expense of adult, youth and dislocated worker programs funded through the Workforce Investment Act. If enacted, $245 million in funds for those programs would be rescinded. The President has threatened to veto the L-HHS bill because it exceeds his funding request by $9.8 billion. The THUD bill includes $40.2 billion for highway programs, $3.8 billion for CDBG, and $120 million for HOPE VI projects. The President also has threatened to veto this bill because it exceeds his funding request by $5.3 billion. The President is expected to sign the Defense bill.

Mortgage Reform and Anti-Predatory Lending Bills on Fast Track
On Nov. 6, the House Financial Services Committee approved bipartisan mortgage reform and anti-predatory lending legislation by a vote of 45-19. H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act, will create a licensing system for residential mortgage loan originators, establish a minimum standard requiring that borrowers have a reasonable ability to repay a loan, and will attach limited liability to secondary market securitizers. The legislation also would expand and enhance consumer protections for those taking out certain high-cost loans, include protections for renters of foreclosed homes, and establish an Office of Housing Counseling through the Department of Housing and Urban Development. NLC, an early endorser of the legislation, is working closely with the bill’s sponsor, House Financial Services Committee Chairman Barney Frank (D-MA), to generate support for the bill’s passage in the House. In addition, the same House Committee approved the Escrow, Appraisal, and Mortgage Servicing Improvements Act, H.R. 3837, which could be amended into H.R. 3915 on the House Floor. This bill, introduced by Rep. Paul Kanjorski (D-PA), will require certain borrowers to have escrow accounts to protect against unpaid taxes and insurance premiums. The bill also would create federal appraisal standards and will prohibit appraisers from having a direct or indirect interest in the property or transaction involving the appraisal.

Congress Votes to Override President’s Veto of Water Bill
Earlier this week, the House and Senate voted to override the President’s veto of the Water Resources Development Act (H.R. 1495). This bill authorizes approximately $23.2 billion for Army Corps of Engineers water projects, including over 900 projects for navigation, environmental restoration, and hurricane, flood or storm damage reduction in 23 states. The bill also calls for an increase in oversight of the Army Corps of Engineers for projects costing more than $45 million or that are deemed controversial.

Bridge Repair Bill Approved by House Transportation Committee
On Oct. 31, the House Transportation and Infrastructure Committee approved the National Highway Bridge Reconstruction and Inspection Act of 2007, H.R. 3999, to authorize $2 billion in general funds over two years to create a new program to repair thousands of structurally deficient bridges in the National Highway System (NHS) across the country. In addition to authorizing funds, the bill addresses qualifications and training for bridge inspectors and increases the frequency of bridge inspections. Additionally, the bill would require that each deficient bridge be evaluated and prioritized by risk and that this list be submitted to the National Academy of Sciences for an independent review. No date has been scheduled for full House consideration of the bill.

Efforts to Pass Veto-Proof SCHIP Bill Fail
After failing to muster the votes to override the President’s veto of H.R. 976, the State Children’s Health Insurance Program (SCHIP) reauthorization bill, the House and Senate approved a revised version of the bill designed to attract more Republican support. While the Senate passed the revised version with a veto-proof majority, the House continued to be 13 votes short of the number of votes needed to override a second threatened veto. House and Senate Democrats and Republicans continue negotiations in search of an acceptable compromise. Without an agreement, it is unlikely that SCHIP will be reauthorized this Session, but the program could continue with current program requirements so long as funding is included in the continuing resolution.

Temporary Internet Tax Moratorium Extension Becomes Law
Last week, the President signed into law legislation that extends the Internet Tax Freedom Act (ITFA) for another seven years. The Act bans state and local governments from taxing internet access. The National League of Cities, along with its national state and local partners, supported the temporary extension as an alternative to proposed legislation that would have made the ban permanent. Besides extending the ban, the bill clarifies the definition of Internet access and maintains the grandfather provisions that protect state and local taxes imposed on Internet access prior to 1998. The bill also excludes from state and local taxes for seven years any e-mails, instant messaging, and electronic storage capacity sent over the Internet even if the service is not provided by an Internet access provider.

FCC Adopts Second Video Franchising Order
Last week, over the objections of NLC and its national government partners, the Federal Communications Commission (FCC), in a second Order, decided to extend some of the findings from its original Video Franchising Order (first Order) to incumbent cable providers. (The first Order applied to new service providers.) In last week’s 3-2 vote, among other things, the FCC concluded that the “shot clock” and build out provisions in the first Order do not apply to incumbents, but that the cap on franchise fees and many of its rulings on public, educational and governmental channels (PEG) do apply to incumbents. Importantly, the second Order rulings do not apply automatically to existing franchises; instead, an incumbent will have the burden to prove, under the facts and circumstances of each situation, that the new rules apply to its franchise agreement. Last week’s FCC decision is not yet in effect. The written Order was released on November 6th and will go in effect 30 days after it is published in the Federal Register, which could be as early as next week. NLC and its national partners are currently reviewing this order and evaluating options for challenging parts of it with which we disagree. Earlier this year, NLC and its partners filed a lawsuit challenging the FCC’s decision in the first Order; that suit is pending at the United States Sixth Circuit Court of Appeals. A decision by the court is anticipated by summer 2008.

For more information, contact Jon Moran at 609-695-3481, ext. 121 or jmoran@njslom.com.

Very truly yours,

William G. Dressel, Jr.
Executive Director