RECOMMENDATION TO COUNCIL
Staff requests input from the committee on any of the elements of the proposals that are of particular importance to the committee.
| BACKGROUND
BACKGROUND
Infrastructure Proposal
The Administration recently released a 53-page legislative infrastructure plan that it hopes will create at least $1.5 trillion in new investment over the next 10 years. The Administration wants the proposal to serve as the foundation for a broad infrastructure development vision that will provide Congress with the incentive to draft and pass a comprehensive infrastructure plan that will create state, local and private sector investment in infrastructure.
The plan also calls for reforms of federal regulations governing infrastructure investment. Although there is some bipartisan support for an infrastructure initiative, concerns are being voiced by some in Congress who are criticizing the proposal for failing to provide adequate funding and for eliminating the environmental review process in some instances.
The proposal calls for $1.5 trillion in infrastructure investments - $200 billion of which would come from the federal government, offset through budget cuts. The plan would put a premium on states and local governments that pay for infrastructure projects without using federal funds. It would also carve out $50 billion for rural infrastructure projects and revamp federal permitting.
The following are a few of the primary elements included in the proposal:
Infrastructure Incentive Program:
• $100 billion made available for a broad range of infrastructure programs, including hydropower
• Funds would be divided and administered by Department of Transportation, Corps of Engineers, and EPA
• Incentive grants could not exceed 20 percent of project costs
• No state could receive more than 10 percent of total program revenue
Rural Infrastructure Program
• $50 bill available for capital investment in rural infrastructure programs
• Eligible infrastructure assets include roads, bridges, public transit, rail, water and wastewater – as well as broadband and “government generation, transmission and distribution facilities”
• 80 percent of the funds would be distributed as block grants to state via a formula, with Governors provided discretion to distribute funds in rural areas with population less than 50,000
Infrastructure Financing Programs
• $20 billion of the overall infrastructure amount would be targeted for major, complex infrastructure programs and by broadening use of Private Activity Bonds
• Private Activity Bond eligibility would be expanded to include hydropower and rural broadband facilities, remove Alternative Minimum Tax (AMT) payment on Private Activity Bonds, remove state volume caps on Private Activity Bonds, and preserve tax-exempt status when a public project is purchased by a private service provider
Infrastructure Permitting Reform
• Establish a firm two-year deadline for National Environmental Protection Act (NEPA) review and issuance of all permits for infrastructure projects
• Preclude consideration of NEPA alternatives outside the scope of agency’s authority or not technically or economically feasible
• Direct California Environmental Quality Act (CEQA) to issue streamlining guidelines for NEPA process
• Allow “categorical exclusions” issued by one federal agency to be used by another federal agency for similar activities
• Provide expedited Historic Preservation Act review for small cell attachments
• Allow other federal agencies both to participate in license review and to appeal actions
• Constrain Environmental Protection Agency (EPA) review of 404 permit decisions
• Consolidate NEPA process for 404 and 408 permits
• Amending the Clean Water Act to prevent state agencies from delaying issuance of 401 permits
There is a growing concern that the proposal sets up a situation where cities and counties across the country would scramble for a relatively small amount of federal funds to build the infrastructure projects. If unsuccessful in competing for the available federal monies, cities and counties would need to use their own funds or find private money that would be willing to build the projects. A situation that has some concerned that would lead to a surge of privately financed toll roads and the elimination of regulations in the name of building projects faster.
Fannie Mae and Freddie Mac
Several Senators are working on a 40-page proposal to reform the mortgage market. The plan would be a very different approach to changing the market than what was proposed and failed several years ago. The new proposal builds on the existing system and would preserve critical elements of the current systems, according to various sources on the issue. The reform would preserve Fannie Mae and Freddie Mac, which would continue to operate under government control until competitors could enter the securitization market for home loans. It is expected this process could take many years.
Some members of Congress believe that reforming the nation’s housing finance system is the last major piece of unfinished business of the financial crisis. Senator Corker (R-Tenn.) and Senator Warner (D-Va.) are the authors of the proposed legislation and are engaged in productive discussions with members of congress, the administration and many stakeholders in an effort to craft a bill that has a chance of passing through congress.
Under the plan, regulators would approve pricing and returns, taking away incentives to engage in the kind of reckless lending that led to the housing collapse. Fannie Mae and Freddie Mac would lose their special government charters, and their investment portfolios, which drove corporate returns.
The changes would result with the companies becoming smaller and less powerful. The draft includes a government guarantee in the event of catastrophic losses to protect mortgage investors if homeowners default on their loans in large numbers, a program that would be financed with a fee on mortgages.
The draft language also would ensure that protections and reforms already put in place by the companies’ regulator, the Federal Housing Finance Agency, would be written into law. Furthermore, the plan would ensure that small lenders have access to the secondary mortgage market, which is important for providing capital to homebuyers.
The framework of the proposed legislation is far from complete and many of the key details, including how to fund affordable housing, have yet to be defined and finalized. However, the effort is moving forward and is a dramatic departure from the 2014 attempt to reform the mortgage market, which passed the Senate Banking Committee, but never received a vote by the Senate. This version of reform is trying to build off the existing system while adding protections that ensure that things that went wrong previously won’t happen again. The proposal is currently being vetted by Senators, Treasury officials and industry leaders before being made public.
Conclusion
City staff will research, track and provide the City’s perspectives to our congressional delegation on both items over the coming weeks. Staff will also work with other regional and state organizations to help develop effective policy advocacy strategies for both items to ensure the City’s positions are heard and considered.
| FISCAL IMPACT
The costs of these activities are contained within the City’s current budget.
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ECONOMIC DEVELOPMENT / JOBS CREATED
The activities detained in this report will not result in job development or creation.
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ENVIRONMENTAL REVIEW
The California Environmental Quality Act (CEQA) does not apply to activities that will not result in a direct or reasonably foreseeable indirect physical change in the environment (CEQA Guidelines §1506(b) (3). The action of reviewing proposed CEQA legislation does not include the potential for a significant environmental effect, therefore is not subject to CEQA.
| Respectfully Submitted,
Mark Wolinski, Government Relations Administrator
Megan MacPherson, Public Affairs and Communications Director | | | |
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