By Conference Staff
March 1, 2004

Under Conference President Hempstead (NY) Mayor James A. Garner, the leadership of The U.S. Conference of Mayors met in Key West on February 19-21, with the primary focus of the discussion centered around continued problems with homeland security funding.

President Bush came to the recent Winter Meeting of the Conference of Mayors in Washington and committed to helping "unstick" first responder funding, which in many states is not reaching cities. Since that time, Homeland Security Secretary Tom Ridge has discussed the issue with Garner, and met with Conference Executive Director Tom Cochran to begin a process for working on the more than $7 billion in the pipeline.

On the first day of the meeting, the mayors discussed continuing issues related to homeland security funding among themselves, and then engaged with federal officials.

Toby Burke from the White House Office of Intergovernmental Affairs briefed the mayors on a number of priorities for the Administration including homeland security, transportation investment, job creation, tax policy and prisoner reentry.

Following Burke's presentation, the mayors discussed specific ideas regarding homeland security funding mechanisms with Josh Filler, Senior Director in the Office for State and Local Government Coordination at the U.S. Department of Homeland Security. Filler and the mayors explored administrative alternatives including possible changes to rules and regulations to improve the allocation process and make sure that funding reaches first responders under the deadlines established by law.

Filler and the mayors also discussed other key issues related to homeland security in cities, and how DHS has merged his office with the Office for Domestic Preparedness to help create one'stop'shopping for grants available from DHS.

The mayors were also joined by Leevia Eve from the office of Senator Hillary Rodham Clinton (NY). Ms. Eve discussed continuing efforts to change the law and create a direct funding mechanism for cities and first responders. The Conference of Mayors strongly supports Senator Clinton's legislation (S.2021) which would establish direct, formula funding for cities. Ms. Eve also discussed efforts to find some consensus with key Senate Republicans such as Susan Collins (ME) who is supporting legislation that is moving in the direction of direct funding.

The Leadership Meeting focused on other issues contained in the Administration's FY 2005 proposed budget, as well as legislative and regulatory matters related to CDBG and housing, TEA-21 reauthorization, Amtrak, sale-lease backs, crime funding and gun safety, telecommunications, brownfields redevelopment, MTBE liability protection, internet taxation, and public sector collective bargaining.

Sale-Lease Back Financing

Ken Kies, managing director of federal policy for Clark Consulting in Washington (DC) told mayors that the Senate Finance Committee and the Treasury Department are advancing separate legislative proposals that could drive up the cost of leasing equipment and property, as well as eliminate sale-lease back financing for state and local governments. The proposed changes will deny legitimate losses that may be incurred by companies that lease to cities and other tax-exempt entities, and slow tax depreciation on property used by these companies to provide services to such entities. Kies said the proposals would amount to a huge tax increase which companies would be forced to pass down to tax-exempt entities in order to offset their losses.

He said the Senate Finance Committee approved a bill, S. 1637, last year that would impose strict limits on tax deductions for companies that lease equipment and property to cities and other tax-exempt entities. The Treasury Department included similar provisions in the Administration's FY 2005 budget. And the Senate Finance Committee is expected to revise its proposal to incorporate many of the provisions from the Treasury proposal before the bill is considered on the Senate floor. Although the Senate leadership would like to begin consideration the week of March 1, it is unlikely the Senate will finish anytime soon due to widespread concerns about the bill.

So far the House version of the bill, H.R.2896, does not include the changes in the Senate Finance Committee and the Treasury Department proposals. The House Ways and Means Committee is expected to consider them at some point. While the House leadership may adopt some the changes, it has indicated it is opposed to making the legislation retroactive as called for in the Senate Finance and Treasury proposals.

Internet Tax Moratorium

DeKalb (IL) Mayor Greg Sparrow told mayors that the Conference is working very closely with Senators Lamar Alexander (TN) and Thomas Carper (DE), who are leading the fight in the Senate against S. 150, a proposal that would impose a permanent moratorium on state and local taxes on Internet access fees. A similar bill passed in the House last year. The Conference and other state and local groups oppose S. 150 because it would redefine Internet access to include telecommunication services that state and local governments currently tax. If the bill is enacted, state and local governments will lose an estimated $5 billion in telecommunications revenues.

Sparrow said Alexander and Carper introduced an alternative proposal, S.2084, on February 12 which would extend the moratorium for two years. During this time, state and local governments would not be permitted to approve any new taxes on Internet access. However, those that currently have taxes on Internet access fees would be allowed to continue collecting them. Also the moratorium would be expanded to apply to Internet access provided over digital subscriber lines (DSL) and all other technologies used to provide Internet access. Again, current taxes on DSL Internet access would be grandfathered.

The Senate leadership could schedule a Senate floor vote on the Internet tax moratorium bill in early March. If S. l50 is considered, Alexander and Carper will offer their bill as a substitute. A Conference alert will be sent out urging mayors to contact their Senators and urge them to cosponsor and support the enactment of S.2084.

MTBE Liability Immunity

Fremont (CA) Mayor Gus Morrison, chair of the Energy Committee, led a discussion on pending energy legislation, underscoring the Conference's strong opposition to provisions in the House'senate conference report (H.R. 6), that would provide producers of methyl tertiary butyl ether (MTBE) with product liability immunity ("safe harbor"), unfairly leaving communities and local taxpayers with the costs of cleanup.

Section 17102, the "Fuels Safe Harbor" provision in H.R.6, which the House adopted last November and which stalled in the Senate late last year, exempts companies that manufacture MTBE from paying the costs associated with MTBE contaminated groundwater and surface water supplies. Water that is tainted with MTBE renders it virtually undrinkable.

Noting that the provision would pass the estimated $29 billion cost of clean up and decontamination on to local and state governments — which could be the largest unfunded mandate passed down from Congress to local taxpayers in recent years — Morrison called on the mayors to contact their Senators and Representatives to urge them vote against including MTBE liability immunity in energy, transportation or any other legislation.

Morrison pointed out that millions of dollars in clean-up costs, and untold impacts to local water supplies, are at stake in the debate over this provision, adding that, "It is difficult to overstate the potential harm of this language for local governments already struggling in a tight fiscal climate amid ever increasing threats to their water supplies."

At the conclusion of his remarks, Morrison circulated a letter for mayoral signatures to be sent to the Congress. The letter urged members of the House and Senate to oppose MTBE liability immunity in the energy bill or any other legislation that may contain this provision.

Crime Funding and Gun Safety

Mayors and Police Chiefs Task Force Chair Scott L. King of Gary briefed the leadership on proposed cuts in key law enforcement programs, and Senate action on gun safety initiatives.

The Administration's FY 2005 budget proposes to all but eliminate the COPS program by reducing funding administered by the COPS Office from $487 million to $95.5 million (almost an 80 percent cut). Of that total, no funding would be provided for the Universal Hiring Program, the COPS MORE program, the school resources officers program, or interoperability grants.

The budget also proposes to combine the Local Law Enforcement Block Grant and the state-based Byrne Formula Grant Program into a new Justice Assistance Grant program. Overall funding for the combined new program would be reduced from $884 million to $509 million. This comes on top of the 44 percent reduction in LLEBG funding in FY 2004.

On the issue of gun safety, the Senate is expected to vote soon on legislation that would severely limit the ability to bring lawsuits against gun manufactures and dealers, and would preempt existing lawsuits brought by a number of cities. The Conference has strong policy opposing this preemption. If this law is approved on the Senate floor, attempts will be made to add assault weapon ban and gun show loophole proposals to the final bill prior to final passage.

TEA-21 Reauthorization

Dearborn Mayor Michael A Guido, Vice Chair for Telecommunications of the Transportation and Communications Committee, led a discussion on the reauthorization of TEA- 21. Guido pointed out that under the threat of a veto by the Administration, the U.S. Senate on February 12, 2004 approved a six-year $318 billion TEA-21 reauthorization bill. Included in the bill is $56.5 billion for transit, $255 billion for highways and $6 billion for safety programs. The highway and transit amounts are guaranteed and firewalled which is vital to the predictability of the programs.

The Senate bill also for the first time includes $2 billion annually for Amtrak. Unfortunately, Amtrak's funding is not guaranteed as passed in the bill.

Guido noted that the vote came a day after the Administration issued a veto threat. The final vote was nine more votes than the two-thirds needed to override the threatened veto.

"Now the debate shifts to the House early March. The House has yet to move its $375 billion transportation bill," said Guido.

Telecommunications: Cable Modem and VOIP

Highlighting the continued hard line lobbying by the telecommunications industry challenging local government's control of rights'of-way and taxing authority, Dearborn Mayor Michael A. Guido, Vice Chair for Telecommunications of the Transportation and Communications Committee, briefed the mayors of the status of the cable modem appeal and focused the mayors on new taxing and control threat Voice Over Internet Protocol (VOIP).

Guido noted that local government is not opposed to updating the telecommunications laws. Technology has advanced rapidly. However, local government must resist modernizing telecommunication laws that are targeting the reduction or elimination of local control and taxing authority.

On the issue of the cable modem ruling, Guido noted that experts have assessed that the ruling has already cost local government over a billion dollars and highlighted that the Conference has appealed the 9th Circuit ruling that cable modem is a telecommunications as opposed to a cable service subject to local taxing authority.

Briefing the mayors on VOIP, Guido said, "The stakes in the VOIP debate are enormous." VOIP is technology that allows telephone calls using broadband Internet connection instead of a regular (or analog) phone line.

The FCC decided on February 12, 2004 that some VOIP providers do not offer the same sort of service as conventional telephone companies and as a result don-t need to be regulated in the same way that phone companies are regulated. Guido said "local governments could lose billions of dollars in revenue from regulatory fees if calls moved onto the Internet are no longer subject to the charges.

Amtrak

North Little Rock Mayor Patrick Henry Hays, Chair of the Amtrak Mayors Advisory Council, said "last year, Amtrak was able to completely turn around its finances and end the year with $150 million." "On top of the financial success Amtrak enjoyed last year, they had the most riders in their 32-year history with 24 million riders," said Hays.

Amtrak's FY05 budget request is $1.8 billion. "The Administration recommended half of Amtrak's need at $900 million, a 26 percent cut from last year's appropriation," said Hays. During the briefing on the FY05 recommended budget, U.S. Department of Transportation Secretary Norman Mineta said this amount was not enough to run the railroad.

Hays said "compounding the difficulty Amtrak faces in the annual appropriations battle, the Chairman of the House Transportation Appropriations Subcommittee, Representative Ernest J. Istook of Oklahoma, sent a "dear colleague" letter threatening to reduce any Member of Congress' highway or airport project requests if that member supports Amtrak's funding request." Hays concluded his briefing for the mayors stating, "it will not be easy for Amtrak to get $1.8 billion next year. They will need our help."

Nationwide on Financial Literacy

Maggie Kwasny of Nationwide Retirement Solutions spoke to the mayors about the launch of new NRS and U.S. Conference of Mayors sponsored education initiative aimed at children on the issue of financial literacy. Using an original adaptation of a classic fairy tale, The Three Little Pigs — A Financial Fairy Tale was created. This new version of the classic is available in story book form along with on-line collateral materials.

The program is geared to grade school children and takes about twenty minutes including interaction with the children to present. The students learn the importance of sharing, saving and spending their money. Materials will be available in time for the national launch on April 22, then national "Take Your Children to Work Day," but can be used anytime for events such as school visits, etc. To receive your kit and further information, contact Maggie Kwasny at 614-854-8697.

Metro Economies

Conference Vice President Akron Mayor Don Plusquellic reported on plans by the Council on the New American City to expand its Metro Economy series to include periodic reports in addition to its standard publications on gross metropolitan product and jobs. He also announced that in the Spring the Conference and the Council will launch a National Financial Literacy Campaign promoting financial education to residents and youth.