By Larry Jones
July 2, 2012

Racine Mayor John Dickert, Vice Chair of the Metro Economies Committee, served as Chair of the June 14 meeting. He reminded mayors that our nation is still recovering from the Great Recession and that many local communities are still facing high unemployment and stagnant job growth. To put America back to work, he said, "We need the federal, state and local governments to work together to ensure maximum job growth in local communities." To shed light on several federal initiatives that are making a difference in local communities, Dickert introduced a panel of four speakers who discussed what's being done to increase the number of high-growth firms, expand small business access to credit, promote new market tax credits, and protect municipal bonds.

Strong Cities, Strong Communities Initiatives

Matthew Erskine, Acting Assistant Secretary for Economic Development at the U.S. Department of Commerce, told mayors about a new initiative—Strong Cities, Strong Communities (SC2) that was announced by President Barack Obama last year to connect federal government resources directly with communities to create jobs, improve the business climate and address local and regional challenges. The goal of the program is to strengthen neighborhoods, towns, cities and regions across the country by enhancing the capacity of local government to develop and execute their economic vision. Currently he said six mayors are participating in the program from New Orleans, Memphis, Detroit, Chester (PA), Fresno and Cleveland. These mayors are working closely with federal teams to help spend resources they already have better, smarter and more catalytically. During his presentation, Erskine announced the launching of the $6 million Strong Cities, Strong Communities visioning challenge that will help six new cities (one in each of EDA's six regions) leverage innovative strategies to spur local economic and job growth.

nching of the $6 million Strong Cities, Strong Communities visioning challenge that will help six new cities (one in each of EDA's six regions) leverage innovative strategies to spur local economic and job growth.

Bob Ibanez, Manager of the New Markets Tax Credit program at the U.S. Treasury Department's Community Development Financial Institutions Fund (CDFI), explained that the main mission of the CDFI is to promote community development investments for underserved populations and in distressed communities. The New Market Tax Credit Program permits individual and corporate investors to receive a federal income tax credit for investing in Community Development Entities set up to spur investment in distressed neighborhoods. For 2011, he said $4.6 billion was made available in lending and investing activities and a total of 30,075 jobs have been created in low income communities across the nation.

State Small Business Credit Initiative

The State Small Business Credit Initiative Program was created in 2010 under the Small business jobs Act of 2010 to increase the availability of credit to small businesses, and generate jobs and other economic development benefits in every state. Cliff Kellogg, Director of the program at the U.S. Treasury Department, explained that the program provides $1.5 billion to strengthen state programs that support lending and investing to small businesses and small manufacturers. Funds are used to support two components: the Capital Access Programs (CAPs) and Other Credit Support Programs (OCSPs). The program allows states to build on successful models for state small business programs or launch new ones. In order to be eligible for funds, each state must demonstrate that it will be able to leverage each $1 of federal funds ten times by the end of the program in December 2016. It is estimated that loans and investments supported by the program would create 3,510 new jobs within two years and retain an additional 7,634 jobs at risk of loss.

Michael Decker, Managing Director of the Securities Industry Financial Market Association, provided an update on an issue that could drive up the borrowing costs for cities on municipal bonds. He told mayors that the Volker Rule, which was approved as part of the Dodd Frank Act, generally prohibits banks from two kinds of activities: proprietary trading and participating in certain kinds of investments like hedge funds. But, he said, the Dodd Frank legislation made clear its intension to exclude municipal bonds from the proprietary trading restrictions for two reasons: (1) municipal bonds are extraordinarily safe investments and (2) the default rate is almost zero. He explained that rather than exclude all municipal bonds, the proposed rule would only exclude bonds issued by state and local governments and not those issued by independent government agencies and authorities such as school districts and water and sewer districts. These agencies and authorities issuances account for over 60 percent of total state and local government borrowing in the municipal market. If the proposed rule is allowed to go into effect as drafted, bonds issued by agencies and authorities will be perceived to be more risky by investors, which is likely to drive up borrowing costs. He asked mayors to contact regulators and their congressional delegations directly to urge that all municipal bonds be excluded from the Volker Rule.

districts and water and sewer districts. These agencies and authorities issuances account for over 60 percent of total state and local government borrowing in the municipal market. If the proposed rule is allowed to go into effect as drafted, bonds issued by agencies and authorities will be perceived to be more risky by investors, which is likely to drive up borrowing costs. He asked mayors to contact regulators and their congressional delegations directly to urge that all municipal bonds be excluded from the Volker Rule.

Decker also urged mayors to oppose efforts to reduce or eliminate entirely the tax exemption for municipal bonds. He explained that the vast majority of municipal bond investors pay no federal income tax on their interest. As a result, state and local governments get a significant reduction in their borrowing costs. He warned that proposals have been included in the Administration's 2013 budget and in the Simpson-Bowles Commission recommendations to curtail and eliminate respectively the tax exemption on municipal bonds.

After Dickert explained the rules for the resolution process, he briefly reviewed each resolution submitted to the Committee for consideration and members voted to adopt the following resolutions:

• Support for the Marketplace Fairness Act

• Supporting a Change in the Definition of Municipal Securities in the Volker Rule

• Opposing Changes in the Net Asset Value (NAV) Rules for Money Market Mutual Funds

• Standardization, Transparency and Accountability in Federally Funded Grants

• Support for Comprehensive Regulatory Streamlining and Reform

• Support for Local Infrastructure Banks

• Enabling Public Employees to Adopt Pension Benefit Alternatives That Reduce Cost to Public Employers

• Urging Support for EB5 Immigrant Investor Pilot Program

• Support for Emerging Energy Technologies by "Greening" the Tax Code

• Support for Strong Cities, Strong Communities

• Support for Credit Union Small Business Jobs Bill

• Support for Defense Transition and U.S. Cities

• Mayoral Support for Consumer Financial Protection Through the DollarWise and Summer Youth Campaigns

• Endorsing Offices That Facilitate Close Collaboration between Local Governments, foundations, and Nonprofits

• Support for the Economic Census

• Support for the Census of Governments

• Support of the American Community Survey

• Support of Amendments to Permit Municipalities to Register Their Flags, Coats of Arms, and Other Official Insignia

• Establish as a Position of The U.S. Conference of Mayors That: Corporations Should Not Receive the Same Legal Rights as Natural Persons, Money is Not Speech, and Independent Expenditures Should Be Regulated