November 17, 2003

Jeffrey D. DeBoer, President, The Real Estate Roundtable

The Conference of Mayors is to be commended for bringing together this diverse group of mayors, business leaders and community activists to share thoughts on the economy, job growth and the need to make investments in our nation's infrastructure.

Without question, the economic well being of the real estate industry is tied directly to the state of infrastructure, jobs and the quality of life issues that are the subject of today's discussion. At the same time, the interests of America's cities are contingent on the health of the real estate industry. After all, real estate generates nearly a third of total U.S. GDP and creates jobs for over 9 million Americans. And, of particular interest to mayors, real estate is the source for nearly 70 percent of local government tax revenues.

Economic expansion without significant job growth is our leading concern. With workforce expansion, office buildings will be more fully utilized. Increased distribution of goods will benefit the industrial warehouse sector and increased business travel will benefit hotel owners.

Of course resources are needed to fund infrastructure needs and education. We suggest that one source of revenue be the collection of taxes already owed . . . for example, internet sales which today largely go untaxed even though all purchasers are supposed to send in taxes on internet purchases. Congress is now working on legislation to authorize states to collect these taxes. We hope the Conference of Mayors will support it.

Additionally, adding to the amounts paid in property taxes, our industry must pay its fair share of infrastructure improvements. Where there is a nexus between new development and the need for such infrastructure, we are clearly going to be picking up a big piece of the tab. We should be. Candidly, however, with local and state budgets weakening, all too often some real estate development companies and large landowners find themselves appropriated by the appropriators. That leads — very simply — to a lack of investment in those jurisdictions.

We look forward to continuing to solidify our close working relationship with the U.S. Conference of Mayors.

Mike Worthington, Corporate Vice President, Motorola Inc.

Motorola was very pleased to have participated in the extraordinary forum led by President Garner and the Conference of Mayors in New York City. The topics of Homeland Security and Economic Security go hand-in-hand. The investments needed in both areas are essential top priorities.

The support The Conference of Mayors has provided for Federal funding for cities to implement interoperable communications systems has been instrumental in highlighting this very important requirement. We compliment you on the significant cooperation you have demonstrated in support of this legislation.

Motorola looks forward to being a part of this continuing forum and to our future in cooperation with the Conference of Mayors.

Mike Kercheval, President and CEO, International Council of Shopping Centers

The International Council of Shopping Centers (ICSC) supports the United States Conference of Mayors efforts to strengthen our cities through infrastructure investment. We cannot allow the shopping center industry's prosperity to be impeded because we have neglected to maintain infrastructures.

The shopping center industry is a fiscal engine that many communities rely on for jobs and revenue. In 2002, shopping centers registered over $1.23 trillion dollars in sales, collected $53.1 billion in state sales taxes and paid an additional $9 billion in property taxes.

ICSC has long recognized the importance of partnering with the U.S. Conference of Mayors and other municipal associations to better serve our communities. In May, the U.S. Conference of Mayors made ICSC's Spring Convention a major tool in their arsenal of community growth and 35 mayors participated in a Town Hall meeting that focused on retail development. In all, more than 1,000 public officials participated in the event. We are also working with the Governors, Mayors, and other local officials to collect sales tax on Internet purchases.

ICSC stands ready to assist the U.S. Conference of Mayors on this important endeavor and together I believe we can improve and enhance the quality of life in the communities in which we build and live.

David Dworkin, Vice-President Regional Management and Housing Partnerships, Fannie Mae

There is a positive economic impact of new residential construction on job growth and local tax revenue in cities across the nation. The construction of 100 single-family homes on average generates 250 jobs in the local community during the first year of construction and 65 jobs every year thereafter according to statistics compiled by the National Association of Home Builders (NAHB) and Fannie Mae. In terms of local tax revenue, constructing 100 single-family homes generates $1.4 million in additional local tax revenue and other fees during the first year of construction and nearly $500,000 every year thereafter, for a total of $5.9 million over ten years.

Walt McDonald, President, National Association of Realtors

The American Dream of Homeownership is a powerful concept. And housing is a powerful economic engine. This summit is focused on job growth in the U.S. economy through infrastructure investment. There is no better investment in the economy and in a community — than investing in a home.

Housing accounts for about 20 percent of the nation's Gross Domestic Product, or about one out of every seven dollars spent in the United States each year. In 2003, the housing sector has contributed $1.6 trillion to the national economy.

For every 1,000 single-family new homes constructed, 2,448 construction-related jobs are created. That translates into $79.4 million in wages. In addition, $42.5 million in tax revenues and fees will come into local, state and federal coffers. And, for every 1,000 multi-family units, more than 1,000 construction-related jobs will be created, generating $33.5 million in wages, and almost $18 million in fees and tax revenues.

Transportation plays an important role in housing decisions. Buying a house isn't just about a structure and a lot, it's also about transportation. Savvy buyers will even look into the future and wonder how planned transportation changes will affect a property's value over time.

A sound transportation system creates the foundation for a community's long-term economic well-being. NAR is supporting an increase in the federal motor fuel tax to fund a federal transportation program. This is one of the few times that our association has actually voted in support of a tax increase.

By close involvement in their communities, Realtors are advancing practical ideas about how transportation can be improved, as well as how to make the American Dream of homeownership a reality for even more people.

Healthcare should be very high on every mayor's economic agenda, now more than ever. Healthcare is the largest employer in metro areas, with most of the employment concentrated in cities and economically distressed inner cities. Despite the downturn, hospitals go begging for nurses and technicians and healthcare jobs are expected to increase significantly in the future. Consider that many of these jobs provide a real opportunity to reach the middle-class, that these functions cannot be exported, and that most of the jobs are located close to where low-income people live. How can you do better than this?

Several cities are experimenting with strategies to link low-income residents to this long-term opportunity, thereby increasing their middle-class tax base and boosting the performance of their largest economic engine.

I would urge mayors to look at Medicare and Medicaid policy as urban economic policy. Many of these resources flow to urban hospitals, and changes in state and federal eligibility and funding on Medicare and Medicaid will directly affect your city's economic capacity. Weigh in on this one from both a social and an economic perspective.

Lion is a manufacturer and logistics provider of uniforms for first responders. The global migration of manufacturing jobs will continue especially in commodity-item related jobs. However, process and knowledge workers can replace these jobs. At Lion, we continue to manufacture high-tech apparel products in the U.S while we are exporting our process knowledge in: Logistics, Manufacturing, Maintenance, and Financing. City strategies must recognize the new economic reality described in the Global Insight jobs report and make the following commitments.

First, we need to make a commitment to provide a stronger education system for children and technical training for employees.

Second, we need to make a commitment to transport infrastructure improvement. This is important for the improved movement of goods and people for a globally competitive and globally convenient city,

Third, we need to promote secure and prepared cities. A growing city must have citizens who feel safe and secure with well-funded and prepared first responders. The White House, Congress, and DHS need to work harder to get funding to the metro cities where it is needed the most.

We in the private sector increasingly use partnerships to be competitive. State and federal governments need to contribute to this effort by working harder to provide incentives that can make these types of partnerships more attractive to the private sector and to cities.

Record low mortgage interest rates, all-time high mortgage re-financings and near-record home purchase volumes have helped the housing industry become the backbone of the nation's economy.

And, it looks like the housing and real estate sector will continue to play a vibrant role in our nation's future economic security. But there is still more that can be done to create opportunities for single-family homeownership, provide affordable rental housing and promote commercial development.

First and foremost, our nation's tax policies need to be reviewed and amended to reflect the realities of the marketplace and retain the attractiveness of owning, mortgaging and selling both commercial and residential property. Specifically, we need to enact the "Renewing the American Dream Tax Credit" to create a Single Family Affordable Housing Tax Credit that would be given for the rehabilitation or construction of singe-family homes for sale to low- and moderate-income families over the next five years.

We need to revive the Low-Income Housing Tax Credit (LIHTC) to eliminate the bias toward non-profit sponsors, encourage mixed-income developments and improve its use with FHA programs. We need to make permanent the expanded brownfield tax incentive that was contained in the Community Renewal Tax Act (CRTA) of 2000 that is set to sunset in January 2004.

Second, there is currently no program designed to provide rental housing for America's working families making between 60 percent and 100 percent of median income. To help stimulate increased production of affordable rental housing we should look at creating a new multifamily production program that uses FHA insurance, in conjunction with interest rate subsidy to stimulate the production of new rental housing.

Fourteen million families — one in every seven — have "critical housing needs," paying too much for housing or living in substandard conditions. Decent, affordable homes are a critical foundation for family success and community stability. Housing also is a critical component of the economy. A housing and reinvestment agenda for America's low-income communities and working families should include:

New Housing — and New Jobs: Support construction and rehabilitation of more than 1 million affordable homes for low-income working families over the next 10 years by doubling the HOME block grant program to $4 billion annually. Housing Choice and Opportunity: Provide 100,000 new Section 8 rental assistance vouchers to help low-income people move to safer communities. High-Impact Homeownership: Award seed funds to local jurisdictions to encourage large'scale development of for'sale housing in low-income areas. Large'scale Commercial Development: Expand the New Markets Tax Credit, which produces jobs and economic development in hard-hit communities. Public Housing Reform and Redevelopment: Continue the highly successful, broadly supported HOPE VI public housing and community redevelopment program. Flexible Resources for Comprehensive Revitalization: Enhance local flexibility to better coordinate federal block grants to support comprehensive community revitalization efforts. Private Support for Grassroots Groups: Support small, proven programs that leverage large private contributions to strengthen community-based groups. Greater Grassroots Skills, Knowledge and Strength: Invigorate the offices in various federal agencies charged with helping community-based and religious organizations apply for federal funds by increasing their capacity.

This is CMAA's first meeting with this group and I am highly impressed with the dialogue in this room. The Construction Management Association of America is North America's largest organization dedicated exclusively to the interests of professional program and construction management. CMAA member firms are in the heart of infrastructure investment throughout the country stimulating job growth.

CMAA shares similar views and concerns to ASCE regarding the current state of our nation's infrastructure and our member firms look forward to the opportunity to help improve upon the low grades portrayed in ASCE's Report Card for America's Infrastructure. CMAA member firms are involved in all aspects of infrastructure, including road, bridge, building, transit, aviation, schools, and wastewater. CMAA wants to be viewed as a trusted advisor to government and industry on how to successfully manage their construction programs. We want to show the value that a professional construction manager brings to the construction process. We will partner with other industry associations to help advance legislative priorities.

Mark Morial hit the target right on when he stated "ramping up on infrastructure will have a ripple effect on improving our nation's entire economy". Capital investment historically creates jobs in all industries. Although we have a great deal of work ahead of us, I commend all of you for addressing these issues head on.

As cities position themselves to compete in a global market place, they will need to deliver essential services in the most cost-efficient manner possible. Public-private partnerships in the management of water and wastewater services can bring significant operational savings to cities while at the same time ensuring high performance.

Many cities are also looking at design, build and operate contracts (DBOs) on capital projects. We are seeing some staggering cost savings through this approach, because the design, engineering, construction and operational aspects are integrated into a single bid.

We have also talked today about wage pressures in the economy as a whole. All of us have heard about the huge capital investment needed to modernize our water and wastewater systems. It is clear that the ratepayer will not be able to absorb the entire bill. That means we have to find creative ways to operate and finance systems that save money and stabilize rates while at the same time modernizing systems. We think public private partnerships can be an important part of the solution.

Time and again, we are told that our transportation systems, a key part of our infrastructure, should work like a business. Businesses need support from both their management and their investors to do that, and the debate over transportation funding levels is a good lesson in how business'like decisions should be made. Well documented reports by the U.S. Department of Transportation, cleared by the White House for submittal to the Congress, show that a meaningful increase in funding is required to simply maintain the condition and performance of our nation's roads, bridges and transit systems. "Maintain" in this context means a continued acceptance of today's level of physical condition and today's level of congestion and delay. But the USDOT report tells us moreÉthat there is a level of infrastructure investment well above the maintenance level that would generate positive economic benefits for the nation. Such investments would support growth and adapt the system to changing trade patterns. That's the business'like decision that the White House and Congress should make — invest in the system, improve its performance, reap economic benefits and create jobs.

While unemployment and slow growth in GMP pose serious problems for Mayors and other government leaders, the effects of living in a society demanding instant gratification is equally problematic. Personal bankruptcies continue at a record setting pace, reaching 1.6 million for the 12 months ended June 30, 2003. Credit card debt has tripled between 1990 and 2000 growing from $240 billion to $690 billion and is currently approaching 1 trillion dollars. The average number of credit cards is also steadily increasing to a current rate of 10 cards per person.

If you stratify this mountain of debt by salary levels, we find that of consumers earning in excess of $100,000 per year, roughly one third carry their balances over from month to month while of those earning under $10,000 per year, over two thirds are carrying their balances forward. Consumers who are most likely to carry balances and make minimum payments, incurring high interest and often late fees and over the limit penalties, are those who can least afford to do so. And thenÉsomething happens - a loss of a job, an illness or even a divorce and suddenly, the bills cannot be paid.

The impact of debt stress, whether manifested through loss of productivity or the filing of personal bankruptcy, is a significant drain on local economies. The responsible use of credit is not taught in schools and many parents do not have adequate knowledge and skills to pass on to their children. As long as credit is readily available and credit education is scarce, the problem will continue to compound.

Schools scored poorly on the ASCE Infrastructure Report Card. Local communities in every state face the daunting task to renovate and repair aging school facilities and to build new schools to meet the pressures of rising enrollments. The American Society of Civil Engineers estimates the costs to be $127 billion. Rebuild America's Schools Coalition estimates the national need to be in excess of $225 billion. Currently these costs are carried by state and local governments. Finding these funds in the current fiscal climate for state and city governments is extremely difficult.

A federal investment in school infrastructure will accomplish two major national objectives. Schools will be built, renovated and repaired and well paying construction jobs will be created.

The Conference of Mayors is exactly on target: the generation of good jobs is critical to the economic recovery. Federal investments in infrastructure such as schools will do that and ensure an economic foundation for the future. Rebuilding America's schools is an investment in today's schools and students and tomorrow's economy.

Thanks to the USCM for their ongoing and Herculean support of Amtrak and the development of passenger rail in this country.

Amtrak operates in 46 states in over 500 communities across the country. We just enjoyed the most successful year in the Company's history - over 24 million passengers rode Amtrak despite the challenges of last year (weak economy, blackout in NYC, continuing operational difficulties due to capital underinvestment).

Reauthorization provides an opportunity to fund the development of passenger rail in this country. No matter what policymakers decide, Amtrak needs to be in a state of good repair in order to build the higher speed rail corridors that the Mayors have so strongly endorsed.

Bechtel is proud to stand with the US Conference of Mayors in creating solutions for the urgent infrastructure needs of the nation. As Bechtel works in cities across America, improving the nation's airports, rail and transit systems, highways, bridges, ports and harbors, we have seen first hand the many successes which result from close cooperation between the public and private sectors. Together we will invest in the future by designing and building projects which provide good jobs and are the engine of economic growth.

Homeownership is critical to the financial and social well-being of individuals, families, neighborhoods, communities and cities across the nation. Once an individual is a homeowner he or she can leverage this asset to realize other goals, including starting a business, paying for college, funding other investments, saving for retirement. At the community level, considerable evidence suggests that homeowners are more likely to be satisfied with their homes and neighborhood, more likely to participate in voluntary and political activities and more likely to stay in their homes. These, and other factors, increase opportunities for cities to rebuild and stabilize infrastructure — to work toward specific community-building goals, including entrepreneurial and business development efforts that are critical to inner-city growth and development. While community-building is a complex undertaking, increased homeownership levels play a major factor. By supporting program and legislation that facilitates incentives such as tax relief, down payment assistance and home buyer grants, mayors, state legislators and governors can work together with the mortgage industry to raise homeownership levels among their constituencies. It is equally important that, elected representatives and others recognize that seemingly well-intentioned legislative measures can be counterproductive to the creation of a positive environment for business growth and growth in homeownership levels. As a national leader in residential finance, Countrywide works diligently to offer innovative, affordable home loan programs, designed specifically to meet the needs of emerging markets population segments that are strongly represented in inner-cities. Countrywide is eager to work with mayors, state legislators and governors in ways that support strong business development and stable, prosperous communities.