Roundtable’s U.S. Real Estate, Political Leaders Discuss National and Real Estate Industry Concerns — from Weak Job Creation, Debt Refinancing and FIRPTA, to “Taxmageddon” and ADA Pool Lift Regulations Issues
Concerns over political gridlock, comprehensive tax reform, a wobbly economic recovery and “taxmageddon” — the looming expiration of some $500 billion in tax breaks at year-end — were key themes at the Spring 2012 Roundtable Meeting in Washington this week, along with ongoing debt refinancing challenges facing commercial real estate. The Roundtable meeting, held over the course of two days, offered an opportunity for candid dialogue between top real estate industry and trade association leaders and key U.S. policymakers — including House Majority Leader Eric Cantor (R-VA), U.S. Transportation Secretary Ray LaHood, and some 20 other House and Senate lawmakers.
House Majority Leader Eric Cantor (R-VA), left, and Roundtable Chairman Daniel M. Neidich (CEO, Dune Real Estate Partners)
Cantor focused on some of the big questions facing the nation as it seeks to remake the roughly 70,000-page tax code (and as policymakers grapple with the looming expiration of the Bush tax cuts) — including questions about how the tax code can foster entrepreneurship, risk-taking, and U.S. competitiveness, as well as the challenges of eliminating popular tax deductions in order to pay for other changes in the tax code. As for the 1986 Tax Act, he echoed the sentiments of many real estate executives by suggesting that it laid the groundwork for the debilitating credit crisis in commercial real estate in the early 1990s — and that any comprehensive tax restructuring must be done very carefully.
In conjunction with the Spring Roundtable Meeting, Roundtable members traveled to Capitol Hill on Tuesday to meet with groups of Republican and Democratic senators to share their concerns over tax, capital and (regulatory) environmental issues. A day later, a contingent of real estate CEOs and industry advocates met with U.S. Treasury Secretary Tim Geithner and U.S. Deputy Treasury Secretary Neal Wolin to press for administrative repeal of a 2007 IRS rule extending the reach of the Foreign Real Property Tax Act of 1980 (FIRPTA) — an outdated and discriminatory tax law that discourages foreign equity investment in U.S. commercial real estate.
FIRPTA reform would help attract new sources of equity capital from abroad, which in turn would help bridge the massive “equity gap” complicating the refinancing of hundreds of billions in commercial mortgages (and threatening a new wave of foreclosures that would hurt communities and smaller financial institutions).
In conjunction with the Spring Roundtable Meeting, Roundtable members traveled to Capitol Hill to meet with groups of Republican and Democratic senators to share their concerns over tax, capital and (regulatory) environmental issues.
Tuesday’s program also featured a special briefing by TIME magazine editor-at-large and senior political analyst Mark Halperin on this year’s high-stakes presidential elections and the outlook for key policy issues during the anticipated “lame-duck” congressional session.
On Wednesday, Council on Foreign Relations senior fellow and veteran financial writer Sebastian Mallaby offered insights on global economic and liquidity challenges — an especially timely topic given this week’s meetings of the World Bank, IMF and G-20 in Washington, and upcoming meetings of the Federal Open Market Committee (FOMC) on April 24-25. Despite surprisingly weak job creation numbers in recent weeks, Fed officials have been downplaying the likelihood of another round of so-called “quantitative easing.” The central bank next week is expected to update its forecasts for economic growth, unemployment, inflation and interest rates.
The Spring Roundtable Meeting came on the heels of Monday’s failed Senate vote on the “Buffett rule” — President Obama’s proposal for a 30 percent minimum tax on those earning over $1 million annually — and as the House prepared to vote on small business tax legislation and (another) short-term transportation infrastructure funding bill.
LaHood: Long-Term Infrastructure Bill Means Jobs
The new 90-day highway bill (which would pick up after the current stopgap funding law expires on June 30) includes controversial language on the Keystone XL pipeline that has already drawn a veto threat from the White House.
U.S. Transportation Secretary Ray LaHood, center, with Roundtable member Ross Perot, Jr. (Chairman, Hillwood), left, and Roundtable President and CEO Jeffrey D. DeBoer, right.
Addressing The Roundtable on Wednesday, LaHood lamented the poor outlook for passage of long-term funding for complex transportation infrastructure projects requiring input from many stakeholders. (The last five-year transportation funding law expired in 2009; since then, there have been nine short-term extensions.) Earlier in the day, at a separate event, the U.S. Transportation Secretary said a longer-term transportation bill is the best way to chip at an unemployment rate stubbornly stuck at more than 8 percent. “If the [long-term] transportation bill passes, people go to work,” he said. Without long-term funding streams, state departments of transportation and companies leveraged to federal infrastructure cannot engage in multi-year planning, which results in a further strain on aggregates and highway and bridge construction. (Politico, April 18)
The Roundtable has been a key supporter of the two-year Senate transportation bill known as “MAP-21,” which would ensure sustained funding for the federal Transportation Infrastructure Finance and Innovation Act (TIFIA) program, among other things. As Roundtable board member Scott Rechler (RXR Realty) explained during Wednesday’s exchange with LaHood, TIFIA provides federal credit assistance in the form of direct loans, loan guarantees, and standby lines of credit to finance regionally or nationally significant surface transportation projects.
By providing improved access to capital markets, flexible repayment terms, and potentially more favorable interest rates than can be found in private capital markets for similar instruments (e.g., 3.11 % for a 35-year loan, as of yesterday), TIFIA helps fill market gaps and leverage federal funds by attracting substantial private co-investment (every $1 in federal TIFIA funds can provide up to $10 in TIFIA credit assistance, thus leveraging up to $30 in transportation infrastructure investment).
Other important policy issues raised at the Spring Roundtable meeting included:
• pending legislation to promote energy efficiency investment in commercial buildings;
• new Americans with Disabilities Act (ADA) pool lift requirements sought by the U.S. Justice Department (DOJ) that could require the retrofitting of hundreds of thousands of pools at hotels and spas;
• a pending rewrite of lease accounting rules by the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB)
• The status of discussions with regulators regarding the proposed risk retention rules affecting the CMBS market
Roundtable Members Discuss Pool Lifts, Energy Efficiency Legislation on National Television
After briefing Roundtable members on the ADA pool lifts issue on Wednesday, American Hotel & Lodging Association (AH&LA) Executive VP of Public Policy Marlene Colucci-Renna appeared on Fox News yesterday to share the real estate industry’s perspectives on the matter. [See The Roundtable’s March 28 comment letter to DOJ urging that stakeholders be allowed to comment on the substance of the new pool lift requirements, and urging a small business impact analysis — Roundtable Weekly, April 6]. AH&LA has been invited to testify on this issue at a hearing next week by the House Judiciary Subcommittee on the Constitution.
Separately, Sustainability Policy Advisory Committee (SPAC) Chairman Anthony Malkin (Malkin Holdings) appeared on MSNBC’s “Morning Joe” yesterday to discuss energy efficiency retrofits at the Empire State Building — and to urge federal policies encouraging broader retrofitting of America’s existing building stock.
Malkin, who helped brief Senate staff members last fall on improving the ineffective Section 179D tax deduction for energy efficiency, praised incentive-driven, cost-based energy efficiency legislation during yesterday’s interview — an allusion to bipartisan Senate legislation (S. 1000) that includes positive language on federal loan guarantees for energy-retrofit projects in commercial buildings.
The Roundtable has been working closely with the bill’s sponsors — Senators Jeanne Shaheen (D-NH) and Rob Portman (R-OH) — to soften separate provisions aimed at creating federal building codes on energy efficiency. In his appearance, Malkin also referenced The Roundtable’s work with Senators Jeff Bingaman (D-NM) and Michael Bennet (D-CO) to develop legislation that focuses more on market-based incentives as opposed to mandatory regulations as key drivers to transform the energy efficiency building retrofit market.
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