Header Image

July 25, 2014

CAPITAL & CREDIT / TERRORISM INSURANCE
With Time Running Out on Expiring Terrorism Insurance Law, 117 CEOs Urge House to Act; Metro-Area GOP Lawmakers Said to Oppose Hensarling’s Effort to Scale Back TRIA

TAX POLICY
Roundtable Advocates Combining Internet Sales Tax Legislation with Bill Extending Ban on Internet Access Taxes; Long-Term Resolution Unlikely Before Election

LAND USE, ENVIRONMENT AND AVIATION POLICY
Real Estate Coalition, U.S. Chamber Warn of Economic, Environmental, Constitutional Ramifications of FAA Proposal Governing Navigable Airspace

INFRASTRUCTURE & TAX POLICY
Senate to Vote Next Week on House Infrastructure Funding Bill; Some States Already Shelving Bigger Projects Due to Uncertainty Over Congressional Action


CAPITAL & CREDIT / TERRORISM INSURANCE

With Time Running Out on Expiring Terrorism Insurance Law, 117 CEOs Urge House to Act; Metro-Area GOP Lawmakers Said to Oppose Hensarling’s Effort to Scale Back TRIA 

Faced with the prospect that Congress could recess in early August without acting on the expiring Terrorism Risk Insurance Act (TRIA), over 100 business CEOs — representing some of the nation’s largest employers — wrote to U.S. House leaders on Tuesday urging swift action on TRIA reauthorization (Crain’s New York Business, July 23).  The 117 CEOs who signed the letter to House Speaker John Boehner (R-OH), incoming Majority Leader Kevin McCarthy (R-CA) and Majority Whip-Elect Steve Scalise (R-LA) included top commercial real estate executives. 

2014_07_22 image PFNYC ltr TRIA

Faced with the prospect that Congress could recess in early August without acting on the expiring Terrorism Risk Insurance Act (TRIA), over 100 business CEOs — representing some of the nation’s largest employers — wrote to U.S. House leaders on Tuesday urging swift action on TRIA reauthorization. 

“As currently designed, the Terrorism Risk Insurance Act (TRIA) program works, and is what makes it possible to maintain our vibrant economy in the face of what we all recognize as a significant risk,” the New York-based business leaders stated in their July 23 letter. They characterized TRIA as “one of the 21st Century tools we rely on to protect American jobs and allow investment to continue, despite the risk of terrorism.”

Kathryn Wylde, president and CEO of the Partnership for New York City— which organized the letter-writing campaign — added, “We have major employers in New York that are facing the need to extend their insurance policies now, and at this point, it’s extraordinarily difficult without an extension of TRIA” (Newsday, July 24).

The CEO letter came as the 9/11 Commission this week warned of a growing array of threats — from ISIS to cyber terrorism — and an American public that is increasingly complacent about the risk of a terrorist strike more than a decade after 9/11 (The Wall Street Journal, July 22). The commission, which reconvened for the 10th anniversary of its high-profile report, was particularly concerned about the state of the nation’s cyber-defenses.

“As the country becomes ever more dependent on digital services for the functioning of critical infrastructure, business, education, finances, communications, and social connections, the Internet’s vulnerabilities are outpacing the nation’s ability to secure it,” the commission stated, chastising Congress for failing “to pass basic cybersecurity legislation” despite a “growing chorus of senior national security officials [who] describe the cyber domain as the battlefield of the future.” (Govinfosecurity.com, July 23).

Members of New York’s congressional delegation, including Rep. Carolyn Maloney (D-NY) and Peter King (R-NY), continue to sound the alarm on TRIA and the implications of inadequate terrorism insurance for the nation’s — and the city’s — economies.

King reportedly has the backing of 25-30 Republicans from metropolitan areas who are unhappy with efforts by House Financial Services Chair Jeb Hensarling (R-TX) and his conservative allies to scale back TRIA’s protections and increase insurers’ “skin-in-the-game” (Times Ledger, July 23).   Last week, after the Senate voted 93-4 for a seven-year extension, Hensarling said it could take months to resolve differences between the two bills.

Maloney last Friday said House leaders must consider modifying the bill passed by Hensarling’s committee (H.R. 4871) or risk defeat on the chamber floor. “Failing that, the House should bring up the Senate-passed bill, which I believe would have the votes to pass the House.”

Added Maloney, “It is unfortunate that the effort to reauthorize this legislation, which is essential to our economy and job creation, has become mired in partisanship and controversy in the House. The TRIA program doesn’t cost the federal government a dime and would save taxpayers money in the event of an attack by spreading risk and limiting the government’s exposure.”

Rep. Peter King x200 hearing chair

Members of New York’s congressional delegation, including Rep. Peter King (R-NY), above, continue to sound the alarm on TRIA and the implications of inadequate terrorism insurance for the nation’s — and the city’s — economies.

Writing on CNBC.com on Tuesday, Wharton School professors Howard Kunreauther and Erwann Michel-Kerjan said they are poised to release a new report (TRIA after 2014) comparing the Senate-passed bill and its House counterpart — including their differing approaches to risk-sharing. The analyses are reportedly based on scenarios of financial losses from terrorist attacks in Chicago, Houston, Los Angeles and New York, provided by the modeling firm Risk Managements Solutions and the impacts on 750 insurers operating in these markets.

As Kunreather and Erwann-Kerjan stated July 22, “The findings that we will present at a briefing in the U.S. Senate on July 24 surprised us and others. We find, for instance, that under the current program, losses from a terrorist attack would have to exceed $40 billion before the taxpayers pay a penny. The Senate and House bills would raise the taxpayer threshold level anywhere from 30 percent to 85 percent.” 

The professors also drew attention to TRIA’s mandatory recoupment provisions affecting commercial policyholders. “Consider a $50 billion attack against New York City. Under TRIA today, all insured commercial enterprises across the nation would pay about $7 billion. It could be nearly $17 billion under the Senate bill and as high as $18 billion under the House bill,” they explained.

Roundtable board member Ed Walter similarly explained TRIA’s risk-sharing mechanisms in an op-ed for Roll Call newspaper on June 24, saying that TRIA requires insurers and policyholders “to bear the first-dollar loss up to a formula-defined level that could be as much as $37 billion in claims resulting from a terrorist attack, and insurers remain on the hook for a share of any losses above that level.”

In a statement last week (July 17), The Roundtable warned that congressional inaction on TRIA would cause a cascade of negative effects for businesses and institutions of all kinds that need terrorism insurance to protect against potentially catastrophic losses.

Roundtable Members Should Maintain Pressure on Congress

Roundtable members are urged to help maintain pressure on Congress by continuing to write, call or tweet U.S. officials about the need for immediate action on TRIA — using our grass-roots advocacy tool and micro-website “Engage.”

Take Action on TRIA - The Real Estate Roundtable

With the focus now on the House, Roundtable members are urged to help maintain pressure on Congress to reauthorize TRIA

Lawmakers should be reminded that terrorism is a man-made, constantly-evolving threat that strikes in a totally unpredictable manner — making it virtually impossible for private insurers to model or price such risk. They should also be reminded of the various mechanisms TRIA employs to protect taxpayers, U.S. economic security, and U.S. homeland security.

For further reference:

April 10 RAND Corp. report (The Impact of Eliminating the Terrorism Risk Insurance Program on Federal Spending) confirming that TRIA saves taxpayers money, particularly for terrorist incidents on the scale of 9/11

March 6 report by the RAND Corp. discussing TRIA’s role in protecting U.S. national security (National Security Perspectives on Terrorism Risk Insurance in the United States)

March 17 report by Standard & Poors (TRIPRA On the Brink of Expiration: A Ratings Perspective) warning that excessive changes in TRIA’s structure — to increase insurers’ “skin in the game” — could trigger ratings downgrades for smaller insurers, while limiting availability of indirect terrorism coverage.

# # #

Return to Top

TAX POLICY

Roundtable Advocates Combining Internet Sales Tax Legislation with Bill Extending Ban on Internet Access Taxes; Long-Term Resolution Unlikely Before Election  

2014_07_22 image Marketplace ITFA ltr6

The Roundtable on Tuesday urged Senate leaders to allow a vote soon on the combined Internet access tax /Internet sales tax measure

Senate Democrats this week signaled they will hold off — until the fall — on consideration of a new bill linking the Internet sales tax and Internet access tax issues (S. 2609, the “Marketplace and Internet Tax Fairness Act” [MITFA]).  Meanwhile, with the ban on new Internet access taxes expiring Nov. 1, the Senate could vote as early as next week on a short-term extension addressing only this issue.

Senate backers of the combined bill (MITFA) — including Sens. Richard Durbin (D-IL) and Mike Enzi (R-WY) — reportedly hoped to move their bill before the August recess, but ran into scheduling constraints and will now have to wait until after Labor Day (The Hill, July 23).

On the heels of last week’s House vote to permanently ban Internet access taxes and the Senate introduction of the combined (MITFA) bill [Roundtable Weekly, July  18], The Roundtable on Tuesday urged Senate leaders to allow a vote soon on the combined Internet access tax /Internet sales tax measure.

At the center of the Internet sales tax issue is whether states can compel Internet-only retailers to collect state sales taxes, and whether remote retailers should continue to enjoy a significant — and unfair — competitive advantage over “brick-and-mortar” retailers.

With real estate contributing nearly 70 percent of local tax revenues to communities around the nation, The Roundtable stated in its July 22 letter to Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY), “Our industry has a significant interest in ensuring that state and local tax systems work fairly and efficiently.”

Real estate also has an interest in ensuring tax policies that “promote and sustain broad-based job and income growth,” as these provide the “economic foundation that supports our ability to continue investing in capital-intensive, productive real estate assets,” the letter continued.

durbin_crop

Senate backers of the combined bill (MITFA) — include Sens. Richard Durbin (D-IL), above, and Mike Enzi (R-WY)

The appeal, signed by Roundtable President and CEO Jeffrey DeBoer, called for tax laws that “encourage capital investment, job creation, and economic growth without picking winners and losers in the marketplace. Unfortunately, with respect to retail activity, existing federal law has had the opposite effect.”

As DeBoer noted, a Congressional Budget Office (CBO) report in 2003 supported the need for even taxation of “identical goods purchased from a local seller and a remote seller,” concluding that current tax policy actually undermines federal income tax receipts by allowing “people to make purely tax-motivated decisions about consumption and production.”

Yesterday, The Roundtable letter forwarded the letter to all members of the U.S. Senate as well as key staff members, including legislative directors and tax legislative assistants.

The Senate last year broadly approved the “Marketplace Fairness Act” (S. 743) — legislation that would put virtual and store-based retailers under the same obligation to collect sales tax, and help states collect billions of dollars in sales tax revenue that they are owed. The Marketplace Fairness Act (MFA) — now incorporated into the broader MITFA bill — is supported by a broad coalition of real estate and retail groups, governors and the White House.

With S.743 languishing in the House Judiciary Committee for the past year, it remains to be seen how Republicans in the lower chamber will react to the combined Internet sales tax/Internet access tax measure. Also unknown is whether they will go along with a temporary extension of the Internet access tax ban — after having just voted overwhelmingly for a permanent extension.

“They have shown little interest in taking up such a proposal [MITFA], setting up a potential showdown between the two chambers if the Senate insists on pushing their melded bill,” The Hill reported July 23.

# # #

Return to Top

LAND USE, ENVIRONMENT AND AVIATION POLICY

Real Estate Coalition, U.S. Chamber Warn of Economic, Environmental, Constitutional Ramifications of FAA Proposal Governing Navigable Airspace  

 2014_07_25 image FAA letter

The Roundtable, 13 real estate trade groups and the U.S. Chamber of Commerce today jointly urged the Federal Aviation Administration (FAA) to withdraw an April 28 proposal.

The Roundtable, 13 real estate trade groups and the U.S. Chamber of Commerce today jointly urged the Federal Aviation Administration (FAA) to withdraw an April 28 proposal that seeks to incorporate “one engine inoperative” (OEI) procedures into unrelated “Section 77” regulatory criteria for determining potential hazards to navigable airspace. As the coalition writes in its July 25 comment letter, the proposed merging of the two regulatory issues.

represents a significant departure in longstanding agency practices;

lacks any substantiated basis in public safety;

has significant economic, environmental and property rights implications for real estate and surrounding communities — including potential restrictions on building heights; losses in the value of (transferrable) air rights that attach to properties around airports; reduced land development potential for such properties; potential Fifth Amendment “takings” consequences; implications for lenders, insurers and land use permitting authorities; and unintentional promotion of urban “sprawl” over high-density development.

The FAA at its June 25 online public hearing stated that the proposed OEI changes are “not about safety.”

Thus, the coalition concludes, the agency’s “overriding justifications are economic in nature. Should the FAA move forward and alter its longstanding Part 77 rules and determinations, it must conduct a full, 360-degree assessment of the economic impact on all stakeholders — including the impacts on land development interests and local communities. In this regard, the FAA must compile a rulemaking record that satisfies the APA [Administrative Procedure Act].”

Additionally, as a “major federal action significantly affecting the quality of the human environment,” the FAA proposal “triggers processes required under the National Environmental Policy Act (NEPA) and implementing regulations of the White House Council on Environmental Quality (CEQ).”

FAA Logo

The FAA proposal seeks to incorporate “one engine inoperative” (OEI) procedures into unrelated “Section 77” regulatory criteria for determining potential hazards to navigable airspace.

The coalition further explains, “As the proposed OEI changes can encourage sprawl and discourage greater densities for viable transit-oriented development (TOD) projects, at this juncture the FAA should assess environmental impacts including possible increased greenhouse gas emissions (GHG) and climate change effects, impediments to ‘smart growth’ policies such as programs allowing transfer of development and air rights, noise impacts, and effects on aquatic and habitat resources.”

Should the FAA proceed with its proposal, says the coalition, then due consideration should also be given to potential violations of the U.S. Constitution’s Fifth Amendment and its regulatory “takings” clause, as well as the potential for “just compensation” claims from aggrieved land owners.

According to the coalition, the FAA thus far has “ignored” entreaties from U.S. lawmakers to the U.S. Transportation Secretary and FAA Administrator seeking assurances that Part 77 rules changes satisfy APA requirements (including those relating to the need for cost-benefit analyses).

Bipartisan legislation (H.R. 4623) introduced by Rep. Jim Moran (D-VA) and other lawmakers would require the FAA to follow full notice-and-comment procedures applying to any federal rulemaking — including the rule change regarding navigable airspace [see June 9 letter of support for H.R. 4623 from The Roundtable and 12 real estate trade groups]

Signatories on today’s [July 25] coalition letter include: American Hotel & Lodging Association (AHLA); American Resort Development Association (ARDA); Building Owners and Managers Association International (BOMA); CCIM Institute; Institute of Real Estate Management (IREM); International Council of Shopping Centers (ICSC); National Apartment Association (NAA); National Association of Home Builders (NAHB); NAIOP, the Commercial Real Estate Development Association; National Association of Real Estate Investment Trusts (NAREIT); National Multifamily Housing Council (NMHC); National Association of REALTORS®  (NAR); Society of Industrial and Office Realtors® (SIOR); The Real Estate Roundtable; U.S. Chamber of Commerce

# # #

Return to Top

INFRASTRUCTURE & TAX POLICY

Senate to Vote Next Week on House Infrastructure Funding Bill; Some States Already Shelving Bigger Projects Due to Uncertainty Over Congressional Action  

With cuts looming in federal funding for state infrastructure projects — and concerns growing about potential economic impacts — the Senate is planning to vote next week on the Highway Trust Fund (HTF) “patch” approved by the House last week. Four amendments will be allowed on the Senate floor (each with a 60-vote threshold for passage), including: 

 Infra Onondaga road and buildings x200

With cuts looming in federal funding for state infrastructure projects — and concerns growing about potential economic impacts — the Senate is planning to vote next week on the Highway Trust Fund (HTF) “patch” approved by the House last week. 

A proposal by Sens. Barbara Boxer (D-CA), Bob Corker (R-TN and Tom Carper (D-DEL) to change the expiration date for the funding from May 2015 to mid-December — and to cut spending from $10.8 billion to approximately $8 billion — in hopes this will force a “lack-duck session” debate on a multi-year funding plan;

Senate Finance Chairman Ron Wyden’s (D-OR) amendment adjusting the funding mechanisms so that they rely less on so-called “pension smoothing” and more on tax compliance measures (as in his own HTF funding bill)

“The important thing is to try to win it,” Boxer said of her amendment, reportedly “buttonholing other senators” this week to line up support. “Otherwise you’re going to have the thing expire” and “no one is going to do any long-term planning. We’ve got to take care of this this year” (The Wall Street Journal, July 23).

President Obama this week warned that the looming depletion of funds — and the Administration’s need to begin cutting funds to the states — could put 700,000 jobs at risk and slow or stop 100,000 active projects across the country (US News, July 23). 

Obama last week criticized the short-term nature of the House funding extension, while ultimately endorsing that version (The Hill, July 16).   Over the last two weeks, the Administration has launched several new initiatives aimed at stimulating private investment in infrastructure, including the announcement on Thursday of a $10 billion public-private Rural Infrastructure Opportunity Fund.

The Roundtable views the transportation infrastructure debate as a natural venue for advancing reform of the Foreign Investment in Real Property Tax Act (FIRPTA), as well as increased certainty for the EB-5 “immigrant investor” program — as both represent an important potential source of foreign capital that can help fund infrastructure and development projects.

Transportation infrastructure is vital to the health of U.S. real estate markets, given that it underpins local, regional, and national economies — and is critical to moving people, goods, information and resources within the “built environment.”

# # #

Return to Top
For questions about content/editorial matters, please contact The Roundtable's Xenia Jowyk at xjowyk@rer.org or (202) 639-8400. For layout or email delivery issues, contact RER's Scott Sherwood at rweekly@rer.org or (202) 639-8400.

imgAdFoundationimgAdRealEstateC4BB_cropped_trans  

© Copyright 2017. All Rights Reserved.
The Real Estate Roundtable, Market Square West, 801 Pennsylvania Ave, NW Suite 720, Washington, DC 20004
Tel: 202.639.8400      Fax: 202.639.8442     info@rer.org | Privacy Policy