COVID-19 Congressional Negotiations Stall; Republican Package Includes Liability Protections, PPP Round 2, and Healthy Workplaces Tax Credit
Negotiations between Democrats and Republicans over the next round of COVID-19 relief stalled this week after policymakers could not bridge significant differences between the GOP’s $1 trillion package released Monday and the $3.4 trillion proposal House Democrats passed in May. (BGov, July 30 and Roundtable Weekly, May 22)
- "We're still very far apart on a lot of issues," Treasury Secretary Steven Mnuchin said on July 29 after three days of meetings with House Speaker Nancy Pelosi (D-CA), Senate Minority Leader Charles Schumer (D-NY) and White House Chief of Staff Mark Meadows. "I do think there is a subset of issues that we do agree on, but overall we’re far from an agreement." (RollCall, July 29)
- Mnuchin added that negotiating a compromise on unemployment insurance, state and local government assistance, and liability protections for businesses are especially challenging. "It makes it the pending business for next week,” said Majority Leader Mitch McConnell (R-KY) [CQ, July 29].
- CARES Act benefits regarding $600 weekly unemployment insurance and the federal residential tenant eviction moratorium expire today – placing additional pressure on lawmakers to reach agreement before the congressional recess, scheduled to start on August 8.
HEALS Act Provisions
- Senate Republicans on July 27 unveiled the “Health, Economic Assistance, Liability Protection, and Schools (HEALS) Act.” The GOP package would reduce the expanded unemployment benefit to $200 per week, authorize another round of $1,200 stimulus checks to most Americans, provide more than $100 billion for reopening schools, among other provisions. (Appropriations Committee news release, July 27 and Republican Policy Committee summary, July 28)
- The GOP’s HEALS Act is comprised of eight bills that form a base for negotiations with Democrats, who passed the $3.4 trillion “Health and Economic Recovery Omnibus Emergency Solutions Act [HEROES] Act” (H.R. 6800) in the House in May. (How the HEALS Act compares to the HEROES Act, CNBC, July 30 and HEALS Act Comparison to HEROES Act and Current Law, Brownstein Hyatt Farber Schreck, July 31)
The HEALS Act includes:
- Liability protections in the “Safeguarding America’s Frontline Employees To Offer Work Opportunities Required to Kickstart the Economy (SAFE TO WORK) Act,” introduced by Sens. John Cornyn (R-TX) and Mitch McConnell (R-KY). A billsummary notes it would “create a federal cause of action for coronavirus exposure claims” that preempts state laws outside of workers’ compensation regimes. A business defendant would lose the liability shield if it engaged in “gross negligence” or “willful misconduct” in causing the plaintiff’s COVID-related injuries. (Summary of the Act)
- The Safe and Healthy Workplaces Tax Credit in the “American Workers, Families and Employers Assistance Act” introduced by Senate Finance Committee Chairman Charles Grassley (R-IA). [Section-by-section summary] The proposal would provide a refundable payroll tax credit for 50% of the costs associated with protecting employees (testing, PPE, cleaning, etc.), reconfiguring workplaces, and upgrading workplace technology to prevent the spread of COVID-19. Expenses between March 13 and the end of this year would qualify, and the maximum credit would be based on the number of employees. The measure reflects stand-alone legislation recently introduced by Senator Rob Portman (R-OH) and Rep. Tom Rice (R-SC). [Roundtable Weekly, July 24]
- A Wall Street Journal video released yesterday profiles the extensive efforts of commercial real estate companies to accommodate the safe return of workers to offices, featuring Roundtable member Scott Rechler (Chairman and Chief Executive Officer, RXR). The video features the use of new technological tools, revised layout plans and enhanced ventilation systems to enhance the well-being of building occupants.
- A second round of funding for the Paycheck Protection Program (PPP) would be provided in the “Continuing Small Business Recovery and Paycheck Protection Program Act,” introduced by Sens. Marco Rubio (R-FL) and Susan Collins (R-ME). The $190 billion bill would fund PPP “second draw” loans; a new Section 7(a) loan program for Recovery Sector Businesses; and numerous program criteria reforms. (Section-by-section summary and one-pager.)
- In other pandemic relief news, a bill introduced on July 29 by members of the House Committee on Financial Services, Van Taylor (R-TX), Al Lawson (D-FL), and Andy Barr (R-KY), would provide economic support to the commercial real estate market, especially for businesses with Commercial Mortgage-Backed Securities (CMBS) debt. The “Helping Open Properties Endeavor (HOPE) Act” (H.R. 7809) would establish a Treasury facility to encourage bank loans in the form of preferred equity to help struggling CMBS borrowers. (Wall Street Journal and Rep. Taylor news release, July 29)
- Federal Reserve Chairman Jay Powell on July 29 held a news conference after a two-day meeting of the Federal Open Market Committee (FOMC) to address interest rates and the repercussions of the pandemic. Powell stated, “To support the flow of credit to households and businesses, over the coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning.” (FOMC statement and new conference video, July 29)
As pandemic negotiations continue in Congress, The Roundtable and its real estate industry partners remain engaged in issues of vital importance to CRE. See the story below for more details presented this week in a webinar held by Walker & Dunlop.
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Industry Trade Group Leaders Focus on Prospects for Stimulus Legislation and CRE Impact
Real Estate Roundtable President and CEO Jeffrey DeBoer joined other real estate industry trade group leaders in a July 29 Walker & Dunlop webinar “All Eyes On Washington: What will the next stimulus bill do for CRE?” moderated by Roundtable member and W&D Chairman and Chief Executive Officer Willy Walker.
- Mortgage Bankers Association CEO and President Bob Broeksmit and National Multifamily Housing Council President Doug Bibby also participated in this “Walker Webcast” to discuss the next $1 trillion+ stimulus bill under consderation on Capitol Hill and its impact on the multifamily, mortgage, and commercial real estate industries. (Watch video on The Roundtable’s YouTube channel)
- The three trade group leaders agreed that consensus on a new stimulus bill will stretch into August and predicted a new bill would be passed by Aug. 8 or Aug. 15. Bibby and Broeksmit predicted the legislative package cost would total $1.75 trillion, while DeBoer estimated $2 trillion. (BisNow, July 29 and ConnectCRE, July 30)
- DeBoer noted that the real question in determining whether additional funding for state governments, small businesses, and others will be approved is how previous funds allocated by Congress during the pandemic are being allocated. DeBoer asked, “Are they going to solve COVID-related problems, or solve issues that were pre-existing?”
- Broeksmit added, “An imperfect compromise is going to emerge, and that’s all right because we need to get the funding out quickly. We don’t have time to get it perfect.”
- Walker also focused on the federal eviction moratorium, observing that it negatively affects the relationship between landlords and their tenants as they attempt to work through financial challenges of paying rent.
- “When you have an eviction moratorium, there is a propensity for people to go dark on you,” Walker said. “The owner and tenants stop working with each other. You lose the ability to maintain your community.”
- Bibby stated that an eviction moratorium may seem appealing but it creates a cycle of economic disinvestment and puts the livelihoods of tens of thousands of owners across the country at risk.
- DeBoer emphasized that a robust federal rental assistance program to help the unemployed as well as struggling small business is necessary to preserve the “rental obligation chain” that underpins the economy. He also said The Roundtable supports additional funding for the Paycheck Protection Program (PPP), which has distributed approximately $520 billion to an estimated 5 million businesses.
- DeBoer added that businesses should receive assistance from the government on “new and unusual” expenses related to safety and cleaning protocols.
“We have to think of this period as building a bridge to a time when the economy works again, when businesses are open and when people are employed and can stand on their own two feet again,” said DeBoer. “But we need the bridge to get there, and it needs to be strong enough and long enough.” (REBusiness Online, July 31 and Walker Webcast video)
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Business Coalition Urges Senate to Pass Corporate Diversity Legislation
The Real Estate Roundtable and 16 other national organizations sent a letter on July 27 urging leaders of the Senate Banking Committee to advance legislation that would require public companies to report the racial, ethnic and gender composition of their boards and executive officers. (The Hill and coalition letter, July 27) [Photo above: Senate Banking Committee Chair Mike Crapo (R-ID), left, talks with Committee Ranking Democrat Sherrod Brown of Ohio.]
- The Improving Corporate Governance Through Diversity Act of 2019 (H.R. 5084), championed by Rep. Gregory Meeks (D-NY), passed the House by bipartisan vote last November. (Rep. Meeks news release) The coalition’s letter encourages the Senate Banking Committee to consider a companion bill (S. 360) sponsored by Sen. Robert Menendez (D-NJ).
- The act would require issuers that must register under the Securities Exchange Act of 1934 to provide data regarding diversity on corporate boards and in executive management. Such diversity reporting would occur in annual reports and proxy statements regarding election of directors filed with the Securities and Exchange Commission (SEC).
- The bill would also require securities issuers to disclose whether it has adopted a plan or strategy to promote board- and executive-level racial, ethnic, gender, and veteran-status diversity.
- The coalition letter addressed to the Senate Committee’s Chairman Mike Crapo (R-ID) and Ranking Member Sherrod Brown (D-OH), cites a 2019 PwC Annual Corporate Directors Survey to show the benefits of diversity. The survey results show that 94% of participating board directors indicated that a diverse board brings unique perspectives; 87% responded that diversity enhances board performance; and 84% responded that it improves relationships with investors.
- Other signatories on the coalition letter include Nareit, International Council of Shopping Centers (ICSC), American Bankers Association, and the U.S. Black Chambers, Inc.
- There is a growing interest among policymakers regarding environmental, social, and governance (ESG) reporting by public companies. In July 2019, the House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets held a hearing on “Building a Sustainable and Competitive Economy: An Examination of Proposals to Improve Environmental, Social and Governance (ESG) Disclosures.” (Roundtable Weekly, August 9, 2019).
- Presumptive Democratic Presidential Nominee Joe Biden this week presented a series of proposals intended to address racial economic inequality. Biden said that as president, his future appointments to the Federal Reserve would be “diverse nominees for the Board of Governors and the regional Federal Reserve Banks.” (The Wall Street Journal, and The New York Times, July 29)
- Last week the Biden campaign indicated its desire to eliminate several current law tax provisions, including like-kind exchanges under Section 1031, to pay for a 10-year, $775 billion “caregivers” proposal.
Roundtable President and CEO Jeffrey DeBoer responded, "The long-standing like-kind exchange tax law has encouraged investment in affordable housing and other properties, generated state and local tax revenue, and spurred new jobs through labor-intensive property improvement. As a result, exchanges allow cash-strapped minority, women, and veteran-owned businesses to grow their business by temporarily deferring tax on the reinvested proceeds.” (Entire Roundtable Statement on like-kind exchanges, July 21 and Roundtable Weekly, July 24).
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EPA Releases ENERGY STAR Guidance on Building Operations Impacted by COVID-19
The U.S. Environmental Protection Agency (EPA) announced ENERGY STAR program guidance this week to reflect changes in building operations due to the COVID-19 pandemic. The guidance was developed after EPA sought input from The Roundtable’s Sustainability Policy Committee Advisory Committee (SPAC).
- The EPA guidance – “Has COVID-19 affected ENERGY STAR certification?” – impacts real estate industry practices regarding the web-based “Portfolio Manager” tool used by more than 450,000 properties (or nearly 45% of U.S. commercial building space) to measure, benchmark, and track energy, water, and waste management in buildings. “Portfolio Manager” is a voluntary platform at the federal level for private sector buildings although a number of state and local laws mandate its use in major markets.
- EPA explained that building owners and managers should update Portfolio Manager “use details” to reflect changes in occupancy and operations that may have occurred since the start of the pandemic – for both the numbers of workers in a building and the asset’s weekly operating hours. (Point #1 in EPA’s guidance) The agency also provided practical instructions on how to update such “worker numbers” and “hours of operation” details in the Portfolio Manager tool.
- When merged with data on a building’s actual energy consumption, these “use details” are key variables to determine a 1-100 ENERGY STAR rating that allow investors, tenants, regulators, and other audiences to assess an asset’s energy performance compared to like-kind buildings.
- EPA staff sought input on these matters at SPAC’s “virtual meeting” on June 12, which was held in conjunction with The Roundtable’s remote Annual Meeting (Roundtable Weekly, June 12). SPAC members were surveyed for their recommendations about how ENERGY STAR should address changes in building operations during the pandemic. The committee’s preferred option is now reflected in EPA’s latest guidance.
- EPA plans to issue additional guidance (expected in September) to advise owners and managers on how to apply for ENERGY STAR certifications that may be awarded to buildings in 2020. (Point #3 in EPA’s guidance) The key clarification in this week’s announcement is that updating “use detail” data to reflect COVID-era operations is prerequisite for the ultimate ENERGY STAR “label,” which may be granted for a building that ranks “75” or higher on EPA’s scale.
- This week’s guidance is the latest example of longstanding cooperation between the ENERGY STAR program and SPAC. It follows collaborations to update the technical models that EPA currently uses to “score” buildings (Roundtable Weekly, July 19, 2019). SPAC also assisted the agency with developing the “ENERGY STAR Tenant Space” program to recognize high performance design and construction of leased office. (Roundtable Weekly, June 15, 2018)
- In related news, EPA opened its process for 2021 ENERGY STAR awards this week. Applications must be submitted by December 9, 2020 and can be downloaded here.
SPAC is led by Chairman Anthony E. Malkin (Chairman, President, and CEO, Empire State Realty Trust) and Vice Chairman Daniel Egan (Senior Vice President, Energy & Sustainability, Vornado Realty Trust).
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