WASHINGTON - House members last night voted 244 to 188 to approve a $819 billion economic stimulus bill that they had amended to tighten transportation funding requirements for state and local governments.
The lawmakers earlier in the day approved an amendment sponsored by Rep. Jim Oberstar, D-Minn., chairman of the House Committee on Transportation and Infrastructure, that would pare down to 90 days the six-month deadline for states to obligate half of their stimulus funds for aviation, highway, rail, and transit projects. Funds not obligated during the 90 days would be redistributed to other states.
The amendment drew support from the committee's ranking minority member John L. Mica, R-Fla., who said it would employ people immediately, and was passed by a voice vote.
The Congressional Budget Office, however, has recently questioned whether transportation spending would indeed have an immediate effect.
Infrastructure spending "may affect the economy only slowly but have salutary effects on demand that continue over several years," Douglas W. Elmendorf, director of the CBO, told the House Budget Committee on Tuesday. He said infrastructure spending probably would not boost outlays or gross domestic product much this year, but would "probably provide significant stimulus from 2010 through 2012."
Furthermore, Elmendorf said: "There may be a limited number of infrastructure projects that are ready to go in the next year, and aid to states and localities beyond some level may be used to bolster rainy-day funds or reduce borrowing, rather than leading to the increased spending or reduced taxation that feeds demand."
Another amendment sponsored by Rep. Bill Shuster, R-Pa, that House lawmakers added to the bill would clarify that federal stimulus funds for highway maintenance could not be used by states and localities to replace transportation funds they already provided for projects.
A third amendment cosponsored by five lawmakers and approved would increase transit capital funding by $3 billion.
Meanwhile, the Senate Finance Committee late Tuesday night approved a $522 billion economic stimulus tax package by a vote of 14 to 9, with every Republican member voting against the bill except Sen. Olympia Snowe, R-Maine.
The legislation will be combined with a $358 billion spending package that the Appropriations Committee signed off on Tuesday, and is expected to be considered by the full Senate sometime next week. Senate leaders could file a so-called cloture motion that, if passed, would require two days of debate on the measure before a vote.
The finance committee approved a number of amendments to the bill, most notably a one-year "patch" to the individual alternative minimum tax, at a projected cost of $70 billion.
But tax-exempt and private-activity bonds would be exempt from both the individual and corporate AMT for the next two years under a separate provision in the bill. Currently only housing bonds and 501(c)(3) bonds are exempt from the individual AMT and only housing bonds are exempt from the corporate AMT.
Another provision would relax the minimum speed of high-speed rail projects that could qualify as exempt facilities and be financed with private-activity bonds. Current law states that such projects can receive bond financing if they would involve trains that travel at least 150 miles per hour. The bill would allow bond financing for any projects with trains traveling up to that speed.
The Finance Committee bill also would encourage banks to begin purchasing municipal bonds by applying to banks the 2% de minimis rule that currently applies to other financial institutions and by expanding the "small issuer exception" for so-called bank deductible bonds.
Under the temporary change to the de minimis rule, a bank would be able to deduct 80% of the cost of buying and carrying tax-exempt bonds issued in 2009 and 2010 to the extent that its tax-exempt holdings do not exceed 2% of its assets.
The bill would raise the small issuer limit to $30 million from $10 million for bank deductible bonds and apply it to individual borrowers in conduit financings. Under current law, banks can deduct 80% of the cost of buying and carrying only the tax-exempt bonds sold by issuers whose annual bond issuance is less than $10 million.
Tax-exempt issuers struggling to access the municipal market would be given the option of issuing taxable debt under the package. The so-called Build America Bonds program would allow tax-exempt issuers to offer taxable debt in exchange for a cash subsidy or tax credit for the investor.
Under the program, an issuer of general obligation bonds could sell taxable debt that in 2009, 2010, and 2011 and receive a direct payment from the federal government equal to the credit that would otherwise have been available to investors for taxable, tax credit bonds. Beginning in 2012, issuers would no longer get cash payments, but investors would receive tax credits for the bonds.
The legislation also would authorize $15 billion of infrastructure tax credit bonds and $10 billion of exempt facility private-activity bonds for economically distressed areas under a new recovery bond program. Every state would be guaranteed at least 1% of the authorized amount of bonds, with the remaining amount distributed to states based on unemployment numbers.
Another provision of the bill would defer for one year the implementation of a 2005 law that would require state and local governments to withhold 3% of any payments made for property or services for tax purposes.
The bill would create a new type of tax-credit bond, qualified school construction bonds and authorize a total of $10 billion of them to be issued in 2009 and 2010. It also would authorize in 2009 and 2010 an additional $1.4 billion of qualified zone academy bonds, which are also tax-credit bonds, but can only be used to finance the renovation or rehabilitation of schools, not new construction.
An additional $2.4 billion of energy conservation tax-credit bonds would be authorized to finance projects to reduce greenhouse gases under the legislation, as well as an additional $1.6 billion of clean renewable energy bonds to finance renewable energy projects.
The bill would temporarily expand the definition of manufacturing facilities that can be financed with small-issue industrial development bonds to include facilities that produce intangible products. That provision would be effective during 2009 and 2010.
In addition, tribal governments would be authorized to receive another $2 billion of bonds in 2009 and 2010 and would not have to limit the use of the bonds for projects providing an "essential government function," with the exception of casinos and projects off their reservations.