The legislation would relax mortgage revenue bond rules, allow issuance of Sandy bonds, and permit certain issuers an extra advance refunding. It is designed to “reduce the tax burden on those financially impacted by Superstorm Sandy,” according to a joint release.
It comes on the heels of the Obama administration’s request late Friday for Congress to provide $60.4 billion of federal aid, including at least $24.6 billion for transportation projects and state and local grants or loans, but no new bonding authority.
Schumer and Menendez said that the administration’s proposal “is a very good start ... but doesn’t cover all of New York and New Jersey’s needs” and that more supplemental legislation will be needed.
One bond proposal applies to governmental and qualified 501(c)(3) bonds outstanding on the date of storm and not otherwise not permitted another tax-exempt advance refunding. The one additional tax-exempt advance refunding would be allowed to be issued on behalf of the states and their political subdivisions. Additionally, exempt facility private-activity bonds that can’t be advance refunded under federal tax law would be permitted one tax-exempt advance refunding.
Another Sandy-specific provision is recovery zone bonding authority. This would enable disaster states to issue tax-exempt Sandy bonds between the date of enactment and Jan. 1, 2018. Bonds could be used to finance residential rental projects, nonresidential real property and public utility property located in disaster areas, as well as below-market rate mortgages. It would also permit states to issue tax-credit bonds to pay the principal, interest or premiums on qualified governmental bonds, or to make loans to political subdivisions to make such payments.
The package also contains provisions that will apply to any state that has suffered from a Federal Emergency Management Agency-declared major disaster this year, including relaxed mortgage revenue bond rules. That would eliminate current-law requirements that one must not have owned a home in the previous three years to qualify for the mortgage revenue bond program for homeowners who lost their homes in Sandy.
Similarly, the Obama package includes efforts to repair damage to homes and public infrastructure and help communities prepare for future storms.
Under the 2011 Budget Control Act, Congress designated $11.8 billion of disaster relief funding, which is not subject to discretionary caps. The Office of Management and Budget recommends Congress provide $5.4 billion in additional disaster-relief funding and said an additional $55 billion in budget authority would be needed for recovery efforts.
Specifically, the administration proposal would provide $600 million in state grants for clean-water and drinking-water state revolving funds for mitigation projects.
One of the larger requests is for $15 billion of flexible Community Development Block Grant funds to assist state and local governments to address disaster recovery needs. An additional $2 billion in CDBG funds for mitigation projects would be provided by the Department of Housing and Urban Development.
“It will be very interesting if the bipartisan support that usually exists for these type of packages occurs here because Congress doesn’t do much on a bipartisan basis these days,” said Chuck Samuels, a lawyer at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC.
Republicans have generally expressed a reluctance to vote for new spending that isn’t offset somewhere else in the federal budget.
“We will go through the proposal to determine what we think is necessary and appropriate and not just rubber-stamp something the White House sent over,” a Republican aide said.
House Appropriations Committee chairman Hal Rogers, R-Ky., is tasked with reviewing the administration’s request and has been concerned about possible cases of waste and abuse, especially after Congress rescinded $23 billion of Hurricane Katrina funds. It is expected to take at least a week for the committee to comb through the administration’s request.
It’s unclear if relief would be a standalone bill or part of a fiscal cliff package or omnibus bill, an aide said.