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Thursday, January 19, 2017

SBA to modify the SBIC Program

posted by: Kirill Abbakumov

In December 2016, the Small Business Administration announced a number of proposed changes to its Small Business Investment Company (SBIC) Program. SBIC is an SBA financing program created to stimulate and supplement the flow of private equity capital and long-term loan funds, which small-business concerns need for the sound financing of their business operations and for their growth, expansion, and which are not available in adequate supply. Through the SBIC Program, SBA licenses and provides debenture leverage to privately-owned and professionally managed for-profit SBIC investment funds that invest in small businesses.

On December 16, 2016 SBA proposed to increase the SBIC licensing and examination fees. Presently, the SBA is allowed to collect licensing and examination fees to offset SBA’s costs associated with the administration of these two activities. SBA last increased fees for SBICs in 1996 and current fees offset less than 40% of SBA's administrative expenses related to these activities. The proposed rule would revise existing regulations to increase, over a 5-year period, SBIC licensing and examination fees in order to annually recoup an estimated 70% of SBA administrative expenses related to these activities. After the 5 year period, the rule proposes annual increases of these fees based on inflation. To encourage investment into underserved areas, the proposed rule would establish certain examination fee discounts for SBICs that make significant low and moderate income investments. SBA invites stakeholders and the public to submit comments on the proposed rule on or before February 14, 2017.

In addition, on December 28, 2016, SBA announced that it is revising regulations for the SBIC program to expand permitted investments in passive businesses and provide further clarification with regard to investments in such businesses. SBICs are generally prohibited from investing in passive businesses under the Small Business Investment Act of 1958, but the new regulations will provide for two exceptions that allow an SBIC to structure an investment utilizing a passive small business as a pass-through:

  • The first exception will provide conditions under which an SBIC may structure an investment through up to two levels of passive entities to make an investment in a non-passive business that is a subsidiary of the passive business directly financed by the SBIC.
  • The second exception will enable a partnership SBIC to provide financing to a small business through a passive, wholly-owned C corporation (blocker corporation), without the need for prior SBA approval.

The rule will become effective on January 27, 2017.

Tuesday, January 17, 2017

EDA issues final rule for Regional Innovation Strategies

posted by: Kirill Abbakumov

On January 11, 2017, the Economic Development Administration (EDA) issued a final rule applicable to the Regional Innovation Strategies (RIS) Program. Since inception, EDA has invested approximately $40 million dollars and awarded 98 grants to increase the economic competitiveness and improve the quality of life of communities across the country.

The RIS Program is an effort to foster innovation and better coordinate federal support for scientific and technological research and development, technology transfer, and commercialization. The Program aims to effectively support the development of regional innovation clusters in local communities, which are significant catalysts of economic development, and to increase access to the capital necessary to implement the innovative manufacturing technologies required to compete in the 21st century global economy.

Through RIS, EDA awards grants for capacity-building programs that provide proof-of-concept and commercialization assistance to innovators and entrepreneurs and for operational support to organizations that provide essential early-stage funding to start-up companies. The new regulations are the first for this Program and establish the framework and structure of the RIS Program, including its mission and objectives, applicant eligibility requirements, allowable investment rates, eligible project activities, and required application components. These regulations provide enhanced customer service to the RIS Program while mitigating the administrative burden on EDA’s constituents.

Detailed legislative and programmatic history of the RIS Program, and its parent Program (the Regional Innovation Program), can be found through the Federal Register. The rule will become effective on February 10, 2017.

Monday, January 16, 2017

EDA announces new round of funding for 2017 to help distressed communities

posted by: Kirill Abbakumov

On December 23, 2016, Economic Development Administration (EDA) has published the FY 2017 Economic Development Assistance Programs (EDAP) Federal Funding Opportunity (FFO). Through its funding opportunities, EDA provides strategic investments on a competitive merit basis to support economic development, foster job creation, and attract private investment in economically distressed areas of the United States.

Under this FFO, EDA solicits applications from applicants in order to provide investments that support construction, non-construction, technical assistance, and revolving loan fund projects under EDA’s Public Works and Economic Adjustment Assistance (EAA) programs. Grants and cooperative agreements made under these programs are designed to leverage existing regional assets and support the implementation of economic development strategies that advance new ideas and creative approaches in distressed communities.

The estimated total program funding is between the award ceiling of $3 million and award floor of $100,000. Additional information on this funding opportunity and eligibility can be accessed here.

There are no submission deadlines under this opportunity. Proposals and applications will be accepted on ongoing basis until the publication of a new EDAP FFO.

Thursday, January 12, 2017

EXIM Bank business operations hit 40-year low

posted by: Kirill Abbakumov

The Export-Import Bank (EXIM) reported on January 4, 2017 that it authorized just $5 billion in loan guarantees and credit insurance in its latest fiscal year, a 40-year low for the agency. The decline was blamed on Congressional effort to hold up nomination to the EXIM Bank board, preventing it from doing large financing deals.

According to the report, business at the Bank, which helps finance exports by American businesses, was down 60% in fiscal 2016 and down 75% from a high reached in fiscal 2014, the final full year before Congress delayed the bank’s reauthorization by 6 months and the Senate Banking Committee started blocking new members to the bank’s five-member board. The Bank’s board requires a quorum before it can approve any loans, guarantees or credit insurance surpassing $10 million. It has lacked a quorum since early 2015.

Congressional critics of the bank claim that about 99% of all U.S. exports occur without EXIM Bank financing. Congressional Republicans prevented EXIM Bank reauthorization for about six months in 2015, but Democrats and Republican supporters were able to get a four-year reauthorization attached to a highway bill at the end of 2015.

Among the highlights of the EXIM 2016 Annual Report, the Bank is credited with the following:

  • Authorizing $5 billion and supported $8 billion in exports at no cost to American taxpayers;
  • Supporting 52,000 American jobs;
  • Sent $284 million to the U.S. Treasury for debt reduction;
  • Small business authorization continued to represent nearly 90% of all EXIM authorizations.

The Annual Report stressed that Congressional inaction have cost the country jobs. The $5 billion in authorized financing that supported 52,000 jobs in fiscal 2016 is far fewer than 165,000 jobs supported in 2014 through $20 billion in EXIM Bank financing.

Wednesday, January 11, 2017

President signs SEC Small Business Advocate Act into law

posted by: Kirill Abbakumov

On December 16, 2016, President Barack Obama signed into law the SEC Small Business Advocate Act of 2016 (H.R. 3784). The legislation had broad bipartisan support in the House and Senate, and establishing within the Securities and Exchange Commission (SEC) an Office of the Advocate for Small Business Capital Formation and a Small Business Capital Formation Advisory Committee.

Both the Office of the Advocate and the Advisory Committee are tasked with the dual role of helping small businesses navigate the securities laws and advocate against the application of overly burdensome regulations to small businesses.

According to the Congressional Summary of the Act, the Advocate will:

  • Assist small businesses and small business investors in resolving significant problems they may have with the SEC or with self-regulatory organizations;
  • Identify areas in which such businesses and investors would benefit from changes in SEC regulations or the rules of such organizations;
  • Identify problems that small businesses have with securing access to capital, including any unique challenges to minority-owned and women-owned small businesses;
  • Analyze the potential impact on businesses and investors of proposed SEC regulations and rules that might have a significant economic impact on small businesses and capital formation;
  • Conduct outreach to businesses and investors to solicit views on relevant capital formation issues;
  • Propose to the SEC changes in its regulations or orders, and propose to Congress legislative, administrative, or personnel changes, to mitigate problems identified and to promote the interests of such businesses and investors;
  • Consult with the Investor Advocate on proposals and advise the Advocate on small business-related issues; submit annual reports on its activities to specified congressional committees;
  • Be responsible for planning, organizing, and executing the annual Government-Business Forum on Small Business Capital Formation.

In addition, the Advisory Committee will advise the SEC on protecting investors, maintaining markets and facilitating capital formation with respect to:

  • Capital raising by emerging, privately held small businesses and publicly traded companies with less than $250 million in public market capitalization through securities offerings;
  • Trading in the securities of such businesses and companies;
  • Public reporting and corporate governance requirements of such businesses and companies.
Thursday, January 5, 2017

DOE announces funding for regional clean energy innovation partnerships

posted by: Kirill Abbakumov

On December 28, 2016 the Department of Energy (DOE) announced a funding opportunity for up to 4 awards of up to 4 $200,000 for analytical studies that characterize and examine multi-state Regional Energy Technology Innovation Ecosystems. The grants are intended to enhance regional capacities to foster sustainable regional clusters, innovation “ecosystems” and partnerships that can generate new clean-energy technologies and jobs.

The objective of this funding opportunity is to fund analytical studies that examine the potential of an integrated strategy for a multi-state region to enhance and accelerate energy innovation via a regional energy innovation ecosystem. For purposes of these studies, a region must comprise a minimum of three contiguous states. The studies and supporting analysis should provide new insights as to how an integrated regional strategy could promote affordable, reliable innovative energy technology, create jobs, increase entrepreneurial activity and new venture financing, and promote economic growth and prosperity.

The studies should provide data-driven insights based on inputs from current and potential energy innovation ecosystem participants within the proposed region. Studies should analytically support components of an integrated regional strategy that could provide benefits that a “business as usual” approach would not. In addition, the results should help DOE identify the possible benefits such regional innovation strategies might have to help meet key national objectives of energy security, economic competitiveness and environmental responsibility.

The deadline for the Notice of Intent is January 18, 2017 and the deadline for applications is February 28, 2017.

Thursday, December 22, 2016

Council on Community Solutions to align federal and local government collaboration

posted by: Kirill Abbakumov

On November 16, President Obama has signed an executive order establishing the Community Solutions Council in an effort to modernize the way the federal government works with cities, counties and communities across the nation. The Council aims to provide a lasting foundation for federal agencies to strengthen partnerships with local communities and enhance coordination across the federal government to more effectively deliver assistance in improving infrastructure, revitalizing neighborhoods and increasing economic opportunities for local communities.

Local community leaders have communicated to Congress the need for a federal partner that is more effective, responsive and inclusive in addressing the needs and challenges of more than 1,800 communities. While the policies and programs established by the federal government are intended to guide local officials and coordinate efforts, local leaders are often left on their own to find federal resources and implement costly programs.

The Community Solutions Council includes leadership from agencies, departments and offices across the federal government and the White House that will work to develop and implement policy that puts local priorities first, highlights successful solutions based on best practices and streamlines federal support for communities. Further, the council will engage with representatives and leaders of local organizations, businesses and communities to expand and improve partnerships that address the most pressing challenges communities face.

The Council also builds on the last seven years of work done by federal leaders and the successful efforts of the Community Solutions Task Force launched in 2015. The Task Force works to develop a customized federal approach to working with cities and towns. The Federal programs launched since then, such as Strong Cities Strong Communities and Partnership for Sustainable Communities have revealed ways the federal government can work better with local communities to drive desired outcomes.

Tuesday, December 20, 2016

Congress will take up corporate tax reform in 2017

posted by: Kirill Abbakumov

Congressional advocates for small businesses have made it clear in November that they intend to press for parity in tax rates for corporations and small businesses in the 115th Congress.

Republican leaders are promoting a leveling of tax rates for corporations and pass-through businesses in 2017 tax negotiations, echoing statements of Republican president-elect Donald Trump. An entity that is structured as a pass-through business doesn't pay taxes at the corporate level but distributes income to owners, who pay individual tax rates. The efforts to stop placing small- and medium-sized businesses at a competitive disadvantage against large corporations would require parity in taxes paid by corporations and pass-through businesses.

Trump’s plan calls for a 15 percent rate both for business income for corporations and for pass-through businesses. However, the Republican proposal simply would prohibit qualified business income of individuals from being taxed at a higher rate than corporate income, without setting specific rates. The measure would cover income from a trade or business, including any S corporation, partnership, estate or trust. S corporations are organized under the tax code to avoid double taxation because only shareholders are taxed.

These measures will alleviate small business owners suffering under a burdensome regulatory code that makes tax time costly and time-consuming. Reforms to the tax code could ease the burden for America’s job creators, helping to energize the economy and create more jobs once small businesses are confident they are not paying a higher tax rate.

Friday, December 16, 2016

Second Continuing Resolution extends funding into 2017

posted by: Kirill Abbakumov

President Barack Obama signed Continuing Resolution into law on Saturday, December 10 as Congress finally cleared a stopgap spending measure (HR 2028) on Friday, December 9 before most government funding was set to expire. The stopgap measure took immediate effect and extends current funding levels for most federal agencies through April 28th. The bill abides by an annual cap on discretionary spending of $1.07 trillion for fiscal 2017 and includes additional funding for:

  • $4.1 billion in disaster relief funds to respond to major flood and hurricane damage in certain states;
  • $872 million for programs in the biomedical innovation package, including $500 million for states to combat the opioids addiction crisis;
  • $170 million to address water infrastructure and health needs in Flint, Michigan;
  • $45 million to address a funding shortfall and continue health care coverage for retired coal miners past the end of the year;
  • $7 million in Justice Department grants to reimburse “extraordinary law enforcement overtime costs” to protect Trump between Nov. 9 and the Jan. 20 inauguration.

In preceding months, there was a plan to push an omnibus spending bill by the end of the year, which was to be broken into a series of smaller packages called “minibuses.” However, Republican leaders scrapped the plan after the president-elect Donald Trump announced he prefers to put off spending decisions until spring so his incoming administration can help shape them. With this comes an end to the 114th Congress.

Friday, December 16, 2016

House passes package of bills to help businesses raise capital

posted by: Kirill Abbakumov

On Monday, December 5, the House passed a measure that would repackage six bipartisan bills aimed at helping small- and medium-sized businesses raise capital. The Creating Financial Prosperity for Business and Investors Act (HR 6427) would also create a small business advocate at the Securities and Exchange Commission (SEC) and relax regulatory requirements for some investors and securities issuers.

The bill is a compilation of measures bills that have individually passed the House earlier this year, but weren't taken up by the Senate. Supporters of the bills hope that packaging them into one they can draw attention from the Senate in the waning days of the 114th Congress. HR 6427 is seen by legislators as a package of bipartisan solutions to ensure that the SEC is responsive to small-business concerns. The package will focus on fostering economic growth by promoting capital formation and decreasing unnecessary friction in American securities laws while simultaneously upholding necessary customer and market protections.

The package includes six previously passed bills:

  • HR 4168, which would require the SEC to respond to the recommendations of its government-business forum on capital formation. It passed the House in February.
  • HR 3784, which would create the small-business advocate position and passed the House in February.
  • HR 4854, which would define qualifying venture capital funds as those with not more than $10 million and/or 250 investors. It passed the House in July.
  • HR 2187, which would add securities professionals, attorneys and accountants to the definition of accredited investors who can take part in investments now restricted to those meeting wealth and income standards. It passed the House in February.
  • HR 4855, which would relax registration requirements for crowd-funded shares. It passed the House in July.
  • HR 5322, which would eliminate the exemption for investment companies from the Investment Company Act for companies in Puerto Rico, the Virgin Islands, or any other U.S. possession. It passed the House in July.
Thursday, December 8, 2016

EXIM Bank announces adoption of SBA rule to streamline applications

posted by: Kirill Abbakumov

On November 22, the Export-Import Bank of the United States (EXIM Bank) announced a proposal to adopt the Interim Rule of the Small Business Jobs Act of 2010 (PL 111-240) as an alternative standard for defining small business for all its programs. This measure is expected to streamline the application process for small- and medium-sized businesses.

The Jobs Act mandated that the Small Business Administration (SBA) use maximum tangible net worth and average net income as an alternative to the use of industry based size standards as follows: Not more than $15 million in tangible net worth and $5 million in average net income after Federal income taxes to define a small business concern.

The SBA currently uses the Interim Rule for its business loans under the 7(a) Loan Program and 504 Loan Program, which represent the bulk of SBA’s small business guaranteed loans. If approved by the SBA's Administrator, EXIM Bank will apply the Interim Rule as an alternative size standard in addition to using size standards established by SBA for individual industries to determine whether or not participants of EXIM programs can be categorized as small business concerns.

This proposal to align the Bank’s size standards for determining small businesses with SBA’s current standards will bring consistency to the marketplace, would possibly increase the number of applicants qualifying as a small business for EXIM Bank’s programs and increase the accuracy of the Bank’s reporting to Congress on its small business activities.

Thursday, December 8, 2016

Congress plans budget process overhaul for 2017

posted by: Kirill Abbakumov

There is a strong push in Congress to overhaul the federal budget process which has been in place since the 1974 act (PL 93-344) that created the congressional budget resolution, the House and Senate committees and the Congressional Budget Office (CBO). Legislative action on proposed changes are expected to come in 2017.

Prospects for a Republican-led overhaul were strengthened by the November elections, which gave the GOP control of the White House and both chambers of Congress for at least the next two years. Many Republicans, along with some Democrats, have concluded that the budget process is broken, illustrated by the fact that Congress hasn't passed all of its 12 annual spending bills on time in more than 20 years.

Work on a rewrite of the process has proceeded slowly. Some of the proposals include:

  • Strengthening budget enforcement.
  • Adoption of a two-year budget cycle.
  • Controlling automatic spending programs.
  • Reasserting congressional authority over the budget.
  • Increasing “transparency” in the budget process, including with the CBO.
  • Reversing a bias in the budget process toward “higher and higher spending.”

It attempts to give Congress greater control over all federal spending and more time to complete bills in an orderly way. It would for the first time create a two-year federal budget cycle, designed to give lawmakers additional time to better scrutinize programs they fund. The fiscal year, which currently begins on Oct. 1, would be shifted to Jan. 1 to coincide with the calendar year and allow more time for bills to be completed without the need for a stopgap measure.

The overhaul plan has been presented as a draft, and is yet to turn into legislation.

Thursday, December 8, 2016

SelectUSA seeking exhibitors for investment meeting in Dubai

posted by: Matthew Mullin

SelectUSA is looking for communities interested in exhibiting at the 2017 Annual Investment Meeting (AIM) of the Gulf Cooperation Council (GCC). The meeting is similar to the SelectUSA Investment Summit, though not in size. Only a handful of communities will take part in the U.S. Investment Pavilion and enjoy direct access with investors from key trading partners like the United Arab Emirates (UAE) and Saudi Arabia.

From SelectUSA:

As a trading bloc, GCC markets constitute the United States’ fifth-largest export market and our fourteenth-largest source of foreign direct investment (FDI), with over $43 billion in FDI as of 2015. In 2014, combined GCC FDI in the United States supported approximately 24,000 U.S. jobs.

  • Secure one-on-one meetings with regional government and private sector officials with decision-making authority;
  • Meet regional investor delegates recruited by the U.S. Commercial Service;
  • Leverage AIM's exclusive networking system to initiate meetings with investors;
  • Connect with priority AIM participants at events organized by the U.S. Embassy in Abu Dhabi, the U.S. Consulate in Dubai, and AIM; and
  • Receive full assistance from SelectUSA and Commercial Service investment specialists.

For more information, including registration, please contact Steve Miller in Washington, D.C. or Maya Najm in Abu Dhabi, UAE. If you are interested in reserving booth space, please contact Julianna Kreko in Washington, D.C.

Friday, November 18, 2016

FHWA announces new pilot program for local road projects

posted by: Kirill Abbakumov

On October 25, 2016, the Department of Transportation’s Federal Highway Administration (FHWA) announced that they are accepting submissions for the Local Empowerment for Accelerating Projects (LEAP) Pilot Program. The LEAP program is an effort to reduce the cost of delivering highway projects by allowing for direct funding from the federal government to local public agencies (LPAs).

Created as part of the FAST Act, the program allows local governments to identify projects under a formula criteria and apply directly to FHWA for funding. This includes projects like the design, construction and preventative maintenance of major collector roadways. As a pilot program, only five submissions will be awarded these funds. The main stipulation is that the LPA must agree to a voluntary contribution from non-Federal funds (LPA, State, or other) in an amount equal to 1% for the first year of the funds transferred to FHWA.

With counties owning 45 percent of the nation’s roads, this direct funding pilot program will help LPAs to save precious financial resources and complete projects faster for their communities. This program will be carried out over 5 years and requires an agreement between the LPA and their respective state DOT, however it will also be subject to federal oversight.

Applications will need to be submitted by November 25, 2016 by following the instructions outlined on the Federal Register.

Friday, November 18, 2016

SBA announces $18.8 million to support small business exporters

posted by: Kirill Abbakumov

On October 3, 2016 the Small Business Administration (SBA) announced $18.85 million to support export growth among American small businesses. The funding was awarded through SBA’s competitive State Trade Expansion Program (STEP).

These awards are granted to U.S. states and territories to support programs that help small businesses expand their export-related activities. This includes participation in foreign trade missions, foreign market sales trips, subscription services for access to international markets, as well as the design of international marketing campaigns, export trade show exhibits, export training workshops and more.

The top 5 awardee states are:

  • Illinois - $850,000
  • North Carolina - $850,000
  • Washington - $850,000
  • California - $844,214
  • Michigan - $820,000

Full list of awardees can be found here.

STEP awards were created to advance key priorities identified in the President’s National Export Initiative, namely to expand the base of small businesses that become exporters and to make the exporting process as easy as possible for small enterprises. Recipients of STEP awards in the first three rounds (FY 2011, 2012, 2014) reported a strong return on federal taxpayer investment, generating $22 in U.S. small business export sales for every $1 awarded.

STEP funds allow small businesses the opportunity to meet foreign buyers face-to-face at trade shows or on trade missions, and complement SBA’s export loan guaranty programs, which can finance the working capital needed to complete export orders and in turn help finance the expansion of production facilities due to export success. Loans are available up to $5 million. More information can be obtained from SBA’s Export Finance Mangers located at 21 U.S. Export Assistance Centers across the country.

Friday, November 18, 2016

DOL announces $50.5 million in Apprenticeship State Expansion Grants

posted by: Kirill Abbakumov

On October 21, 2016 the Department of Labor (DOL) announced $50.5 million in State Expansion Grants under the ApprenticeshipUSA Initiative. The 18-month grants, ranging from $700,000 to $2.7 million, were awarded to 37 grantees across the country.

The State Expansion Grants represent the final set of investments supported by a $90 million appropriation for apprenticeship in the FY 2016 omnibus spending bill. DOL had previously released $10.4 million in state Accelerator grants in June 2016, and $20.4 million in intermediary and equity technical assistance contracts to national organizations in late September 2016.

Grantees are state projects that bring together stakeholders across the apprenticeship system to develop innovative system reforms to increase the use of apprenticeship as a training strategy. Stakeholders include intermediaries, industry, education providers, and community-based organizations. States are tasked with integrating workforce and education systems, building capacity to conduct outreach to new sectors not traditionally using apprenticeship and to populations underrepresented in the current system. They are also tasked with building on and developing practices to increase demand for apprenticeship and availability of apprenticeship opportunities.

It is unclear whether there will be further funding to support the ApprenticeshipUSA initiative next year. The Senate Appropriations Committee proposed an additional $100 million in FY2017 to build on this year’s investments, while the House did not include additional funding in their version of the FY2017 Labor, Health and Human Services, Education, and Related Agencies bill. Congress approved a short-term continuing resolution in early October that lasts through December 9th, so final decisions on FY 2017 funding will be made once lawmakers return on November 14.

Friday, November 18, 2016

EPAís WOTUS faces continued opposition from states and industry groups

posted by: Kirill Abbakumov

A group of 31 states, industry groups and companies assert that the Obama administration lacks authority to expand federal jurisdiction over streams and wetlands, as they file briefs challenging the Environmental Protection Agency’s (EPA) Waters of the United State (WOTUS) rule in the U.S. Court of Appeals for the Sixth Circuit.

The EPA and the Army Corps of Engineers in May 2015 finalized the rule to clarify the scope of federal authority under the Clean Water Act. Opponents of this Act have been critical of the rule, calling it an unconstitutional power grab by the federal government that is burdensome for industry and farmers because they would be required to apply for permits for activities that affect streams and wetlands added to federal jurisdiction. States also filed separate cases, arguing in their briefs that WOTUS undermines state authority because it intrudes upon the states’ sovereign interests in regulating their land and water resources.

The EPA and Corps were prohibited by the court in October 2015 from enforcing the rule, and it continues to face opposition from Republican lawmakers who have tried unsuccessfully to deny federal agencies funds to carry out its provisions. Republicans will likely have in President-elect Donald Trump an ally in their fight against the so-called encroachment into state authority that hurts industry and farmers. Trump rode to victory partly on his promise to scuttle President Barack Obama's environmental regulations like the Waters of the U.S. rule, which he said have killed jobs and made the U.S. less competitive.

But while Trump has decried Obama administration environmental regulations, he has also said he believes in clean air and clean water. But while Trump has a history of contradicting his advisers, he has promised to turn over more power to the states, which bodes well for the states that have sued on the grounds that WOTUS infringes on their power to self-regulate.

The EPA and the Army Corps of Engineers have until Jan. 18 to file their response to the challengers in court. A hearing is unlikely to occur before April 2017.

On October 13, 2016, the Department of Housing and Urban Development (HUD) announced that Louisiana would receive the bulk of the $500 million in flood relief cleared by Congress in September, while the rest of the funding would be shared with Texas and West Virginia. The three states experienced destructive flooding that caused extensive damage to residents’ homes and drained state resources.

Louisiana will receive approximately $438 million, or 88% of the total allocation made in a stopgap spending bill, through the Community Development Block Grant (CDBG) program to rebuild and recover from severe flooding that ravaged the state in August. Texas will receive $45 million and West Virginia will receive the remaining $17 million. The CDBG grants will support housing redevelopment, business assistance and infrastructure repair. Administered by HUD, the department estimates that nearly 102,000 households and 41,000 families in the three states have been affected by destruction of the natural disaster. Maryland was affected by flash flooding in late July that destroyed downtown businesses and homes, but was absent from the CDBG disbursement.

Congress provided $500 million in flood aid through CDBG as part of a stopgap spending package (PL 114-223) enacted last month. The funding was targeted to the most impacted and distressed areas that experienced disasters declared by the president prior to September 29, when the spending bill was signed. This measure excludes East Coast states affected by Hurricane Matthew in October from receiving a slice of the $500. The Federal Emergency Management Agency (FEMA) currently estimates that $5 billion in disaster relief funds will be used to address immediate damage from Matthew.

Friday, November 4, 2016

Federal government considers FEMA flood insurance reform

posted by: Kirill Abbakumov

Congressional lawmakers are considering how to limit the government’s liability to increasingly severe natural disasters. The effects of climate change, exemplified by frequent floods from torrential rains, hurricanes and other phenomena, are straining the federal flood insurance program and exposing American taxpayers to a potentially growing price tag of flood relief payouts. Proposed solutions could include designating more places as flood-prone and encouraging residents to move out of harm’s way.

In the past 5 years, the National Flood Insurance Program, operated by the Federal Emergency Management Agency (FEMA) has taken in between $3.2 billion and $3.5 billion in premiums from its policymakers, while paying out only $372 million for claims in 2014 and $839 million in 2015. But funding is problematic in years characterized by powerful storms, exemplified by fiscal 2013 when FEMA paid out $8.2 billion for damage resulting from Superstorm Sandy.

In a 2015 report, the Government Accountability Office (GAO) came to a conclusion that losses generated by the program, as well as the potential for future losses, have created substantial financial exposure for the federal government. The flood program has been on GAO’s High Risk List since 2006, and the program owes $23 billion to the Treasury. This prompted Congress to propose the idea of moving away from flood insurance programs and towards grants for resiliency efforts. FEMA is recommended to ensure that flood insurance premiums begin aligning with changes in flood risk, especially as those risks grow in areas where they historically occurred less frequently.

Congress is also looking at a variety of proposals to limit the federal government’s liability exposure. In an effort to expand coverage in flood-prone areas. In April 2016, the House unanimously passed a bill (HR 2901) meant to spur the development of a private insurance market offering comparable coverage at a lower cost than the federal flood program offers. The bill would ensure that private insurance would satisfy the requirements for federally-backed mortgages on properties that are prone to flooding.

Lawmakers have also targeted areas and homes that have been subjected to repeated flood impacts. Congress introduced legislation in September 2016 that would direct FEMA to map the areas of flooded properties and public infrastructure that have experienced repeated flood impacts, and then develop and implement a plan to mitigate the risk in these areas.

On October 12, 2016, the U.S. Department of Transportation’s Federal Transit Administration (FTA) announced that 16 organizations around the country will receive a share of $14.7 million in grants that the communities can use to expand the economic and social impact of new transit services.

The funds are made available through FTA’s Transit-Oriented Development (TOD) Planning Pilot Program and would provide grants for comprehensive planning work in 16 metropolitan areas around the country, helping communities plan improved access to transit, jobs, education and services, and helps revitalize communities by attracting new business opportunities, jobs, and housing. In addition, the program encourages inclusive communities and seeks planning solutions to reduce residential and commercial displacement that can result from gentrification, seeking to connect people and opportunities through multimodal access to transit stations and to enhance connectivity of disadvantaged populations to essential services.

Nationwide planning projects highlighted by FTA include:

  • The Santa Clara VTA will receive $1.5 million to identify and plan for multimodal access needs and TOD opportunities for station areas along the Bay Area Rapid Transit (BART) Silicon Valley Phase II project. The project is a 6.5-mile heavy rail extension that connects BART to San Jose and Santa Clara.
  • The Regional Transportation District and City and County of Denver will receive $1.35 million to fund planning efforts of urban design guidelines for the corridor, an affordable housing strategy, small business retention and development strategy, and a financing plan for implementation of TOD.
  • The City of Phoenix will receive $2 million to plan for additional development and improved pedestrian and bicycle infrastructure in the South Central Light Rail Transit Extension corridor, while also preserving nearby housing affordability and established small businesses. 
  • The City of Milwaukee will receive $750,000 to conduct comprehensive TOD planning of the Milwaukee Streetcar from downtown into surrounding neighborhoods. The city will work with stakeholders along the proposed extensions to evaluate how to use transit-supportive development, to revitalize the two corridors, and to better connect residents to downtown jobs.

To be eligible for the Pilot Program, planning work must be associated with a transit project for which the local community intends to seek funding through FTA’s Capital Investment Grant (CIG) Program or that recently received funding through the CIG Program. The CIG Program is FTA’s primary competitive grant program for funding major transit capital investments, including heavy rail, commuter rail, light rail, bus rapid transit and core capacity projects.

Thursday, October 20, 2016

EDA seeks public comments to improve programs

posted by: Kirill Abbakumov

On September 21, 2016 the Economic Development Administration (EDA) announced two notices of proposed rulemaking (NRPM) and requests for public comment through the Federal Register for its Innovative Technologies in Manufacturing (ITM) Loan Guarantee Program and the Regional Innovation Program (RIS).

The ITM program is utilized by EDA to provide loan guarantees for obligations to small and medium-sized manufacturers for the use or production of innovative technologies, and ITM has supported approximately $280 million in loans over the past 5 years. These guarantees enable innovative technology manufacturers to obtain capital otherwise unavailable to them.

Specifically for the ITM program, EDA seeks public input through the Federal Register before the comment period closes on December 20, 2016, particularly on:

  • The biggest impediments to small or medium-sized manufacturers receiving a loan from a lending institution.
  • Whether the EDA's ITM loan program would make it more likely for lenders to lend to manufacturers, especially small or medium-sized manufacturers.
  • What lending institutions should require for a borrower to demonstrate that a market exists for an innovative technology product.
  • Whether there is an existing market for small to medium-sized business loans in the innovative manufacturing sector that are not currently being met.
  • What other requirements in a loan guarantee program would be necessary for a lender to offer such loans.
  • The manufacturing size threshold and definition to be considered a medium-sized manufacturer.
  • The typical loan size that a small-medium business in innovative manufacturing would apply for.
  • Whether securing a loan through the EDA ITM program to support the use or production of innovative technologies would assist manufacturers with access to outside capital.
  • Other activities and outcomes from the EDA ITM loan program that would best support innovation in the manufacturing sector.

EDA is also seeking input on its RIS program, which began in 2014 to competitively award grants to eligible applicants for activities related to the formation and development of regional innovation clusters. The RIS program is designed to increase economic growth and resilience, enhance prosperity, and improve quality of life by increasing employment and private investment in economically distressed regions.

EDA is seeking public input on how to use the RIS program to best provide funding to encourage scientific and technological innovation and collaboration. Comments can be submitted through the Federal Register, with the comment period closing on November 21, 2016.

Wednesday, October 19, 2016

Perkins reauthorization bill approved by the House

posted by: Kirill Abbakumov

On September 13, 2016, the House of Representatives voted to approve the Strengthening Career and Technical Education of the 21st Century Act (HR 5587), legislation which will help train workers for high-skilled jobs that employers have trouble filling in industries such as manufacturing. As technological advances are changing the landscape of work, modernization of the Perkins Act is crucial for strengthening access to high quality career and technical education for all workers and industries.

The measure would update the Carl D. Perkins Career and Technical Education Act (PL 109-270) of 2006 through Fiscal Year (FY) 2022. The federal program helps fund state and locally developed training to prepare students for high-skilled jobs. Changes to the bill would give states and districts more control over their programs, adding emphasis on local control and giving more power to the states in formulating their plans. The legislation is expected to comprehensively update programs serving more than 11 million students, overhauling how the government invests in American workforce and strengthens the nation’s competitiveness through job skills training in advanced manufacturing and computer science.

As the Perkins program provides training to students in high school and college, the update of the bill aligns standards with two other recently passed bills: the overhaul of the Elementary and Secondary Education Act (PL 114-95) and the Workforce Innovation and Opportunity Act (PL 113-128), which focuses on training workers.

The new bill would require a gradual increase in funding to $1.23 billion in fiscal 2022. It would cost $7.1 billion between fiscal 2017 and fiscal 2022, according to the Congressional Budget Office.

A version of the bill passed by the House to reauthorize the program has been approved by the committee and is currently facing some opposition, according to lawmakers, advocates and lobbyists. Should the bill not pass this year, there is potential for it to be resurrected in the next Congress as a high priority on the agenda.

Tuesday, October 18, 2016

Congress passes continuing resolution to fund government until December

posted by: Kirill Abbakumov

On September 28, 2016 lawmakers passed a 10-week continuing resolution (HR 5325) through both chambers to be signed into law by President Barack Obama on September 29, 2016. CR extends government funding until December 9, 2016, after which Congress will need to either pass fiscal 2017 spending in some form or extend the CR.

After nearly a month of false starts and partisan conflict, Congress managed to pass a stopgap spending measure that avoids a government shutdown when the fiscal year ends on September 30, 2016. The bill also provides $1.1 billion in funding to respond to the Zika virus, $500 million in flood relief for Louisiana and other states and full fiscal 2017 appropriations for military construction and veterans.

Missing from the package was any money to help repair the lead-contaminated water system of Flint, MI. In addition, there were no proposals to resolve a block on a Securities and Exchange Commission rule that would require publicly traded companies to disclose political spending, and no language was included to help the revived Export-Import Bank re-establish its quorum in order to fully function. All three issues will have to be taken up by Congress after lawmakers return post-elections in November.

As lawmakers return from their November break, the month-long struggle it took to produce a relatively simple measure raises troubling questions about the ability of congressional leaders to pass another mammoth omnibus bill that will likely be needed in December, to fund the government for the remainder of fiscal 2017 once the stopgap expires. While some lawmakers argue that there should be an attempt at a catchall spending package after the elections, others prefer to bundle legislation into small “minibus” groups, yet others still want to delay all major fiscal decisions until a new president and new Congress take office next year. The Senate is scheduled to return Nov. 15 and the House Nov. 14.

Monday, October 17, 2016

SBA amends disaster loan program

posted by: Kirill Abbakumov

On September 15, 2016, the Small Business Administration (SBA) announced the final rules amending its Disaster Loan Program regulations, which have been made in response to Hurricane Sandy Rebuilding Task Force recommendations from 2014. SBA identified proposed two changes to its program.

The first change allowed SBA to rely on a disaster loan applicant’s credit, including credit score, as evidence of repayment ability. This change allows SBA to expedite processing of applications from disaster victims with strong credit by removing the requirement to analyze cash flow for all loans.

The second change increased the amount of disaster assistance funds that can be immediately disbursed to borrowers. This rule allows SBA to increase the unsecured disaster loan limit to $25,000 for economic injury loans for all disasters and for physical damage loans for major disasters.

These changes are designed to remove obstacles to resilient rebuilding while taking into account existing and future risks and promoting the long-term stability of communities.

The final rule is effective September 15, 2016.

Friday, October 14, 2016

EXIM Bank reopens for business in Argentina

posted by: Kirill Abbakumov

On Wednesday, September 14, the chairman and president of the Export-Import Bank of the United States (EXIM), Fred P. Hochberg, announced that the Bank will resume short-term and medium-term financing in Argentina for the first time in more than 15 years.

The re-opening of EXIM signifies a potential for increased cooperation between U.S. and Argentine businesses, with meaningful reforms implemented by Argentine President Marci providing an improved economic and financial environment, and with EXIM bank able and willing to provide the financing necessary to facilitate mutually beneficial partnerships. The Bank will offer financing terms of up to 7 years, and will additionally consider supporting structured, long-term financing.

Argentina was once one of EXIM’s largest and most diverse markets. The Argentine economy holds opportunities in a range of sectors, including commercial, business, and agricultural aircraft; helicopters; farm, power, and medical equipment; and satellites. At the same time, EXIM is well positioned to capitalize upon the momentum unleashed by Argentina’s recent efforts to promote renewable energy, and support hydroelectric, solar, and wind projects that are materializing throughout the country.

The decision becomes effective on September 21, 2016, as EXIM officially opens in Argentina.

Friday, October 14, 2016

Secretary Prizker announces Manufacturing USA

posted by: Kirill Abbakumov

On Monday, September 12, Secretary of Commerce Penny Pritzker announced that National Network for Manufacturing Innovation (NNMI) will be changing its brand name to “Manufacturing USA”. With its new name, Manufacturing USA is designed to capture the geographic reach of a network that spans the United States and is positioned to benefit companies of all sizes from coast to coast.

The network consists of public-private institutes dedicated to securing the nation’s future through manufacturing innovation, education, and collaboration. The current Manufacturing USA network is operated by the Department of Defense and Energy and consists of 9 institutes, with 6 more planned by 2017. Since 2012, the institutes grew their membership to more than 1,300 companies and initiated 240 research and development projects.

In 2016, Congress appropriated funding to the Department of Commerce to support the network and the vision of U.S. global leadership in advanced manufacturing. Manufacturing USA will continue leveraging federal funding into greater private investments of resources and expertise in key national manufacturing sectors. More than $600 million in federal funding has already been matched by more than $1.3 billion in private investment.

The new Manufacturing USA name will be used to increase awareness throughout the manufacturing community. A new domain name for the program, www.ManufacturingUSA.com, emphasizes industry’s investment in manufacturing and the importance of the partnership for enhancing American economic competitiveness.

Friday, October 14, 2016

Congress to revamp taxes charged on craft beverages

posted by: Kirill Abbakumov

Congressional lawmakers are pushing to overhaul federal excise taxes on beer, wine and distilled spirits in lame-duck Congress session with support from a broad business coalition and bipartisan majorities in both chambers (S 1562 / HR 2903) in an effort to modernize outdated federal legislation and expand incentives for small breweries and craft beverage businesses.

The government currently collects approximately $10 billion a year in alcohol excise taxes, with beer, wine and distilled spirits being taxed at different rates, depending on the alcohol content. These excise levels were last raised in 1991 and are lower than historic levels when adjusted for inflation, according to the Congressional Budget Office. A restructuring of alcohol excise taxes is long overdue to encourage the growth of smaller makers of beer, wine, hard cider and distilled spirits, as well as segments of the restaurant industry that includes brew pubs and wine bars, and there is broad support for the legislation from farmers and makers of beer, wine, cider and distilled spirits across America.

For small brewers, defined as those who produce fewer than 2 million barrels annually, the plans would reduce the tax on the first 60,000 barrels of beer from $7 to $3.50 per barrel. The excise tax would go down from $18 to $16 per barrel for any production up to 2 million barrels. For large brewers, who make more than 2 million barrels annually, the tax would go down from $18 to $16 per barrel on the first 6 million barrels brewed.

Wine is currently taxed between $1.07 and $3.40 per gallon based on alcohol content. The bill would replace the current 90 cents per gallon tax credit for wineries that produce less than 250,000 gallons of wine, which is now applied to the first 100,000 gallons of production. The existing benefit phases out between 150,000 and 250,000 gallons. The legislation would provide a new $1 per gallon tax credit on the first 30,000 gallons of wine by any winery regardless of size. Some wineries would be able to claim a 90 cents per gallon credit on the next 100,000 gallons.

Distilled spirits are now taxed at $13.50 per proof gallon, which is each gallon that is 50% alcohol. The legislation would reduce the tax rate to $2.70 on the first 100,000 proof gallons of production, and reduce that levy to $13.34 on the next 22.1 million proof gallons of production. The tax would remain $13.50 per proof gallon for larger amounts produced. Under the proposal, harder cider makers would receive a tax credit of 5.6 cents per gallon on the first 30,000 gallons produced and 6.5 cents on the next 100,000 gallons. Cider is currently taxed at 22.6 cents per gallon.

Tuesday, September 20, 2016

Congress set on increasing tax incentives for infrastructure

posted by: Kirill Abbakumov

Tax writers in both parties are working to push legislation aimed at encouraging broader bond financing for infrastructure projects as both Hillary Clinton and Donald Trump emphasize similar incentives on the campaign trail. The proposal (HR 5361) would allow for tax-exempt bond financing for projects involving government buildings that are financed by public-private partnerships, supplemented by a companion bill (S 3177) in the Senate.

These tax incentives for buildings, roads and bridges are echoed in promises by Clinton and Trump. Clinton has proposed $275 billion in infrastructure funding, which she stated would be financed with funds from reshaping taxes on multinational corporations, including the repatriation of tax-deferred, offshore corporate profits. Trump outlined a plan that would provide $1 trillion for infrastructure, and has offered a similar vision for using bonds to raise funds for infrastructure projects.

Both parties are exploring bond financing to make up for flat revenue in the Highway Trust Fund and the lack of additional federal funds for infrastructure projects after enactment of the five-year highway reauthorization (PL 114-94). One option is to expand the nation’s $3.7 trillion municipal bond market. Other options include tax credits for buyers of taxable infrastructure bonds and other tax breaks for corporations that buy such bonds, including a potential reduction in the 35% tax rate on offshore profits that are repatriated and are invested in these financial instruments.

Bond financing proposals have been gaining attention because of support not only from Clinton and Trump, but from state and local governments and investors, who want to take part in public-private partnerships on infrastructure projects.

However, some Republicans have been cool to Clinton’s idea of providing $25 billion in federal funds for infrastructure bank loans and loan guarantees, citing concerns about potential future government liability for loan defaults, cost overruns and financial losses. Democrats, on the other hand, have taken the lead in promoting a proposal (HR 2676) to renew the Build America bond, which was created by the 2009 stimulus law (PL 111-5) and expired in 2010. The program provided a 35% tax credit for taxable interest payments received by bond buyers.

Tuesday, September 13, 2016

DOT announces $2.45 billion for Amtrak infrastructure upgrades

posted by: Kirill Abbakumov

Vice President Joe Biden announced on August 26, 2016 that the Northeast Corridor’s passenger rail infrastructure — its trains, stations, and rails — will be upgraded using a $2.45 billion federal loan to Amtrak, making it the largest single loan in the U.S. Department of Transportation’s history.

Many aspects of US rail systems – particularly along the Northeast Corridor – are in need of repair and rehabilitation. The price of renewing and safeguarding this 450 mile web of railways in the Corridor stands at an estimated $20 billion. Yet the $2.45 billion will be used to purchase 28 new train sets for the high-speed Acela trains while also pledging $170 million for facility improvements in New York, Washington and Maryland, $90 million for safety improvements and $80 million for track infrastructure.

Biden announced that the funding will come from the Railroad Rehabilitation and Improvement Financing Program (RIFF). Under the RRIF program, the Federal Railroad Administration is authorized to provide direct loans and loan guarantees of up to $35 billion to help pay for rail infrastructure in the United States. The loan is expected to be repaid through growth in Northeast Corridor revenues.

Biden stated that the loan is essential to support one out of every three jobs in the country that are found along the Northeast Corridor. "This loan is a key step to providing investments needed to help keep high speed trains moving throughout the region… We need these kinds of investments to keep this region – and our whole country – moving, and to create new jobs.”

In 2015, federal and state agencies, including Amtrak, developed a 5-year plan to spend $17.7 billion on infrastructure along the Northeast Corridor between 2016 and 2020. Only 40% of the planned projects had been funded by the end of 2015, according to the Congressional Budget Office.

Thursday, September 8, 2016

Federal agency announces $7.3 million for community development

posted by: Kirill Abbakumov

The Corporation for National and Community Service (CNCS), the federal agency for volunteering and service, announced it will invest up to $7.3 million to support and maintain its Pay for Success (PFS) program made possible through the Social Innovation Fund (SIF). Created in 2009, the SIF has grown into nearly a $1 billion social impact incubator within the federal government, creating more than 450 public-private partnerships that deliver high-impact, community-based solutions that work.

At its core, the Social Innovation Fund (SIF) is about finding what works and making it work for more people. PFS is another critical tool with the same mission – supporting innovation, ensuring solutions have the dollars needed to scale, and paying for results.

PFS was created as a new approach for government to partner with the private sector to fund proven community-based solutions. PFS is an innovative contracting and financing model that leverages philanthropic and private dollars to fund services up front, with the government, or other entity, paying after they generate results.  This strategy has gained strong bi-partisan support in Congress, as a strategy for increasing return on taxpayer dollars while improving the quality of services provided in our communities.

The competition will provide up to $7.3 million in grants to build the pipeline of "PFS-ready" governments and address the developmental needs of SIF PFS projects to increase the likelihood that they will launch. Overall, this will aid in advancing the emerging models that align payment for social services with verified social outcomes.  The deadline for applications will be 5 p.m. EST on September 20, 2016. Successful applicants will receive grants of between $350,000 and $1.8 million per year for three years.