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Federal Alert: This Week in Washington
Matthew Mullin   on Wednesday, December 20, 2017 at 12:00:00 am

Congress will vote on a number of measures this week that will impact economic development and the nation for years to come. Taxes, disaster funding, and fiscal 2018 appropriations will all be brought to a vote by Friday.

Taxes

The conference report for HR 1 – the tax bill – includes a number of key changes:

  • Increased corporate tax rate from 20% to 21%
  • 20% credit for rehabilitating historic structures amortized over 5 years; 10% credit for pre-1936 buildings eliminated
  • New Markets Tax Credits preserved
  • Tax exemption related to Private Activity Bonds (PABs) is preserved, including those related to the construction of professional sports stadiums
  • Capital gains income may be temporarily deferred if invested in qualified opportunity zones; estimated to raise $1.6 billion in investments for opportunity zones over 10 years

Congress will be voting to adopt the Conference Report and sending HR 1 to the White House as early as today. The nuts and bolts of the tax bill are better at this stage than in earlier versions of the bill. However, there can be no doubt that decreasing revenue by at least $1.5 trillion will have a negative impact on funding for federal economic development programs over the next several years.

Disaster Funding

Speaker of the House Paul Ryan has signaled he will attach an $81 billion dollar supplemental disaster spending measure to the next fiscal ’18 bill, due out before midnight this Friday. The bill includes a number of key items, including:

  • $600 million for the Economic Development Administration (EDA), including a critical 2% carve out for salaries and expenses to help EDA effectively manage and execute this funding
  • $26.1 billion for Community Development Block Grants (CDBG)
  • $12.1 billion for the Army Corps of Engineers

The bill will bring the total amount of disaster funding for 2017 to $132.75 billion, a record. The Senate has yet to weigh in and it is possible the funding will be delayed past this Friday’s expiring Continuing Resolution (CR) unless agreement materializes quickly.

2018 Appropriations

Congress must pass legislation by midnight Friday to avoid a government shutdown. At this point, it seems unlikely we will see full-year appropriations for the remainder of 2018. The House is likely to pass a Defense-CR hybrid, funding defense for the remainder of the year and funding everything else through a CR into January, prompting another funding showdown at that time.

The Senate will have to respond, either by passing the House measure or altering it before kicking it back to the House. If it kicks it back to the House with changes, which it is almost certain to do since the measure will need at least 8 Democratic votes in the Senate to pass, the Speaker will likely need Democratic votes to pass it to avert a shutdown.

All of this essentially equates to kicking the can again, so we will be once again debating fiscal 2018 funding – well into the second quarter of the fiscal year. Disaster funding could be included to help gather votes, though it seems just as likely disaster funding will be excluded in favor of keeping it for a ‘final’ push for complete fiscal 2018 funding in January.

Wrapping up 2017

We are pleased that at the end of this very tumultuous year, EDA remains intact and positioned to remain strong into the coming years, SelectUSA has been identified as a priority by the new administration, CDBG lives on to fight another day, New Markets Tax Credits & Historic Tax Credits will continue to be part of the economic developer’s toolkit, and tax exemption for PABs will continue to support growth in communities across the country. And despite the devastation of disasters from Puerto Rico and the U.S. Virgin Islands to California, the importance of economic recovery has taken hold with the administration and Congress.

However, we remain concerned about EDA funding overall, which should at least be at fiscal 2017 levels – about $273 million – and providing SelectUSA with at least $10 million. The debate over the federal role in local economic development will only increase in intensity as we begin to wrestle with decreasing revenue against increasing need. For now we have no new action items for economic developers beyond continuing to communicate your support for robust funding for EDA in both the disaster supplemental and fiscal 2018 appropriations.

Before very long we will be pivoting to fiscal 2019 and the next set of administration priorities: President Trump will deliver the State of the Union address on January 30th, 2018, and releasing his fiscal 2019 budget proposal shortly thereafter. Join us at the 2018 FED Forum March 25-27th for the latest news and information on all things federal economic development.