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Urban aid plan confronts lack of consensus.

President Bush and House and Senate Congressional leaders met at the White House last week and agreed to attempt to draft a modest urban aid package, but they reached no agreement on the details, on how to proceed, or how to finance it.

As proposed, the plan would involve no new federal initiatives. If financed as proposed by the administration, the package would result in still further federal disinvestment in the majority of the nation's cities and towns instead of any new assistance.

The agreement to try to draft a bipartisan package for action before the July 4th recess came as:

* a Senate committee became the first unit to approve the President's plan for a significantly larger, $5 billion package of bailout assistance for Russian cities and towns,

* House and Senate conferees moved toward agreement on cutting some already-enacted aid to cities,

* the House passed and sent to the Senate an emergency recovery package to help Los Angeles and Chicago, and

* the House Armed Services Committee voted to increase defense spending to build still more B-2 bombers, but neared agreement on authorizing a $1 billion defense economic conversion program for communities.

Bipartisan Effort on Urban Initiatives

Both the House and Senate Democratic leadership and the White House indicated last Tuesday they would try to forge an urban aid policy initiative including some form of urban enterprise zones, but as Senate Minority Leader Robert Dole [R-Kans.] reported:

"We agreed on everything but the details."

The President ruled out any tax increases to pay for any part of his six-point federal urban agenda worth approximately $3 billion--a repackaging of existing proposals. The administration has proposed instead that its enterprise zone, anti-drug, public housing, education, job training, and welfare reform proposals be paid for by offsetting cuts in existing federal programs, including some that go directly to cities, such as the Community Development Block Grant [CDBG] program and housing modernization funds. That proposal would shift money around from some cities to others, but would result in no net increase.

In the House, Speaker Thomas Foley [D-Wash.] indicated that House Democrats are considering an urban proposal which would include enterprise zones, extended job training, accelerated high-way and public transportation funding, and extentions of the expiring targeted jobs and low income housing tax credit programs, and mortgage revenue and small issue industrial development municipal bond programs.

Funding Obstacles

Not only is there little agreement on what programs should be included in any urban agenda, but also there is significant disagreement within the administration and the Congress about how to finance even a modest initiative. In addition, there is, so far, little agreement about the exact cost of the White House proposals.

HUD Secretary Jack Kemp has suggested that the package be declared an "emergency" by President Bush, exempting the package from the budget rules set under the 1990 budget agreement. House Speaker Foley has suggested reconsideration of those rules to break down the firewalls and allow defense savings to be used for reinvestment in cities. The White House has rejected both those options and the use of tax increases, recommending instead offsetting cuts in other domestic programs.

Because the 1990 budget agreement calls for a cut in domestic discretionary investment of $6.7 billion next year, the question of how to pay for any new urban initiative has become key. Unless Congress and the White House reach a bipartisan agreement, the issue will not be how to provide new resources to cities, but which resources to cut.

Key Programs Affecting Cities

The key programs affecting cities would be the expiring provisions and enterprise zones.

In response to criticisms of the administration's enterprise zone proposal, the President's budget director, Richard Darman, indicated he was considering expanding the program to make more cities eligible and to increase the tax subsidies for businesses willing to invest in designated areas in such cities. He also said that up to 80 percent of the $500 million "weed and seed" funding the President was seeking would go to enterprise zone areas.

Under the President's proposal submitted to Congress earlier this year, areas in up to 10 cities would have been eligible for enterprise zone designation, and up to 50 urban and rural areas over the next four years. That proposal was projected to cost $3.3 billion.

Darman said he is now working with the Treasury to set criteria--such as high unemployment, crime rates and declining tax bases--for eligibility. This would have the effect of creating a significantly more expensive entitlement program. Darman indicated he had no idea yet how much that would increase the cost to the federal deficit, because he had no information on how many businesses would simply move their locations from one place to another to take advantage of the federal subsidies. The administration is expected to submit a revised proposal as early as this week with recommendation of how to pay for it. The revised enterprise zone legislation is the only part of the President's proposed urban relief package which will be formally submitted to Congress.

The White House has indicated it would oppose efforts to link any enterprise zone legislation with proposals to extend the expiring municipal tax provisions or jobless benefits.

Russian Bailout

As the White House and Congressional leaders debated a $3 billion urban rebuilding package for America, the Senate Foreign Relations Committee last week voted 14-4 to authorize an unspecified level of aid to the former Soviet Union, the Commonwealth of Independent States. The bill, S 2532, is, according to the administration, expected to provide some $5 billion in new bailout assistance to Russian cities and towns and $12 billion for an increase in the U.S. contribution to the International Monetary Fund.

The White House has made action by the Congress on the Russian bailout package an urgent priority in an effort to have it enacted prior to Boris Yeltsin's visit to the White House on June 16.

Cuts in Housing and EPA Funding for Mandates

House and Senate conferees met Wednesday and Thursday, but failed to reach agreement on competing proposals to cut already appropriated 1992 federal funds. Under the bill, HR 4990, the House proposed $5.8 billion in cuts, including four percent cuts in the HOME state and local housing block grant program and one percent in the federally mandated EPA municipal wastewater construction grant program.

NLC Executive Director Don Borut wrote the conferess strongly urging rejection of both provisions, noting that cuts in housing assistance would immediately and adversely affect the city of Los Angeles. Borut told the conferees the EPA cuts would not only leave the same mandates in place for cities, but also would undercut municipal tax-exempt bonds issued by a number of states for state revolving loan funds. Those bonds were issued backed by letters of credit which assume the full funding as signed into law by President Bush last year.

The conferees are scheduled to meet again on the HUD and EPA funding issues affecting cities this Tuesday afternoon.

Short Term Assistance to L.A. and Chicago

The House last week passed and sent to the Senate for action this week an emergency supplemental appropriations package of nearly $600 million in grants and loans to help Los Angeles and Chicago. Under an agreement with the White House, the grants and loans would be termed an "emergency" by the President, exempting them from the budget rules and simply increasing the federal deficit. The package includes just under $170 million in loan subsidies to the Small Business Administration to leverage $500 million in loans, $25 million for SBA administrative costs, and $300 million in Federal Emergency Management Agency funds for disaster relief payments.

On Wednesday, President Bush also announced that the Federal Home Loan Bank Board would make $600 million in community investment loans available to help in the rebuilding of Los Angeles.

Economic Conversion

The House Armed Services Committee last week approved and sent to the full House a $273.4 billion 1993 defense bill that includes an authorization for up to $1 billion in economic conversion assistance for workers, businesses, and communities affected by the slowdown in defense spending.

The funding level marks the first major commitment by the Congress to assist the nation's cities and towns in economic conversion. It still, however, lacks details--in part because the administration has submitted no plans or proposals to Congress.

The criteria set by committee Chairman Rep. Les Aspin [D-Wisc] are:

* the creation of real jobs;

* concrete, measurable results; and

* leveraging other investment.

The same day, the House Energy and Commerce Subcommittee on Transportation and Hazardous Materials reported out base closing legislation to make it easier for the defense Department to turn over abandoned military bases to cities and towns. The legislation, sponsored by Rep. Leon Panetta [D-Calif.] and offered as an amendment to HR 4016 by Rep. Al Swift [D-Wash.], would amend the Superfund toxic waste and liability law to allow the transfer of uncontaminated portions of federal property. The provision does not, however, apply to non-Superfund sites, nor would it waive liability for subsequent owner--both issues strongly supported by NLC.

The committee on Thursday agreed to review city concerns before full committee consideration next month.
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Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:May 18, 1992
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