Author: Trey Jackson

Federal Reserve’s Robert Kaplan Discusses Economic Outlook with Roundtable; Real Estate Coalition Urges State and Local Officials to Distribute Federal Pandemic Relief Funds

Posted on by Trey Jackson

Kaplan Discussion

Federal Reserve Bank of Dallas President and CEO Robert S. Kaplan, top left in photo, on April 12 discussed a wide range of monetary and fiscal policy issues with Roundtable Chairman Emeritus Robert S. Taubman (Chairman & CEO, Taubman Centers, Inc.), top right, and Roundtable President and CEO Jeffrey DeBoer, center. (Watch the Kaplan video interview on The Roundtable’s YouTube Channel)

The Fed View

  • The remote discussion focused on the overall economy, inflation trends, affordable housing, commercial real estate, the banking industry and cryptocurrency. Among Mr. Kaplan’s key points:
    • The Dallas Fed forecast for the 2021 U.S. economy’s growth rate is 6.5 percent. 

    • The distribution of COVID-19 vaccines is outpacing the spread of the virus, positively affecting economic growth.  

    • A recovering economy follows improved health conditions, with expected increases in consumer mobility and spending.

    • A significant element driving the economic recovery is “Substantial fiscal policy, much more substantial as a percentage of GDP than we had during the Great Recession.” 
  • Kaplan acknowledged the challenge of balancing central bank monetary policies with fiscal policies enacted by lawmakers. “Anytime there’s fiscal actions or other changes, you have to keep recalibrating that balance. There’s no textbook for this because we haven’t been through a period where we were shut down and we’re now reopening … and there’s no precedent in recent years of fiscal policy that’s this size of GDP,” Kaplan said.  (Video of the discussion)
  • He commented about the yield on U.S. Treasuries, which rose to 1.77% last month. “As we recover, it wouldn’t surprise me for it to drift higher, the 10 year,” Kaplan said, adding, “There’s no shortage of capital” to buy Treasuries. (BGov, April 9)
  • Kaplan also addressed the economic trends monitored by the Dallas Fed, reopening progress and CRE debt exposure to banks.  

Pandemic Relief Funds & Distribution 

treasury-department-building_x475w

  • Significant fiscal policy enacted by Washington lawmakers last month authorized hundreds of billions in pandemic relief under the American Rescue Plan Act of 2021 to households, small businesses, and the hospitality industry suffering from the economic impact of COVID-19. (Roundtable Weekly, March 12, 2021)
     
  • The Wall Street Journal reported on April 13 that state and local authorities are overwhelmed with “how to allocate $25 billion in federal rental relief, leaving many tenants and landlords waiting weeks or months for their share.”
     
  • The Roundtable is part of a broad real estate coalition that wrote on April 15 to state, county and municipal officials, urging them to distribute the allocated federal funds as soon as possible. (Coalition letter)
     
  • The coalition letter emphasized the need for elected state and local leaders “to quickly and fully allocate available American Rescue Plan federal funds to provide assistance to renters, consumer-facing small businesses, and impacted industries such as retail, tourism, travel, and hospitality that are having trouble paying rents, mortgages or remaining viable enterprises due to the COVID-19 pandemic.”
     
  • The letter adds, “Such assistance would make a big difference in the lives of thousands upon thousands of COVID-19 affected renters and businesses in their cities, counties, and states – and would also provide stability to the buildings and communities in which they live.” 

The Treasury Department continues to implement pandemic recovery programs, including the State and Local Fiscal Recovery Fund, State Small Business Credit Initiative, and renter and homeowner assistance. Treasury Secretary Yellen  and White House Rescue Plan Coordinator Gene Sperling met yesterday with members of the National Governor’s Association Executive Committee to determine the most efficient and effective way to get federal resources to states. (Treasury Dept readout, April 15) 

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President Biden Signals Flexibility on Infrastructure Plan as GOP Senators Craft Alternative Approach; SALT Repeal May Influence Negotiations

Posted on by Trey Jackson

Biden White House Meeting

President Joe Biden this week met with a bipartisan group of policymakers about the details of his multitrillion infrastructure proposal as a bloc of moderate GOP senators stated they are developing a far less expensive counterproposal that would pare back the definition of what comprises “infrastructure” and fund it with unspecified user fees. (Washington Post, April 14)

  • Sen. Mitt Romney (R-UT), who is involved in talks about an alternative infrastructure plan, said, “The pay-for ought to come from the people who are using it,” suggesting that a transportation mileage charge could be applied to electric vehicle drivers. “Clearly by bringing in additional revenue from actual miles driven is going to create some additional revenue,” Romney said.  (Politico Pro, April 14)
  • Rep. Donald  Payne, Jr., chairman of the House Transportation Subcommittee on Railroads, attended the White House meeting where President Biden said he was “prepared to negotiate” on his new infrastructure-focused economic plan – and expressed support for the Gateway project, a major rail tunnel project between New York and New Jersey. (BGov, April 12)

SALT Caucus

SALT Caucus

  • An effort by members of Congress to repeal the cap on state and local tax deductions (SALT) is adding to the complexity of negotiations over the White House infrastructure proposal. Yesterday, a bipartisan congressional “SALT caucus” was launched to push for the full repeal of the $10,000 limit on state and local deductions, which was enacted as part of the 2017 Republican tax overhaul. (Bloomberg, April 15)
  • It is unclear how many members of the bipartisan caucus would link their support for Biden’s infrastructure proposal, and its increased corporate taxes, to action on the SALT cap.  Reps. Josh Gottheimer (D-NJ) and Tom Suozzi (D-NY), who co-chair the SALT caucus, said they “will not accept any changes to the tax code that do not restore the SALT deduction.” (CNBC, April 15)
  • Additionally, several New York Democrats sent a letter to House leadership on April 13 urging for a full repeal. “We will not hesitate to oppose any tax legislation that does not fully restore the SALT deduction,” according to the letter. (BGov and Wall Street Journal, April 13)

Energy-Efficient Buildings

  • The White House’s infrastructure plan and the importance of energy efficient buildings was noted in a recent New York Times interview with White House National Economic Council Director Brian Deese.
  • Deese stated during the April 9 Ezra Klein Show (podcast), “… it’s been true for multiple years that energy efficiency upgrades in commercial buildings should just happen, and they’re not.  The built environment and industry get less attention but are extraordinary opportunities. And this [infrastructure] plan has a very significant investment in upgrading buildings and making them more energy efficient.”
  • He added, “The jobs doing that happen all around the country. They’re construction jobs, building trades. A lot of it is actually high-value investment, where providing an incentive could actually unlock a bunch of private capital to invest, particularly in the commercial building space.”
  • Deese is scheduled to participate in next week’s Roundtable Spring Meeting, along with U.S. Department of Transportation Secretary Pete Buttigieg. The remote discussions will be available on The Roundtable’s YouTube channel by April 21.

The Roundtable is part of the Build by the 4th coalition, led by the U.S. Chamber of Commerce, which encourages the Biden Administration and Congress to pass a comprehensive infrastructure deal by Independence Day 2021.

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Administration Outlines FY 2022 Budget, Plans Executive Order on Climate-Related Risks for Public and Private Financial Assets

Posted on by Trey Jackson

Biden Budget April_9_2021

The Biden administration today released its $1.52 trillion discretionary spending request for the coming fiscal year, which starts Oct. 1, 2022. This initial budget request outlines President Biden’s priorities and agenda for the coming year, but does not include any plans for raising revenue or tax policy changes. (Full budget text and news release summary)

Tax Details in Spring

  • Today’s “skinny” budget will be followed in late spring by a formal budget with more detailed requests for mandatory spending and tax policy proposals.  (CQ, April 7)
  • The budget proposal would boost current funding levels for nondefense spending by 16 percent and limit increases in defense spending to 1.7 percent. (CQ, April 9)
  • Among the specific agencies affected, the Environmental Protection Agency budget would increase $2 billion, and the Housing and Urban Development Department would receive a $9 billion boost. (New York Times and USA Today, April 9 )

Budget & Climate

San Francisco landscape wildfire smoke

  • The administration’s is also expected to address risks to financial stability posed by climate change in its long-term budget planning. Bloomberg reported this week that Biden will soon issue an Executive Order to develop a plan on climate-related risks for public and private financial assets.
  • The Executive Order would come as policymakers and the private sector debate how the financial industry should prepare for environmental threats – and the information companies should provide to investors about those risks.
  • The strategy would be developed within 120 days of the Order by National Economic Council Director Brian Deese and National Climate Advisor Gina McCarthy, in coordination with Treasury Secretary Janet Yellen. (Bloomberg, April 8)

Secretary Yellen is currently working on a separate report on government-wide efforts to address climate-related financial risks with the Financial Stability Oversight Council, which includes the Federal Reserve and the Securities and Exchange Commission. (Politico, March 31)

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Roundtable Comments on “Model” Local Ordinance Proposing Efficiency and Emissions Requirements on Buildings

Posted on by Trey Jackson

Honolulu

The Real Estate Roundtable submitted comments on April 6 regarding a “model” law developed for cities, counties, and states considering building “performance standards” for energy consumption and GHG emissions. 

Building Performance Standards (BPS): 

  • The model ordinance has been developed by the Institute for Market Transformation (IMT) – a D.C.-based policy organization that coordinates with state and local bodies on energy- and climate-related regulations. (IMT’s model ordinance, BPS resources, and blog post, Creating Real-Estate Friendly Building Performance Standards, Jan 21, 2021)
  • A task force of The Roundtable’s Sustainability Policy Advisory Committee (SPAC) convened to respond to IMT’s proposed law. According to the letter, a “whole-of-economy approach must drive businesses to take bolder actions within their control to minimize their carbon footprints while operating profitably, meeting investors’ demands, and equitably creating jobs in their communities.”
  • “Real estate developers, owners, managers, and financiers – along with building tenants, occupants, public buildings, and … the power supply, transportation, and manufacturing sectors – all have shared obligations to address climate change,” The Roundtable writes.

Roundtable Comments — Talking Points:

Bloomberg Center Cornell Tech campus

  1. BPS laws must rely on consistent standards, methods, and data that reflect the best available government and industry practices. Uniformity is critical to avoid a divergent “patchwork” of state and local laws that would unduly complicate building owners’ compliance and regulators’ enforcement.
  2. No BPS law should mandate building owners to reduce emissions from sources beyond their control.  Owners should not be saddled with responsibilities to “clean-up” the electric grid, district thermal systems, and other community-wide power infrastructure that they do not manage or control.
  3. Any BPS law should include financial assistance to help all regulated owners defray the significant capital expenses needed to bring buildings into compliance.
  4. BPS laws should encourage investments in existing buildings and allocate compliance burdens based on tenants’ and occupants’ energy usage.

  5. The least efficient buildings and communities are frequently the most distressed buildings and communities. Added regulatory costs from BPS mandates could disproportionately affect housing affordability and economically distressed neighborhoods on the “frontlines” of climate change.

Why It Matters: 

Leadership - RER's SPAC

  • “RER members must engage vigorously on climate and energy issues,” said SPAC Chair Anthony E. Malkin, above left, (Chairman, President and CEO, Empire State Realty Trust). “We have the facts, the practice, and the experience to inform the thinking of cities, states, federal officials, and NGOs as they develop goals to reduce greenhouse gas emissions and stride toward a clean energy economy. The field on which the game is played, and the rules themselves, are in constant flux. RER member engagement has never been more important to offer policy recommendations that create green jobs while modernizing U.S. buildings and power infrastructure.” 
  • “It is critical for Roundtable members to have a seat at the table as cities and states consider laws that set efficiency and emissions standards on buildings,” said SPAC Vice Chair, Daniel Egan, above right, (Senior Vice President, Vornado Realty Trust). “Policy makers must design climate programs that encourage owners to invest in their buildings to improve performance, while incentivizing our industry with market-based solutions that can help increase the nation’s supply of clean, renewable energy.”  

State and local jurisdictions have been marching forward with regulatory mandates on buildings to address energy and GHG emissions, which prompted The Roundtable to comment on IMT’s model ordinance. While Democrats in the House of Representatives have offered omnibus climate legislation with provisions that would affect U.S. real estate (see the CLEAN Future Act, H.R. 1512), it faces an uphill battle in the Senate. (Roundtable Weekly, March 5)   

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Biden Administration Details Tax Proposals to Fund Infrastructure Package

Posted on by Trey Jackson

The White House - roses

The Biden administration this week released additional details on its proposals to raise corporate taxes to pay for its massive $2.3 trillion economic growth and infrastructure proposal.

Infrastructure & Taxes

  • President Biden, anticipating Congress’ return next week to begin deliberations on his proposal, stated, “Debate is welcome. Compromise is inevitable. Changes are certain. Inaction simply is not an option.” (White House remarks, April 7)
  • The administration aims to raise $2.5 trillion to pay for its sprawling “American Jobs Plan” by increasing the corporate tax rate to 28 percent from 21 percent, imposing a strict new minimum tax on global profits, and eliminating incentives to shift profits overseas. (New York Times, April 7)
  • The proposed taxes to fund the infrastructure investments were detailed this week in a Wall Street Journal op-ed by Treasury Secretary Janet Yellen – “A Better Corporate Tax for America” – and in Treasury’s report, “The Made in American Tax Plan.”
  • According to an April 8 Wall Street Journal report, the infrastructure proposal includes at least $5 billion for an affordable-housing grant program that would encourage local jurisdictions to relax zoning rules and restrictions on new construction.  The new competitive grants for cities and localities would seek to eliminate exclusionary zoning policies such as minimum lot sizes, mandatory parking requirements and density restrictions.
  • The Journal article quotes a recent Urban Institute brief: “There are so many decisions made at the local level that can impede the development of affordable housing that federal policy makers should push communities to reorganize their approach to development from the ground up.”
  • The Roundtable has long encouraged federal agencies to leverage economic development and infrastructure funds to discourage exclusionary zoning tactics. Bills such as the Yes in My Backyard Act  and the Build More Housing Near Mass Transit Act would require state and local governments to plan for and encourage high-density and multifamily development when they seek grants from US-HUD and US-DOT. (Roundtable Weekly, March 6, 2020 and February 28, 2020)

What’s Next:

U.S. Capitol with flag

  • Democrats are weighing whether to advance the Biden infrastructure plan under the same “reconciliation” budget process that was used to pass the March $1.9 trillion pandemic relief package by a simple majority vote – thereby bypassing the 60-vote requirement typically needed to advance most legislation in the 50-50 Senate.
  • Senate Parliamentarian Elizabeth MacDonough this week issued an opinion that may allow Democrats to pass additional, large-scale bills with no Republican support before the midterm elections. The sparse April 5 ruling, according to a Democratic spokesperson, has “some parameters [that] still need to be worked out.” The ruling does not specify the types of reconciliation bills that could be considered or how many times the maneuver would be allowed. (Politico, April 7 and CQ News, April 8)
  • House Speaker Nancy Pelosi (D-CA) yesterday said, “If [Democrats] have to go to reconciliation, that’s a lever, but I hope it’s not something that we need to do.” (Roll Call, April 8)
  • Pelosi added that the House could pass the infrastructure package by the July 4 recess, followed by the Senate before the August recess. (Bloomberg, April 8)

Pelosi also said she expects the White House in the coming months to introduce a separate, multi-trillion “American Families Plan” focused on expanded family support benefits, including child care and health measures. That plan could be pared with significant changes to individual taxes, including capital gains.

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Congressional Progressives Propose Legislation to Tax Unrealized Gains at Death as Republican Bill Seeks Permanent Repeal of Federal Estate Tax

Posted on by Trey Jackson

Sen. Chris Van Hollen (D-MD)

Several progressive members of Congress, led by Senator Chris Van Hollen (D-MD), above, on March 29 proposed legislation that would tax appreciated and unrealized capital gains when property is transferred at death or by gift. Meanwhile, Senate Republicans on March 9 reintroduced legislation to repeal permanently the federal estate and gift tax, commonly known as the “death tax.” (Wall Street Journal, March 29 and Fox Business, March 11).

Stepped-Up Basis

Why It Matters

Philadelphia, PA skyline

  • Repealing stepped-up basis and treating death as a taxable event would be particularly burdensome for real estate owners because of the illiquid and indivisible nature of real assets relative to a holdings like a portfolio of publicly traded stock. 
  • The legislation could force owners to sell properties if no cash income is available to pay the tax.  The bill would also pull capital out of real estate markets at a time when it will be needed to help repurpose existing properties in the post-pandemic era. 

Estate Tax Repeal 

  • Senate Republicans on March 9 unveiled the Death Tax Repeal Act of 2021 (S. 617) to permanently repeal the federal estate tax. The legislation, introduced by Sens. John Thune (R-SD.) and John Kennedy (R-LA) would eliminate the federal tax levied on estates worth more than $11.7 million after the death of the owner. (Sen. Kennedy news release)
  • Reps Jason Smith (R-MO) and Sanford Bishop (D-GA) on March 10 introduced companion legislation in the House. (Rep. Smith news release)
  • The Real Estate Roundtable, as part of the Family Business Estate Tax Coalition (FBETC), this week wrote to Sen. Thune and the House co-sponsors in support of S. 617 and the permanent repeal of the estate tax. (Coalition letter, April 2) 
  • The letter states that the FBETC “… supported the temporary estate tax relief in the Tax Cuts and Jobs Act (TCJA), which doubled the exemption to approximately $11.7 million for tax year 2021 and indexed future increases for inflation through 2025. However, without further congressional action, the temporary increase in the exemption amount will expire… repeal is the best solution to protect all family-owned businesses from the estate tax.” 

Proposals to raise the tax burden on appreciated property at death could be considered in the next wave of domestic economic legislation.  President Biden is expected to roll out more tax proposals aimed at upper-income taxpayers over the next few weeks. 

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Bipartisan House Bill Encourages Equipment Upgrades in Commercial and Multifamily Buildings

Posted on by Trey Jackson

Capitol Dome Stormy weather

Roundtable-supported legislation that would accelerate depreciation for high performance upgrades in commercial and multifamily buildings – creating jobs and reducing the built environment’s carbon footprint – was reintroduced this week by House Ways and Means Committee members Brad Schneider (D-IL) and Tom Rice (R-SC).

The E-QUIP Approach

  • The bipartisan Energy Efficient Qualified Improvement Property (E-QUIP) Act (H.R. 2346), originally introduced last December by Reps. Schneider and Rice, encourages energy efficiency building retrofits to replace aging and obsolete HVAC, lighting, windows, roofs, and windows with state-of-the-art systems.
    • The Real Estate Roundtable has rallied a unique coalition of environmental, manufacturing, and business groups to support the bill. The coalition sent an April 1 letter to members of the House Ways and Means Committee, and the Energy and Commerce Committee, to enact the E-QUIP Act and include it in any infrastructure package.
    • Roundtable President and CEO Jeffrey DeBoer stated, “The E-QUIP Act checks all of the boxes for smart energy, climate, and economic policy. Installation of high performance HVAC, lights, windows, and other building components will modernize aging buildings, save businesses billions of dollars on their energy bills, create tens of thousands of jobs, and avoid carbon emissions equal to taking 22 million cars off the road for a year.”
    • DeBoer added, “The E-QUIP Act can also encourage state-of-the-art retrofits that enhance outdoor air ventilation rates — a key practice to improve a building’s health and indoor air quality, according to the best available science.”

    Support for an Energy Efficient Economy

    American Council for an Energy-Efficient Economy E-Quip

    • The American Council for an Energy-Efficient Economy (ACEEE) has  prepared a fact sheet and analysis that estimates the climate, energy, and jobs benefits of E-QUIP Act retrofit projects: 
      • 130,000 net additional job-years.
      • $15 billion energy bill savings.
      • 100 million tons of carbon dioxide emissions avoided – or the equivalent emissions from 560,000 rail cars full of coal or taking 22 million cars off the road for one year.
    • Key elements of the E-QUIP Act are:
        
      • Elective 10-year, straight-line cost recovery period for a new category of depreciable property that meets the E-QUIP Act’s high-performance standards.
      • Available to replace or retrofit systems and components in buildings that are at least 10 years old.
      • Certification requirement that E-QUIP is designed, installed, operated, and maintained by credentialed professionals.
      • Five-year duration of incentive.
    • A uniform 10-year depreciation period for components that meet E-QUIP standards would simplify the current cost recovery “patchwork” in the federal tax code for building investments.

    The E-QUIP Act and advocacy efforts to include it as part of infrastructure legislation will be a focus of discussion during The Roundtable’s April 20 (Remote) Spring Meeting.

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    President Biden Announces $2.3 Trillion Infrastructure Plan Funded by Corporate Taxes

    Posted on by Trey Jackson

    President Biden Offers Infrastructure Proposal

    President Joe Biden on March 31 announced the first part of his sweeping economic growth proposal focused on infrastructure and clean energy – a $2.3 trillion, eight-year plan that White House officials said would be funded, over 15 years, by corporate and international tax increases. (Wall Street Journal and White House Fact Sheet: The American Jobs Plan, March 31)

    Why It Matters

    • The enormous scale of the proposal seeks to use federal spending to address a wide-range of economic and social issues widely defined as infrastructure while strengthening America’s long-term competitiveness against challengers like China.
    • Biden stated, “It’s a once-in-a generation investment in America, unlike anything we’ve seen or done since we built the Interstate Highway System and the Space Race decades ago.” (Remarks by President Biden on the American Jobs Plan, March 31)
    • The White House proposal would direct federal spending to transportation, manufacturing, buildings, schools, water systems, broadband, health care, and energy infrastructure assets. (USA Today, April 1, “These 4 charts show where the money would go”)
    • A “Made in America Tax Plan” would pay for the proposal. It would increase the corporate tax rate from 21% to 28%; set the minimum tax for multinational corporations with U.S. operations at 21 percent; and eliminate certain incentives affecting the offshoring of jobs. (The Hill, March 31)

    Impact on CRE

    Transportation Infrastructure Seattle

    • The Biden proposal would spend $213 billion to produce, preserve, and retrofit two million homes and commercial buildings. In particular, it recommends:
      • Tax credits and grants with a goal of one million new and renovated, affordable and efficient, rental housing units;
      • Extend and expand energy efficiency tax incentives for homes and commercial buildings;
      • A new competitive grant program for cities and localities that eliminate exclusionary zoning policies – like minimum lot sizes, mandatory parking requirements, and density restrictions;
      • Mobilize private sector investment in distributed energy resources, and to de-carbonize the electric grid;
      • Drive clean energy deployment by requiring federal buildings to purchase 24/7 clean power; and
      • Support private development of idle Brownfields into hubs of economic growth.
    • The proposal does not affect the federal eviction moratorium, which was recently extended by the Centers for Disease Control and Prevention (CDC) until June 30. (CDC order and CNBC video, March 30)

    Transportation Infrastructure

    • $115 billion in the White House proposal would focus on repairing Main Street roads, highways and bridges.

    • $80 billion would be devoted to inter-city high-speed rail to address Amtrak’s repair backlog and modernize the Northeast Corridor.  This is of significance to national and regional projects like “Gateway,” the rail tunnel project between New York City and New Jersey.

    What’s Next

    Build By the 4th Coalition

    • Senate Minority Leader Mitch McConnell (R-KY) said, “This proposal appears to use ‘infrastructure’ as a Trojan horse for the largest set of tax hikes in a generation,” and that Biden’s proposal “is not going to get support on our side.” (The Hill, March 31 and Bloomberg, April 1)
    • House Speaker Nancy Pelosi (D-CA) signaled she would like to see an infrastructure bill pass the House by July 4. She added that “hopefully” a final infrastructure package will include a repeal of the $10,000 cap on state and local tax deductions. (Associated Press, March 31 and BGov, April 1)
    • The Roundtable is part of the Build by the 4th coalition, led by the U.S. Chamber of Commerce, which encourages the Biden Administration and Congress to pass a comprehensive infrastructure deal by Independence Day 2021.
    • The Biden administration is planning a second legislative package for April that could seek an additional $1 trillion to expand family support such as the child tax credit and paid leave. (B-Gov, March 31)

    President Biden’s infrastructure plan will be a focus of discussion during The Roundtable’s April 20 Spring Meeting (remote).

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    Biden Administration Preparing Multitrillion Economic Growth Proposal; Transportation Secretary Buttigieg Testifies Gateway Project Has “Sense of Urgency”

    Posted on by Trey Jackson

    Oval Office Infrastructure meeting Biden Buttigieg others

    President Biden will unveil an ambitious economic growth plan on March 31 that may cost up to $4 trillion to fund his administration’s wide-ranging goals on infrastructure, climate and domestic policies. (Reuters, March 24 and Bloomberg News, March 25) 

    • The administration’s legislative effort may be split into two parts – an initial package that funds transportation projects with a focus on climate change, and a second that addresses domestic priorities such as universal prekindergarten, national childcare and free community college tuition.  (Wall Street Journal and Washington Post, March 22, New York Times March 25)
    • Congressional Democrats are working on a filibuster-proof fiscal 2022 reconciliation bill to advance President Biden’s economic recovery plan, along with a five-year surface transportation reauthorization. Funding for the current surface transportation bill expires Sept. 30. (Law360, March 22)
    • Axios reported on March 23, the White House is considering using the budget reconciliation process two more times this year, after using it to pass the recent $1.9 trillion pandemic relief package without any Republican support. Enacting three separate reconciliation packages would be unprecedented, and require a ruling from the Senate parliamentarian that proposed legislation is eligible for reconciliation under the Congressional Budget Act of 1974. 

    Focus on Gateway Project: 

    Gateway Project map

    • The “Gateway” rail tunnel project between New York City and New Jersey is a high priority for the Biden administration that is being treated with a “sense of urgency,” according to Transportation Secretary Pete Buttigieg, who testified March 25 before the House Transportation and Infrastructure Committee. (BGov, March 25)
    • “This is a regional issue, but one of national significance because if there were a failure in one of those tunnels, the entire U.S. economy would feel it,” Buttigieg said. He added that federal and state officials are working “to develop the next administrative draft of the environmental impact statement, which is a big part of what needs to be completed in order to get there.”
    • Buttigieg also acknowledged that funding the administration’s infrastructure transportation goals must look to other revenue sources than borrowing. “There is a simple set of places we can look: user fees, general fund or other tax sources as Congress has done to fill gaps in Highway Trust Fund in recent years or borrowing,” Buttigieg testified.

     How to Pay: 

    Yellen and Powell remote testimony

    • Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell testified jointly this week before House and Senate committees on economic conditions and pandemic relief. (Wall Street Journal, March 23)
    • Yellen testified before the House Financial Services Committee on March 23 that future taxes are needed to fund infrastructure programs. “A package that consists of investments in people, investments in infrastructure, will help to create good jobs in the American economy, and changes to the tax structure will help to pay for those programs.” She added, “We do need to raise revenues in a fair way to support the spending that this economy needs to be competitive and productive.” (Financial Times, March 23)
    • Chairman Powell responded to a concern from House Committee Member Blaine Luetkemeyer (R-MO) that Fed data indicates 51 percent of current commercial real estate debt is held by banks and that community banks have a higher concentration of these loans. Powell stated, “We’re monitoring CRE very carefully. Its concentrations arise principally in smaller banks, and we’ll have to monitor it carefully as we allow moratoriums to elapse. We’re well aware of the issue and we’ll be sure to move very, very carefully when we do address that.”
    • The two regulators also testified before the Senate Banking Committee on March 24. Treasury Secretary Yellen stated that the federal government can afford to invest trillions, despite the national debt. “My views on the amount of fiscal space that the United States, I would say, have changed somewhat since 2017. Interest payments on that debt relative to GDP have not gone up at all, and so I think that’s a more meaningful metric of the burden of the debt on society and on the federal finances,” Yellen said. (The Hill, March 24)

     Taxes & CRE: 

    Taxes and CRE Ryan McCormick

    • A March 25 BisNow webinar on Tax Policy and the Impact on CRE featured Roundtable Senior Vice President and Tax Counsel Ryan McCormick, bottom left in photo. The webinar focused on the outlook for real estate tax policy in 2021, with an emphasis on like-kind exchanges and opportunity zones.
    • Other participants included Ja’Ron Smith, former Deputy Assistant to President Trump; Capital Square Founder and CEO Louis Rogers; and David Franasiak, Principal at Williams & Jensen. (Watch Video)

    Congress leaves Washington today for a two-week recess. “When the Senate returns to session, our agenda will be no less ambitious than it was over the past few months,” Senate Majority Leader Chuck Schumer (D-NY) said yesterday. (The Hill, March 25 and New York Times, March 26) 

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    Biden Administration Plans to Cut U.S. Carbon Emissions in Half by 2030; Fed Announces Climate Threat Monitoring Effort

    Posted on by Trey Jackson

    Flooding of mixed used building

    The Biden Administration continued to work this week on an aggressive goal to slash U.S. carbon emissions in half by 2030, as the Fed announced plans to monitor climate change threats to the financial system. (Bloomberg, March 23 and E&E News, March 24)

    A National Effort

    • White House Climate Advisor Gina McCarthy is leading a National Climate Task Force that will finalize U.S. goals and commitments before participating in an April 22 virtual global climate summit on Earth Day. (White House Readout of the Second National Climate Task Force Meeting, March 18)
       
    • The government-wide effort includes input from 21 federal agencies and industrial sectors, ranging from car manufacturers to aviation to the oil industry. (The Hill, March 22 and E&E News, March 23)
      • The prospects for both chambers of Congress to pass legislation that puts a price on carbon are still remote, even though key business groups such as the U.S. Chamber of Commerce and the American Petroleum Institute have now come out in favor of “market-based” climate policy. (Axios Generate, March 26)

      Climate Change and Real Estate 

      • Federal Reserve Governor Lael Brainard this week emphasized the impact climate change could have on real estate markets. She stated during a March 23 speech, “… the usability of real estate in many areas will be directly affected by the increased risks of floods, wildfires, severe storms, and sea-level rise associated with climate change.”
      • She added, “Sudden realizations of climate-related risks could cause rapid shifts in investor sentiment and shocks to asset prices.” (Financial Stability Implications of Climate Change speech by Gov. Brainard, March 23)
      • Brainard announced the Fed has established new oversight committees “to identify, assess, and address climate-related risks to financial stability.”
      • Fed Chairman Jerome Powell and Treasury Secretary Yellen also commented on their increased attention to the risks posed by climate change during a March 23 hearing before the House Financial Services Committee and a March 24 Senate Banking, Housing and Urban Affairs Committee hearing.
         
      • Secretary Yellen will lead the first meeting of the Financial Stability Oversight Council under the Biden administration on March 30 to discuss climate-related financial risks. (The Hill, March 24) 

      The administration’s climate policy plans and their impact on CRE will be a focus of discussion during The Roundtable’s Spring Meeting on April 20 (held remotely). 

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