Subject: Update -- Highway Trust Fund
From: Dana <[email-masked]>
Date: Tue, 3 Nov 2015 18:45:24 -0500

Mike & Co.,

The House continues work this week on reauthorization of the Highway Trust Fund (HTF).   It is considering a bill for up to $325 billion on transportation projects over the next six years, $261 billion on highways, $55 billion on transit and approximately $9 billion on safety programs — but it still must come up with a way to pay for the final three years.  

The House is in recess next week and the HTF expires on November 20, so leadership hopes to send a bill to the Senate by the end this week.   

Below, a look at the HTF bill amendments likely to receive floor votes, the main offset in play, and the big-ticket riders -- Ex-Im and the Extenders.  

Best,

Dana
Federal Reserve must pay in annual dividends. 

Oil export ban lift

Though the Senate Banking Committee has passed legislation lifting the ban, the White House has pledged to veto legislation to lift the crude oil export ban. Still, an unlikely grouping of Homeland Security Committee Chairman Michael McCaul (R-Texas), House Financial Services Committee member Ed Perlmutter (D-Colo.), Rep. Kevin Cramer (R-N.D.), and Rep. Henry Cuellar (D-Texas) have offered an amendment to lift the ban and use additional tax revenues from export sales to help pay for highway authorizations. 

If passed, the amendment could cause the overarching bill to lose support from House Transportation and Infrastructure Committee Ranking Member Peter DeFazio (D-Ore.), which would likely lead to an exodus of much if not all of the bill’s Democratic supporters, potentially leading to the failure of a bill with such a narrow margin. 

Government-sponsored enterprise guarantee fees

A provision of the bill that passed the Senate in July, now being considered by the House, would delay a 10-basis-point reduction in the fees Fannie Mae and Freddie Mac charge on new mortgages they back. That decrease had been scheduled for 2021 and would be pushed out to 2025 under the highway packages. Because Fannie and Freddie are controlled by the government, the higher fees would generate $1.9 billion in revenue that would be sent to Treasury as an offset for spending on highway projects.

Mortgage bankers, realtors and home builders sent a letter to the House Rules Committee on Friday asking them to allow lawmakers to raise a point of order to strip out the fee increase from the bill

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Yesterday, the White House released its review of the HTF bill currently being debated on the House floor.  In a decidedly mixed Statement of Administration Position (https://m.whitehouse.gov/sites/default/files/omb/legislative/sap/114/saphr22sa_20151102.pdf), the White House applauded the provision reauthorizing the Ex-Im Bank.  But it also cited the bill's principal "shortcomings," including:

-- maintaining only current and inadequate infrastructure funding levels 

--  cutting the Transportation Infrastructure Finance and Innovation Act program by 80 percent 

--  requiring the DOT cease publishing safety study findings

Most of the nearly 300 amendments filed in the House have nothing to do with the White House's concerns.  Likely to get roll    call votes are the below instead. 

•   Key Amendments:

--   turning the CFPB into a Commission 

--   deregulating/reducing oversight of large regional banks 

 --  outsourcing tax debt collection to private interests

On the Fed Dividend:

--   suspending the dividend reduction for one year to allow for a GAO study, instead using a one-time Fed capital surplus account draw of $1.6 billion 

--  replacing the dividend rate reduction with a drawdown of three-quarters of Federal Reserve stock

On Ex-Im:

--  changing the target percentage of transactions that must benefit small businesses to 100 percent – up from the previous rate of 20 percent, and up from the 25 percent required by the Ex-Im language currently in the bill
--   allowing individuals and companies to sue Ex-Im if they can prove they have been financially harmed by its activities. 
--  allowing transactions in cases where there is direct competition from a foreign export credit agency
--  guaranteeing that the export credit agency is a "lender of last resort" 

•   Key offsets

1.  The Fed Dividend:  The package relies largely on revenue from reducing interest rates paid by the Federal Reserve to large banks, selling oil from the Strategic Petroleum Reserve, used to prevent energy crises, and directing fees from the Transportation Security Administration and customs processing.  

The first of these, the "Fed Dividend" is the heavyweight, bringing in an additional $17 billion over ten years.  It came in on cat's feet when McConnell proposed it and the Senate approved it in July.  But K Street is alive and back from summer doldrums.  It will be a pitched battle. 

Banks in the Federal Reserve system must purchase stock in their regional Fed bank, on which they have received annual interest of 6 percent since the Fed was formed in 1913.  To offset spending and keep the transportation reauthorization budget neutral that dividend could be reduced to 1.5 percent a budgetary measure that has banks' opposition.  Fed Chair Janet Yellen has also called for caution in reducing the dividend, and 150 members of Congress signed a letter sent last week calling for a hold on any reduction until the GAO can study its effects. 

2.  Oil export ban lift.  Though the Senate Banking Committee has passed legislation lifting the ban, the White House has pledge  to veto legislation to lift the crude oil export ban. If passed, the amendment could cause the overarching bill to lose support from House Transportation and Infrastructure Committee Ranking Member Peter DeFazio (D-Ore.), which would likely lead to an exodus of much if not all of the bill’s Democratic supporters, potentially leading to the failure of a bill with such a narrow margin. 

3.  Government-sponsored enterprise guarantee fees.  A provision of the bill that passed the Senate in July, now being considered by the House, would delay a 10-basis-point reduction in the fees Fannie Mae and Freddie Mac charge on new mortgages they back. That decrease had been scheduled for 2021 and would be pushed out to 2025 under the highway packages. Because Fannie and Freddie are controlled by the USG, the higher fees would generate $1.9 billion in revenue that would be sent to Treasury as an offset for spending on highway projects.  Mortgage bankers, realtors and home builders sent a letter to the House Rules Committee on Friday asking them to allow lawmakers to raise a point of order to strip out the fee increase from the bill. 

•   Riders:

The Export-Import Bank.  A point of controversy for conservatives, especially Financial Services Chair Jeb Hensarling. He fought to see the government-run trade bank’s authorization lapse only for a discharge petition led by Rep. Stephen Fincher to pass the House of Representatives with over 300 votes in support.  It's in. 

Tax Extenders.  Less certain.  The chambers would need to work quickly to forge a compromise between: 

The House position: protect the R&D deduction, the Section 179 depreciation, the state and local sales tax deduction, bonus depreciation, subpart F exemption for active financing, CFC look-through, depreciation for retail and restaurant improvements, the teachers' expenses deduction -- and eliminate the rest. 

The Senate Finance Committee voted in August to re-up all 52 extender provisions over FY 2016-25 at a cost of $95.6 billion. 

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Recent Updates:  

HTF/Pay-fors  (Nov. 3)
FRB System Risk Rule  (Nov. 2)
Ex-Im Reauthorization  (Oct. 30)
FRB Interest Rate Policy  (Oct. 30)
Tax Extenders  (Oct. 30)
Boehner Budget Deal (Oct. 27)
Debt and Debt Limit  (Oct. 22)
SEC Nominations  (Oct. 20)
TPP/Currency Manipulation  (Oct. 15)
FRB Dividend  (Oct. 7)
Jobs Report (Oct. 2)
Fiduciary Rule  (Oct. 1)
FY2016 Budget/CR  (Sept. 29)
Trade/TPP  (Sept. 25)
GSE Reform  (Sept. 25)
Carried Interest  (Sept. 23)
Bush Tax Cuts  (Sept. 15)
Puerto Rico  (Jul. 23)
Shelby 2.0  (June 24)