Washington Insider -- Monday

Public Transit Projects Threatened

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Lighthizer Pledges to Work to 'Improve' WTO, Not Destroy It

A pledge to work to strengthen the World Trade Organization (WTO) – not destroy it – was made by U.S. Trade Representative (USTR) Robert Lighthizer last week.

The U.S. “recognizes the importance of international trading systems” and is committed to “working with other members to improve the functioning of the WTO," trade body, the Office of the USTR said in a statement issued June 8.

Trade “has not always worked to the benefit of everyone” and certain “unfair trade practices” have harmed U.S. interests and created “large, persistent trade imbalances," the statement said, and was released during a WTO mini-ministerial meeting in Paris. It marked a shift in tone from President Donald Trump's campaign description of the WTO as a “disaster” and his threat to withdraw from the organization entirely.

Meanwhile, in his first WTO address as USTR, Lighthizer told his colleagues at the Paris meeting the WTO was so essential that if it had not already been invented it would need to be. Even so, he said WTO is not working efficiently and it must be modernized to prevent unfair trade practices.

Reaction to Lighthizer's remarks was positive. Lighthizer “was quite clear,” Mexican Economy Minister Ildefonso Guajardo said. “They're interested in a well-functioning and efficient multilateral institution, and obviously it is going to require debate.”

Senate Bill Would Provide Tax Relief for Bankrupt Farmers

Tax relief for family farmers in bankruptcy is the subject of bipartisan legislation introduced in the Senate, a proposal described as a “game changer” for those kinds of cases.

The Family Farmer Bankruptcy Clarification Act of 2017 (S. 1237) aims to “correct” a 2012 Supreme Court ruling on Chapter 12, said Sen. Chuck Grassley, R-Iowa, introduced the measure in the Senate May 25 with Sen. Al Franken, D-Minn.

Chapter 12 of the Bankruptcy Code is designed to protect family farmers and family fishermen with a regular income. The debtors are afforded protection from creditors while they make payments under a plan to repay all or a portion of their debts over a three- to five-year period.

Specifically, the proposed bill would help farmers sell a portion of their land to help fund their reorganization and stay in business despite being levied with a large capital gains bill. The act would change how those capital gains taxes are treated. Instead of being a priority claim that would have to be satisfied in full before unsecured creditors receive payments, the capital gains would be treated as another general unsecured claim.

The measure would vastly alter the landscape of small farm bankruptcy cases, according to lawyers. “In many cases, those capital gains taxes would force the debtors to quit farming altogether,” Carol Dunbar told Bloomberg BNA in a June 5 email about the law in its current state. Dunbar has been a Chapter 12 trustee in Iowa since the chapter's inception in 1986.

While heartening to farmers, the bill's prospects are unclear as standalone legislation. Similar bills introduced in the Senate over the past few years have died in committee. Still, the Senate Judiciary Committee plans hearings -- Grassley is the panel chairman.

Washington Insider: Public Transit Projects Threatened

Well, last week was designated as “infrastructure week," but there is concern that the Comey hearings provided a “distraction” that could seriously interfere with infrastructure investment projects. Already, the Washington Post says, “dozens of public transit projects around the country are in danger of stalling as the White House’s plan to boost U.S. infrastructure fails to gain momentum, with thousands of jobs at risk.”

The uncertainty over these projects has worsened in recent days as the administration called for a new funding mechanism for infrastructure projects. The president had called for $1 trillion in new infrastructure programs to create millions of jobs, but “now faces an increasing probability that not only will his proposal fail in Congress but that existing infrastructure efforts will also stumble, the Post says.”

Rather than funding many of the existing projects directly, the administration says it wants to move toward a version of financing projects that is based far more on private funding. The “sudden uncertainty” of this approach has left local officials who had long anticipated federal support for their projects worrying whether they will get it, the Post says.

Specifically, the Post is reporting that officials at the Department of Transportation last week told project managers for a bus corridor in Pittsburgh and rail projects in Phoenix and New York that the administration’s budget plan for next year “proposes no funding for new projects” under an existing federal program known as the Capital Investment Grant.

Robert Rubinstein, who received the letter as executive director of the Urban Redevelopment Authority of Pittsburgh, said the proposed cancellation of funding would effectively kill the project, which has been in the works for 10 years. It would have created an electric-bus corridor between Pittsburgh and nearby Oakland, Pa. Rubinstein said officials had sought roughly $80 million in federal money to go toward the $224 million project. He said the several million dollars already spent on studies and engineering reviews could be lost.

Capital Investment Grant funding allocates $2.3 billion each year to various projects and was recently authorized by lawmakers from both parties. Its projects include public transportation projects such as rail, streetcars and rapid bus systems. The White House’s most recent budget has proposed phasing out CIG funding, and the White House can block any new CIG projects even if there is congressional support.

Andrew Brady, senior director of government affairs at the American Public Transportation Association, said that more than 50 public transit projects are at risk of being denied federal funding because of Trump’s planned cuts to infrastructure spending.

“He’s saying a lot of good things on infrastructure, but what he’s done is implement very real cuts to infrastructure programs,” Brady said.

The projects that are most at risk, officials say, include some that have moved through the funding pipeline for years but are just short of final approval. Many are in states that Trump won last year, and they include a light-rail­platform-lengthening project in Texas, a streetcar line in Arizona, and a bus rapid-transit line in Indiana.

Besides the transit program, Trump’s budget proposes ending the Department of Transportation’s TIGER grant program, which was created under the Obama administration in the 2009 stimulus bill and has since funded $5 billion worth of road, rail, port and bicycle projects.

Speaking at the DOT on Friday, Trump focused on his efforts to dismantle regulations that he says stand in the way of new building.

Trump had originally held out hope that infrastructure spending could be a rare source of bipartisan action this year, given Democrats’ support over time for the policy. But those hopes have dissipated in recent months as controversies enveloped the White House and Democrats grew skeptical of Trump’s plans to provide large tax credits to private companies to finance much of the construction.

“We offered to work together. We offered our own infrastructure plan to the [White House] to spark discussion. Months passed. We heard nothing back,” Senate Minority Leader Charles E. Schumer, D-N.Y., tweeted Friday. “Now the few details we have of [Trump’s] plan show it’s private-sector driven, has minimal investment & ignores huge sectors of infrastructure.”

White House officials have said they are undertaking an expansive review of infrastructure spending but argue that, in the meantime, any promise of federal spending could delay projects as local officials await word. The White House has proposed spending just $5 billion toward its $1 trillion infrastructure project next year.

In a statement, White House assistant press secretary Natalie Strom said of the CIG program in particular that “there’s always been a great deal of uncertainty around the funding of that program and as a matter of fact uncertainty is one of the most significant impediments to infrastructure, whether it’s funded by the public or private sector.”

“That’s why the President is committed to simplifying and streamlining the process so that there is less uncertainty all around,” she said.

So, it will be important for producers to watch closely as the details of the administration program are revealed. The infrastructure investments were high priority for the administration how well they succeed in helping rebuild U.S. infrastructure will be a prominent indicator of success for the new administration, Washington Insider believes.

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