Fiscal Cliff, Weak Economy Spotlight Municipalities’ Challenges, Local Advocates Say
The U.S.’s looming fiscal cliff and recession-crippled economy pose serious stakes for local governments and the feasibility of countless municipal projects, local government advocates said. They spoke Monday as part of a National Association of Telecommunications Officers and Advisors (NATOA) panel on what to expect politically after the elections. Challenges are enormous, all panelists said, pointing to the drastic consequences associated with a weak economy and pending budget cuts. The financial crush will likely affect such anticipated projects as FirstNet as well as the need to raise money through other means, such as controversial taxation against wireless customers and Internet-based sales, they said.
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“Most experts are saying that is not enough money -- one, to get the network built out, and two, to keep it functioning,” NATOA Executive Director Steve Traylor said of FirstNet’s $7 billion budget. He asked whether advocates of the broadband public safety network will be able to go to Congress in 2013 to seek more money, given the financial strain.
“Trying to add more appropriations for broadband?” said Ed Rosado, legislative director for the National Association of Counties (NACo): “We’d love to see it, but we’re fighting so many wars here.” The issue is worth fighting for, he said, adding he didn’t “want to put cold water” on the idea. But he called it a “tough one” needing a “reality check.” National League of Cities Federal Relations Director Carolyn Coleman agreed and said local governments need to consider the budget cuts and revenues with consideration to “return on investment”: “If we at the level of government are to control our destiny, we need the tools and the resources to do that.” Questions surrounding FirstNet funding will speak to that prioritization and the need for education and advocacy to Congress, she said. Larry Jones, assistant executive director of the U.S. Conference of Mayors, gave a bleaker outlook: “We’re going to lose some programs outright,” he told Traylor. The severity of cuts required, exceeding a trillion dollars, will mean that many programs the U.S. has in 2011 and 2012 won’t be around in the years ahead, he said.
Local governments will, as a result of the financial crunch, look to telecom and the Internet for more revenue, they said. “You cannot cut your way out of this problem,” Jones said. “There have to be some revenues.” City revenues are falling for the sixth straight year, Coleman said. NACo sees telecom taxes as “a staple” for the organization, Rosado said. “Certainly rights-of-way fees and telecommunications fees are what we consider local taxes, and we will continue to fight” against any attempt to “usurp” that authority, Jones said. Traylor asked about ways local government can “fight back” against a proposed moratorium on state and local taxes of wireless services. Jones is “doubtful that this issue will get a lot of free air time” but encourages education and pressure against any moratorium, he said. Most don’t understand its implications for local government, he said.
All three organizations will push for the right of municipalities to tax Internet sales, they said, referring to the stirring debate nationally surrounding the Marketplace Fairness Act. Sen. Dick Durbin, an Illinois Democrat, “has made that known,” Jones said. Durbin met with Republican Sens. Michael Enzi of Wyoming and Lamar Alexander of Tennessee in mid-November to discuss such a push, Jones said. The issue is “certainly something that’s still in play right now,” he said: “They want to make it happen. We want to make it happen.” The mayors will send out alerts and rouse their members to that end, he said. NACo and the National League of Cities would support that push, their officials said. The legislation would permit “a little bit of relief, by allowing us to collect those taxes,” Rosado said. Traylor called the issue a “sacred cow” but questioned whether it’s finally “left the barn.”
The tax-exempt status of municipal bonds is also crucial, added Jones. Without that exemption, “local governments would end up having to pick up somewhere in the neighborhood of $27 billion a year just to make up the difference,” he told panelists. He described advocacy that had taken place in Washington last week for the mayors’ meeting. They met with top Democrats including Senate Majority Leader Harry Reid of Nevada, House Minority Leader Nancy Pelosi of California and Vice President Joe Biden, he said. None of the politicians had grasped the severity of the bond issues, he said, adding that Biden and Reid were “startled local governments were as interested as we are.” The vast number of investors in municipal bonds earn under $250,000, he said, which he told Washington leaders. The politicians understand the municipalities’ stakes better after the meetings, he said, citing “headway.”
All panelists pointed to the significance of the next month as the January 2013 fiscal cliff deadline approaches. They all proposed there may be a short-term solution of a few months before any permanent negotiations happen later in 2013. Going off the cliff is “bound to throw us back into another recession,” Jones said, based on what he’s heard economists report. These cuts would “suck money out of people’s pockets and out of the economy,” he said. Domestic programs account for a small fraction of the overall crisis of deficit and debt, panelists said. “State and local governments are still reeling,” Rosado said, describing a lag in how a bad economy affects municipalities. He cautioned against cutting too far “and reaching the bone.”