Volume XII, Number 1 - February 2007

Are You Ready To Head To The Hill? CCIM Institute Capitol Hill Visit Day, April 25, 2007

Mark your calendar! On April 25, 2007, CCIMs will unite with IREM to bring the issues that affect commercial real estate to Capitol Hill. At the last IREM-CCIM joint Hill Visit venture, over 300 members participated in over 175 meetings with their legislators, educating them on commercial real estate management and investment issues.

Get to know the 110th Congress! There are 54 new U.S. Representatives and 10 new U.S. Senators. Are you represented by a newly inaugurated member of Congress? Or is one of your legislators part of the Senate or House leadership? Then use the Hill Visit as an opportunity to inform them of the issues important to our industry.

If you are active in legislative issues, or if you just want the opportunity to make your voice heard on Capitol Hill, you will not want to miss this exciting opportunity!

An Orientation will be held at the Hyatt Regency Crystal City, close to Washington, D.C, on Tuesday, April 24. At the Orientation legislative staff will explain the issues affecting the industry and what to expect when meeting with members of Congress. Participants will receive essential materials to take with them to the Hill. Time is also provided for members to meet with their delegation and role play. Members will head to Capitol Hill on Wednesday, April 25.

For useful information on the Capitol Hill Visit, including how to register, check out the CCIM Institute Capitol Hill Visits page.

Tax Cut Extenders Pass in Final Hours of 109th Congress

As one of its last orders of business, the 109th Congress approved a bill renewing several real-estate related tax relief provisions that had expired in December 2005. The Senate Finance Committee and House Ways and Means Committee reached an agreement that included:

The CCIM Institute, in conjunction with NAR, lobbied Congress throughout 2005 and 2006 for these measures.

Health Insurance Still on Congressional Agenda

Despite the progress of last year, the change in leadership in the Congress means the Association Health Plan legislation that had been on the table is now off. However, it appears Congressional leaders will still focus on the issue. On Wednesday, January 10, 2007, NAR president Pat Combs participated in the Senate Health, Education, Labor and Pensions (HELP) Committee’s Health Roundtable held by the new committee chair, Senator Edward Kennedy (D-MA). One of ten panelists invited by Mr. Kennedy to participate in the first hearing of his chairmanship, Ms. Combs highlighted the challenge that the self-employed, including real estate firms and agents, face today finding affordable health care coverage.

The following week, President Bush mentioned Association Health Plans in his State of the Union address. In that address, the President proposed changes to the federal tax treatment of health insurance costs in an effort to level the playing field for Americans who purchase health insurance individually vis-a-vis those who receive it through an employer. NAR has met with Administration officials and has raised with them several questions about the proposal's application to independent contractors and the self-employed. The proposal is still something of a work-in-progress, particularly as it affects this group of workers.

The CCIM Institute will continue to work with NAR on this important issue.

Minimum Wage Bill with Leasehold Improvement Depreciation Provision Moves In Senate

The new Speaker of the House Nancy Pelosi and fellow Democrats pushed during the first 100 legislative hours of the 110th Congress to raise the federal minimum wage from $5.15 to $7.25 per hour. The House passed the Fair Minimum Wage Act of 2007 (H.R. 2) by a vote of 315 to 116 on January 10. The legislation provides for the minimum wage to be increased to $7.25 within two years after the bill’s enactment.

The Majority Leader agreed to amend the legislation to include new tax breaks for small businesses in order to attract votes for the wage hike from Republican Senators. The Senate Finance Committee amended the legislation to extend the 15-year cost recovery period for qualified leasehold improvement property and restaurant improvements, currently set to expire at the end of 2007, through March 31, 2008. In addition, the amended legislation extends tax breaks that allow small businesses to deduct up to $112,000 annually in new investments. The Senate version will cost the government $8.3 billion in lost tax revenue over the next decade.

For more information on the amendment, visit the Senate Finance Committee web site or email the CCIM Legislative Liaison at njarmusz@cciminstitute.com.

President Bush has stated his support for an increase in the minimum wage. His staff has suggested the President prefers the Senate version containing tax breaks.

Inflation has eroded the value of minimum wage by 21% since it was last raised a decade ago. The increase would affect less than 3% of U.S. workers.

Banks in Real Estate an Issue on Capitol Hill Once Again

On January 4, 2007, Representatives Paul Kanjorski (D-PA) and Ken Calvert (R-CA) reintroduced H.R. 111, "The Community Choice in Real Estate Act," which clarifies Congressional intent that real estate brokerage and management are not banking activities. So far, 116 House members have signed on as cosponsors in 2007. On January 26, Senators Hillary Rodham Clinton (D-NY) and Wayne Allard (R-CO) introduced S. 413, the Senate version of "The Community Choice in Real Estate Act." The bill was introduced with 13 co-sponsors. For the last 5 years, these bills have received strong bi-partisan support.

Houses Committee Passes Bill on Cleanup of Methamphetamine

The House Committee on Science and Technology passed H.R. 365, the Methamphetamine Remediation Research Act of 2007, on January 24. The bill requires EPA to develop model, voluntary, health-based cleanup guidelines for use by states and localities. The CCIM Institute has policy supporting the development of federal remediation guidelines. This legislation is expected to move quickly through the House and Senate.

FinCEN Attributes Rise in Suspicious Activity to Strong Market

The Department of Treasury's Financial Crimes Enforcement Network (FinCEN) released a study last December that analyzed suspicious activity reports (filed by financial institutions to FinCEN) and found that reports citing commercial real estate are on the rise. The reports referenced the involvement of property management companies, development companies, real estate investment firms, real estate agents and title companies. The study concluded that the increase in suspicious activity likely stems from the strong commercial real estate market -- and notes that it is unclear whether activity will decline if the market cools.

There is no indication at this time that Treasury will look more closely into regulating the commercial real estate industry. The move to develop rules on settlements and closings remains a low priority. CCIM Institute members are advised to be aware of the Patriot Act and SDN regulations, available here.

House Financial Service Chair Supports Extending ILC Moratorium

On December 7, 2006, 107 Members of Congress led by Congressman Paul Gillmor (R-OH) and House Financial Services Committee Chairman Barney Frank (D-MA) wrote to the Federal Deposit Insurance Corporation (FDIC) asking for an extension of the industrial loan company (ILC) moratorium, which is set to expire on January 31, 2007. In anticipation of the moratorium’s expiration, Wal-Mart, Home Depot and a number of other commercial companies have taken steps to own ILCs, which is a special type of federally insured state-chartered bank. The Gillmor-Frank letter argues that the 110th Congress needs more time to debate the industrial loan company issue and consider closing the ILC loophole by prohibiting any commercial firms from directly or indirectly controlling an industrial bank. NAR believes that allowing ILCs to mix banking and commerce creates risks to the financial system, raises inevitable conflicts of interest, and harms the industry’s competitive landscape.

Financial Regulators Release Final Guidance on Commercial Real Estate Lending

On December 12, 2006 the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC) proposed their final guidance (a nonbinding, suggested set of rules) for commercial real estate lending practices. NAR and the CCIM Institute are concerned that the recommended risk management practices to be followed when concentrations in commercial real estate exceed 300% of capital guidelines, may be costly and restrictive for smaller regional banks, and create an incentive for smaller banks to reduce their commercial real estate exposure. However, in response to NAR's comment letter, the regulators note that a diverse commercial portfolio across asset classes and markets may mitigate the perceived risks of commercial real estate concentrations. The Senate Banking Committee and House Financial Services Committee held hearing on this issue last year, but the new Congress has not yet announced definite plans to address it.

Basel IA Update

The Federal Reserve made no changes to the treatment of commercial real estate in its proposed rules implementing the Basel 1A accords (which was originally intended to address inequalities between Basel 1, which applies to smaller banks, and Basel II which applies to larger banks). In its comment letter, NAR urged a more favorable treatment for less risky commercial real estate, such as fully leased multi family and office, and urged that Basel 1A should mirror the commercial real estate categories of Basel II. The fact that commercial real estate disparity was not addressed in the proposed draft may mean that smaller banks will need to hold more in capital reserves for commercial real estate, and thus may drive up the cost of commercial real estate loans.

Real Estate Industry Meeting Addresses Pandemic Flu Preparedness

On January 5, 2007 the National Association of Realtors hosted the first meeting of real estate industry leaders who will form a working group to address pandemic flu issues and provide a common set of principles and resources for improving preparedness against a possible avian flu pandemic. Participants heard from representatives from BOMA Toronto, who presented a widely acclaimed report based on the expertise they gained during the SARS epidemic. Also present were officials from the Department of Health and Human Services, Centers for Disease Control and Prevention, and the Department of Homeland Security. For more information on the meeting’s topics, click here. At this time, no legislative proposals have been discussed, but staff will continue to monitor this issue for further developments.

House Bill Cites NFPA 1600 as Possible Standard

Part of the homeland security bill, H.R. 1, recently passed by the House of Representatives seeks to improve private-sector preparedness, and specifically mentions NFPA 1600, a recommended standard for disaster and emergency management and business continuity programs, as an appropriate national standard. While this would not make the National Fire Protection Administration authored provisions mandatory, it could move the debate into that direction. CCIM Institute legislative staff will continue to work with NAR to monitor this bill for any changes as it is taken up by the Senate.

Take Advantage of The New And Improved State Legislative Database

Have you checked out the new and improved State Legislative Database? Check it out today. It is easier to use and offers the most up-to-date information. Some of the new features include:

• New and updated categories of bills to search.
• Run your own reports.
• View full bill text.
• Check out bill sponsors.

Check out this member exclusive service by visiting the CCIM Institute State Legislative Database.

If you have any questions, please contact the CCIM Legislative Liaison, Vijay Yadlapati, at (800) 837-0706 extension 6033 or njarmusz@cciminstitute.com.

New York State Assembly Considers Mandatory Sex Offender Screening and Notification

Assemblyman Kenneth Zebrowski (D-94th District) introduced a bill (A02146) this month that would require landlords to check to see if prospective tenants or occupants appear on the state sex offender registry and notify other tenants if they are listed. A similar piece of legislation was introduced last session in the New York State Senate, but never made it out of committee. IREM and CCIM Institute legislative staff will monitor this, and any similar bills, and work with the relevant Chapter leadership to keep members informed.

Minimum Wage Hikes In The States

There are 29 states plus Washington D.C. that already have a minimum wage higher than the federal minimum wage. The highest rate in the country--$7.80 an hour—is in Oregon and Vermont. The following state hourly minimum wage increases took affect on January 1, 2007: Connecticut ($7.65 per hour), Hawaii ($7.25), Massachusetts ($7.50), North Carolina ($6.15), and Rhode Island ($7.40).

Mississippi House Passes Legislation To Reduce Commercial Property Insurance

In an effort to control the rising commercial insurance costs along the Gulf Coast, the Mississippi legislature is considering legislation, HB 243, to appropriate $30 million to the Department of Insurance for the purpose of providing funds to the Mississippi Windstorm Underwriting Association to reduce the premium rates charged for insuring commercial property through the Association.

The Association is the insurer of last resort in the six southernmost counties, and it's often called the wind pool. It assesses companies throughout the state to provide coverage in areas most insurers deem too risky. Since Hurricane Katrina struck on August 29, 2005, the wind pool's rates have jumped 268% for businesses.

The House passed HB 243 by a vote of 119 to 1 on January 10. The proposal is now being considered by the Senate. The Senate Insurance Committee Chairman Dean Kirby supports the legislation that will promote economic growth on the coast.

To check the latest status of HB 243, use the CCIM Institute State Legislative Database, or call the CCIM Legislative Liaison, Vijay Yadlapati, at (800) 837-0706, ext. 6033.

State Legislatures Consider Universal Health Care Proposals

Several governors and state legislatures have made insuring the uninsured a priority for 2007. Universal, or near universal health care, has been proposed in several states this year. Universal health care is when all residents of a geographic area have their health care paid for, regardless of medical condition or financial status, typically by that government. Massachusetts and Vermont enacted universal health care legislation into law in 2006. Proposals have been introduced this year in the following states: Colorado, Connecticut, Illinois, Indiana, Iowa, Louisiana, New Hampshire, New Jersey, New Mexico, Maine, Minnesota, North Carolina, New York, Oregon, Pennsylvania, and Wisconsin.

The Governor of Pennsylvania has recently proposed a comprehensive plan that would provide health insurance to almost all of the state’s 767,000 uninsured residents. Businesses would be levied a 3% tax for not covering their employees. The plan includes a phased-in state mandate requiring people with incomes greater than 300% of the federal poverty level, or around $60,000 for a family of four, to purchase health insurance. Those earning below that standard would not be required to purchase coverage and would be given the opportunity to purchase health insurance at a reduced rate. The Governor will provide more details about his proposal on February 6 when he announces his full budget proposal. The state legislature will consider the Governor’s proposal.

Update on Local Ordinances Penalizing Landlords For Renting To Illegal Immigrants

Several local governments, frustrated with the lack of progress made by Congress related to immigration reform, have enacted ordinances attempting to enforce immigration laws and deter illegal immigrants from settling in their communities. These ordinances require landlords and employers to verify the legal status of every applicant for an apartment or a job or face stiff fines, which is burdensome on commercial real estate professionals.

Recently the City Council of Farmers Branch, a Dallas suburb, revised its ordinance that bans renting apartments to illegal immigrants to allow landlords to rent to families with mixed citizenship or residency status. The City Council voted unanimously on January 22 to allow landlords to rent to families with a head of household or a spouse who has legal residency or citizenship. In addition, it exempts minors from mandatory document checks. The ban was to take effect in early January, but implementation has been delayed.

Meth Offenders and Labs Listed By States Online

Methamphetamine (“meth”), an illegal, easily manufactured addictive drug, is a major problem. Real estate managers and residents are able to use newly created online registries to check for meth offenders in select states. Laws have been enacted in Illinois, Minnesota, Montana, and Tennessee creating registries listing names of individuals who have been convicted of manufacturing or selling meth. Montana includes meth offenders on its Internet registry of sexual and violent offenders.

Michigan residents are now able to use the internet to find out the locations of illegal meth labs. Law enforcement is working with the state’s Department of Community Health to maintain the status of each lab and whether the property has been remediated or not.

Legislation creating meth offender registries has been proposed in such states as Georgia, Kentucky, Oklahoma, Oregon, Washington, and West Virginia.

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