On Nov. 4, voters from across the country elected a new Congress and a new Administration. In addition to winning control of the White House, Democrats gained a substantial number of seats in the U.S. House of Representatives. In the Senate, Democrats not only bolstered their majority, but came close to hitting the 60 seats needed to gain a filibuster-proof majority.
At press time, Democrats had control of 58 seats (including the two Independents who caucus with the Democrats). With this new distribution of power, in combination with the ambitious agenda that President-elect Barack Obama continues to develop, what can the commercial real estate industry expect to see when the 111th Session of Congress gets under way this month?
With the economy in a downward spiral, the immediate focus of President-elect Obama and the Congress will justifiably be on ending the U.S. recession and finding solutions to improve the global economy. This may, in fact, slow down or halt action on some key tax issues that would hurt the commercial real estate industry, such as an increase in the capital-gains tax that was widely anticipated to be on the table in early 2009. Just 6 months ago, in the heat of the campaign, raising corporate taxes as a way to provide middle-class tax relief seemed inevitable with a big victory for the Democratic Party. Now, however, risking a further crippling of industry with more widespread bankruptcies or layoffs must be seriously balanced with the competing need for middle-class tax breaks.
BOMA Intl. and its real estate partners continue to voice concern that the commercial real estate industry is facing dire challenges in 2009, with more than $400 billion of both secured and unsecured debt maturing. If the needs of the commercial real estate industry are not addressed immediately, the credit crisis will be even further exacerbated. In a letter to Treasury Secretary Henry Paulson and other key leaders, the Real Estate Roundtable, BOMA Intl., and 10 additional national real estate associations outlined the concerns and recommended steps that must be taken to ensure sufficient liquidity to refinance expiring performing commercial real estate loans.
Though the overall state of the economy leaves some room to question which tax-policy changes will ultimately be enacted, several key issues are on BOMA's agenda, including capital gains, leasehold depreciation, and carried interest. In late 2008, Congress voted to retroactively extend the 15-year leasehold depreciation timeline and immediate expensing of brownfields clean-up costs for 2 years. Both will now expire at the end of 2009 and, if not extended, will represent a large tax increase to the industry.
Climate change is high on President-elect Obama's agenda, and he supports the implementation of an economy-wide cap-and-trade system as part of any climate-change legislation. Last year, more than 12 climate-change bills were introduced in the House and the Senate, one of which passed the Senate Committee on Environment and Public Works before falling victim to a Senate filibuster. With more Democrats in the Senate, momentum will only increase on this issue. In addition, Rep. Henry Waxman (R-CA), a liberal and outspoken leader on climate-change issues, has ousted Rep. John Dingell (R-MI) as chair of the Committee on Energy and Commerce.
Energy efficiency will also continue to be a priority for Congress and BOMA Intl. BOMA has aggressively worked for the past several years to implement voluntary, incentive-based programs to improve the energy efficiency of new and existing buildings. The association has vigorously and successfully fought against the imposition of any mandates without a return on investment. President-elect Obama has stated that he supports the goal to make all new buildings carbon neutral by 2030, as well as a national goal to improve new-building efficiency by 50 percent and existing-building efficiency by 25 percent over the next decade to meet the 2030 goal.
With the new make-up of Congress, the "card-check," or unionization, issue may likely be one of BOMA's first legislative battlegrounds. During the last session of Congress, Senate Republicans were able to prevent the passage of "card-check" legislation. The proposed legislation would eliminate secret ballot elections from the unionization process. For the first contract, if parties are unable to reach agreement within 120 days, then the dispute will be sent to arbitration, the results of which would be binding for a minimum of 2 years. Workers would be unable to vote on the contract, as is the case currently. This issue promises to pit the interests of business squarely against those of the middle-class workforce.
BOMA Intl. and its real estate partners will continue to work throughout the year to educate the new Congress and Administration on the state of the commercial real estate industry and the ramifications of proposed policy changes. You can help BOMA do this by solidifying contacts with your elected leaders and responding to BOMA Intl.'s action alerts and calls for grassroots support.
For more information on this and other issues, call BOMA Intl. at (202) 408-2662 or visit www.boma.org.