Props 1, 2 Will Fail to Mitigate State Housing Crisis

November 5, 2018 By Chris Reed 4 Comments

Housing apartmentIt’s been two and a half years since Gov. Jerry Brown jolted the debate on California’s housing crisis by saying much more private-sector construction was the only realistic way to address the crisis, not the old Democratic recipe of building a relative handful of subsidized housing units that help a small percentage of those in need. “We’ve got to bring down the cost structure of housing and not just find ways to subsidize it,” he said in January 2017 in criticizing previous state policies.

Brown sought to make it much easier for home-builders to clear regulatory hurdles. In September 2017, Senate Bill 35 by Sen. Scott Weiner, D-San Francisco – which reflected the governor’s priorities – was enacted. It holds that cities could not put up new obstacles to projects with proper zoning so long as they contained at least 20 percent of units at lower price levels.

And in the last two months, Brown has signed a series of new housing measures with similar goals – most notablyAssembly Bill 2923, which will make it much easier for the Bay Area Rapid Transit authority to follow through with its plan to build 20,000 new housing units by 2040 on 250 acres BART owns nears its transit stations.

Legislature renews emphasis on subsidized housing

But when it comes to Tuesday’s election and major housing initiatives, it’s back to the old Democratic playbook. Both the key measures meant to increase housing – placed directly on the ballot by votes of the Legislature – involve government-subsidized construction.

Proposition 1 authorizes the issuance of $4 billion in general obligation bonds. The biggest chunk – $1.8 billion – would go toward building apartment-type residences. $1 billion would go to loans to veterans. Both infrastructure and homeownership programs would receive $450 million each. And $300 million would go to build housing for farm workers.

The official state voting guide’s analysis estimates that this will create access to housing for 55,500 families.

Proposition 2 would allow the state to divert funds from 2004’s Measure 63 – which generates about $2 billion a year for mental health programs from an income tax surcharge on the very wealthy – to pay back over 30 years up to $2 billion in bonds to build housing for the homeless and those at risk of being homeless.

The official state voting guide’s analysis doesn’t estimate how many people would gain housing as a result. But based on Proposition 1’s estimate that $1.8 billion could create about 30,000 apartment units, $2 billion should be able to provide around 33,000 units.

Bonds would fund 88,500 units; 2 million needed

The combined net effects of the two measures: providing housing to about 88,500 families over the life of the two bond measures in a state that a 2016 McKinsey consulting group report said has a shortage of 2 million housing units.

The small increases in housing that Proposition 1 and 2 would create are consistent with the criticisms that have been made of California’s state housing policies since at least 2003. That’s when the Public Policy Institute of California released a report that said affordable housing programs focused much more on establishing a process for such housing than on actual results. It said it was “unrealistic” to think such an approach could have a significant effect in increasing affordable housing.

No recent polling has been done on Propositions 1 and 2, but they’re widely expected to pass easily. That’s in keeping with the record of bonds placed directly on the ballot by the Legislature.

This article was originally published by CalWatchdog.com

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Water Wars Rage Over Where to Spend Bond Money

August 20, 2017 By Chris Reed 2 Comments

Lake Shasta Water ReservoirAfter a 35-year stalemate stalled new California water storage projects, Gov. Jerry Brown and legislative leaders agreed in 2014 to include $2.7 billion for such needs as part of Proposition 1, a $7.5 billion water bond approved in a landslide by voters later that year.

The then-raging drought persuaded Democrats to go along with major water storage creation plans after blocking new projects since California completed its last dam in 1979. Many Republicans saw the opposition as a back-door way for environmentalists to squeeze state farmers to limit agricultural pollution and protect native species, and to slow growth in urban areas.

Groups such as the Natural Resources Defense Council scoffed at these claims. They say encouraging water conservation is always a good goal in an arid state, and argue that state and federal laws that protect threatened species need to be fully followed.

This sharp disagreement reflects how water politics have long been fraught in the Golden State. And now that the California Water Commission must choose which of 12 qualified proposed projects to fund with the $2.7 billion kitty, officials’ decisions are sure to be buffeted once again by regional interests (Northern vs. Southern California), economic interests (farmers vs. developers) and environmentalists’ interests. With the 12 projects estimated to cost about $13.1 billion – $10 billion-plus more than what is available – some key water stakeholders are sure to end up unhappy. Some districts will be forced to seek all or nearly all funding from other sources, starting with their customers.

Greens quick to start push for preferred project

The 12 projects were unveiled last week. The water commission must make its final decision by June 2018.

Environmentalists wasted no time identifying their favorite project: The Contra Costa Water District’s proposal to increase the storage capacity at its Los Vaqueros reservoir by more than 70 percent – going from 160,000 acre-feet to 275,000 acre-feet. Contra Costa officials say the additional capacity could meet the yearly needs of 1.4 million people.

But that isn’t why the $914 million project already has the strong support of several environmental groups – including the Planning and Conservation League, the Audubon Society and the Nature Conservancy. It’s because a chunk of the water would go to threatened Central Valley wetland refuges to shore up their fragile ecosystems, long a goal of state greens.

To boost the case for the proposal, Contra Costa water officials have lined up the formal support – and promises of funding help – from 12 other Bay Area water districts, which see the additional storage as “drought insurance.”

The most costly proposed projects are to build a $5 billion dam in Colusa County and a $3 billion dam in Fresno County.

Most of the projects proposed for Southern California are less ambitious. The exception is from the city of San Diego, which is asking for the water commission to help cover the $1.2 billion cost of a plant to recycle wastewater with advanced technology that makes it fully safe to mix with conventional water supplies. Officials believe the plant can supply one-third of city needs by 2035.

The project won final approval at San Diego City Hall in 2014, two weeks after Proposition 1 passed.

This article was originally published by CalWatchdog.com

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Why Aren’t Unions Fighting California’s Bullet Train Boondoggle?

November 27, 2015 By Ed Ring 12 Comments
Photo courtesy of Jon Curnow, flickr

Photo courtesy of Jon Curnow, flickr

Back in 2008, voters in California approved Prop. 1, a statewide initiative to spend “$9 billion for building a new high-speed railroad between San Francisco and Los Angeles.”

Total cost, $9.5 billion. Remember that?

Quoting further from the original initiative’s ballot language:

Bond Costs. The costs of these bonds would depend on interest rates in effect at the time they are sold and the time period over which they are repaid. The state would make principal and interest payments from the state’s General Fund over a period of about 30 years. If the bonds are sold at an average interest rate of 5 percent, the cost would be about $19.4 billion to pay off both principal ($9.95 billion) and interest ($9.5 billion). The average repayment for principal and interest would be about $647 million per year. Operating Costs. When constructed, the high-speed rail system will incur unknown ongoing maintenance and operation costs, probably in excess of $1 billion a year. Depending on the level of ridership, these costs would be at least partially offset by revenue from fares paid by passengers.” (ref. UC Hastings Scholarship Repository, Propositions, California Ballot Propositions and Ballot Initiatives)

Over time, fantasy always yields to reality.

The most recent reputable estimate of high-speed rail costs come from an in-depth special report published last month by the Los Angeles Times, entitled “$68-billion California bullet train project likely to overshoot budget and deadline targets.”

The title of that special report says it all. California’s high-speed rail was sold to voters for an amount that is at least seven times less than our most recent estimate of costs, and if the author of the LA Times special report is to be believed, it is very unlikely this project will come in for a total cost under $100 billion.

High-speed rail was sold to voters back in 2008 in roughly the same way pension benefit enhancements were sold to naive politicians back around 1999. In both cases, the decision makers were told it would cost next to nothing. Isn’t this called fraud? To sell a good or service to a consumer at a given price, then come back and demand ten times as much money?

Payments on these construction costs will be paid from the California state general fund, and based on a $100 billion total cost and a 5.0 percent interest rate, that comes out to $166 per year per California resident. Not that much? Unimpressed? Put another way, based on roughly 6 million taxpaying households in California (about half of California’s 12 million households pay no taxes; their sales tax burden is largely offset by the earned income tax credit), construction of this train will cost $1,084 per taxpaying household per year.

Do you want to pay $1,000 per year for a project that will not alleviate California’s transportation challenges one bit? A project that will lose money forever? A project that will use up massive amounts of capital that could be deployed to achieve literally dozens of other huge and vitally needed infrastructure objectives?

This is where California’s labor leadership, by continuing to support high-speed rail as a centerpiece project, are showing how out of touch they truly are with the average working family. Because they are unwilling to fight for major infrastructure investments that would improve the quality of life and lower the cost of living for all Californians; improvements to existing rail, upgraded roads, state-of-the art natural gas and 5th generation nuclear power stations, reservoirs and aquifer storage projects, upgraded sewage treatment plants to produce potable water, and much, much more. If California’s labor leaders care about all workers, they will find the vision and courage to fight for these useful amenities, instead of promoting high speed rail.

20151123-UW-HSR

High Speed Rail CEO Jeff Morales made $477,760 in 2014

A legitimate role for government spending is to make strategic investments that reduce costs for basic necessities. That is what makes a nation prosperous. That is a proper use of public funds. Artificially inflating the costs for energy, water and transportation – which is the current policy of California’s government, abetted by big labor in this state – is a crime against the people of California.

 *   *   *

Ed Ring is the executive director of the California Policy Center.

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Brown’s 4th Inaugural Looks to CA Past, Future

January 6, 2015 By John Seiler 1 Comment

Gov. Jerry Brown’s unprecedent fourth, and final, inaugural address had an aura of “Back to the Future” about it. Given at 10 a.m. this morning before the assembled Legislature, he looked back to his first inaugural address 40 years ago; and to the gubernatorial inaugural in 1959 of his father, Pat Brown.

He also recalled, among other things, “the discovery of gold … the Transcontinental Railroad, the founding of great universities … oil production … the State Water Project.” The latter was a singular accomplishment of his father.

These were echoes of the items on his own agenda, including, “We are leaders in renewable energy and efficiency … we are building the nation’s only high-speed rail system … we are confronting the drought and longer-term water issues.”

He added that he helped push through Proposition 1, the $7 billion water bond. “And I’m proud to report that as a result, by the end of the year, we will be investing in long overdue water projects,” he said.

For any governor, the primary issue is the state budget. On Friday, Brown will issue his budget proposal for fiscal year 2015-16, which begins on July 1. He looked back at the parlous state of the budget when he took over the governor’s office four years ago, “Then, the state was deep in debt – $26 billion – and our unemployment rate was 12.1 percent. Now, the state budget, after a decade of fiscal turbulence, is finally balanced – more precariously than I would like – but balanced.”

Budget limitations

This included soon making “the last payment on the $15 billion of borrowing made to cover budget deficits dating back to 2002.” He was referring Proposition 57 from the March 2004 ballot, part of the program of Arnold Schwarzenegger, elected governor five months earlier in the famous recall election of Oct. 2003, initiated to patch up a $40 billion budget deficit.

At the time, state Sen. Tom McClintock (now a U.S. representative) and others warned Prop. 57 delayed needed cuts to the budget and saddled future budgets with its repayment. That proved the case when the Great Recession hit in 2008-09 and radical budget-cutting was needed, including to pay for Prop. 57.

Also in 2004, Schwarzenegger pushed Proposition 58, the California Balance Budget Act, a rainy-day fund to cushion future budget deficits. It was sold by Schwarzenegger as a guarantee Prop. 57’s bonds would not just be used for future spending. But Prop. 58 proved unenforceable.

In today’s address, Brown touted his own Proposition 2, which voters passed last fall. He said his new budget will include “saving $2.8 billion in the state’s new constitutionally protected Rainy Day Fund.”

Whether Prop. 2 proves durable, or falls to future budget pressures the way Prop. 58 did, remains to be seen. But after Prop. 2 was passed, “S&P raised the state’s credit rating from A to A-plus, citing the stability offered by Proposition 2,” reported the Sacramento Bee.

Pension reform

The biggest threat to balanced budgets remains the state’s pensions. Brown said:

“We have to face honestly the enormous and ever growing burden of the many commitments we have already made. Among these are the costs of pensions and retiree health care, the new obligations under the Affordable Care Act, the growing government costs of dealing with our aging population, bonded indebtedness and the deferred maintenance on our roads and other infrastructure. These specific liabilities reach into the hundreds of billions of dollars.

“My plan has been to take them on one at a time. We have now taken steps to deal with the unfunded teachers’ pensions and those of the public employees. For the next effort, I intend to ask our state employees to help start pre-funding our retiree health obligations which are rising rapidly.”

No details were provided, but they presumably will be forthcoming in Friday’s budget proposal. But as the U-T San Diego reported recently, the $4.5 billion yearly deficit of the California State Teachers’ Retirement System already is digging in to state and local school budgets:

“Administrators say they’re at a loss for how they’ll come up with the cash, which for some districts could be tens of millions per year. …

“Some school districts in San Diego County highlighted the sticker shock in so-called “interim midyear” budget reports released this month that show escalating contributions from teachers, school districts and even the state as a way to dig the teachers’ retirement fund out of debt over the next several years.”

Projects

Brown touted two of his favorite projects, high-speed rail and reducing greenhouse gases. Construction on the rail begins on Friday. But Brown gave no indication where money for the $68 billion project will come from above the $9 billion from the Proposition 1A bond voters approved in 2008; and $3.5 billion from President Obama’s 2009 stimulus package.

The new Republican majority in the U.S. Senate is as hostile to any more funding as is the House of Representatives that again will be controlled by the GOP. There is no private funding.

Brown promoted the state’s continuing efforts to reduce greenhouse gases:

“The United Nations’ Intergovernmental Panel on Climate Change, backed up by the vast majority of the world’s scientists, has set an ambitious goal of limiting warming to 2 degrees Celsius by the year 2050 through drastic reductions of greenhouse gases. If we have any chance at all of achieving that, California, as it does in many areas, must show the way. We must demonstrate that reducing carbon is compatible with an abundant economy and human well-being. So far, we have been able to do that.

“In fact, we are well on our way to meeting our AB32 goal of reducing carbon pollution and limiting the emissions of heat-trapping gases to 431 million tons by 2020. But now, it is time to establish our next set of objectives for 2030 and beyond.”

But California comprises only 2 percent of the global economy. No other state has anything like AB32, the Global Warming Solutions Act of 2006. And neither does any other country, besides some movement in Europe. Certainly, rising powers China and India are not being inspired by California to retard their ambitious rise out of poverty.

Upbeat

There also were, possibly, only minor hints in his Fourth Inaugural of whether he might run for president for the fourth time. But he might have been testing themes of progressive, prudent governance. He touted raising the minimum wage and “real protections for our hardworking immigrants, including the issuance of long-awaited driver’s licenses.”

And he ended on a cautious, even frugal, yet upbeat note:

“With big and important new programs now launched and the budget carefully balanced, the challenge is to build for the future, not steal from it, to live within our means and to keep California ever golden and creative, as our forebears have shown and our descendants would expect.”

It could be a compelling narrative in Democratic primaries should he choose to run against Hillary Clinton and Elizabeth Warren. After President Nixon and President Reagan, will Brown seek to become California’s third Oval Office occupant?

This article was originally published on CalWatchdog.com

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Could the High Speed Rail Ruling Imperil the Water Bond?

October 28, 2014 By Jon Coupal 6 Comments

Proposition 1, the $7 billion water bond, has broad support from both Democrats and Republicans.  Unlike the previous version of the bond – which had an $11 billion cost – the updated version has less pork and a few more promises for actual water storage.  While HJTA opposed the previous version (and indeed we signed the ballot argument against it) we have taken no position on Proposition 1.  Our neutrality is compelled, at least in part, by the recognition that California does indeed have legitimate needs for improvements in our statewide water infrastructure.

But now we have a new concern.

The California Supreme Court has recently declined to hear an appeal in one of the many lawsuits challenging the California’s High Speed Rail project.  This is a case we originally won in the trial court which blocked the issuance of the High Speed Rail bonds because the project bore no relationship to the project that was promised to the voters back in 2008.  But in a ruling that stunned taxpayers, the Court of Appeal reversed the trial court which correctly found that the Constitution expressly requires the state prove that issuance of the bonds is “necessary or desirable.”   This constitutional mandate ensures that government lives up to the promises it makes to the voters.

A proper interpretation of the California Constitution would require voter approval of, not just the amount of the debt, but specification of the project to be funded.  In our lawsuit, we argued that the current HSR plan so deviates from the proposal presented to voters in 2008 that voter approval of the former proposal should not be deemed approval of today’s plan.  We presented evidence showing that today’s plan is not the true high-speed train that voters were promised.  The HSR bond measure promised that the project would be built with federal and private matching funds.  But today’s plan calls for a system that is not truly “high speed” and is funded primarily by California taxpayers.  (And, by the way, the projected costs have now tripled).

So how does the high court’s inaction impact today’s Proposition 1, the Water Bond?  The fact that the judiciary will not uphold expressed requirements in a bond proposal raises the specter that, no matter what a bond proposal promises about what will be built with the bond proceeds, those promises are meaningless.  In other words, when California voters are asked to approve a bond, are they just approving debt for any purpose at all?  This is the very definition of a blank check.

As the result of California Courts refusing to uphold the language of the High Speed Rail bonds, the opponents of any bond proposal, at either the state or local level, need only point to High-Speed Rail to remind voters that promises in a voter approved bond proposal are meaningless and unenforceable.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This article originally appeared on HJTA.org

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Are benefits of Prop. 1 being oversold?

October 26, 2014 By Chris Reed 5 Comments

 

 

2014-10-23-Prop1coverProposition 1 — a $7.1 billion state bond to pay for a variety of water projects — was billed as a huge improvement over bloated past proposed water bonds when it emerged from the Legislature this summer. Now Gov. Jerry Brown’s political warchest and Sean Parker of Facebook and Napster fame are funding an ad campaign that aggressively pitches the measure and the Prop 2 rainy-day fund as crucial for California’s future.

Last week, however, one of the relatively few think tanks that specializes in water issues came out with a 26-page analysis that in low-key fashion suggests Prop 1’s merits are being exaggerated. The Pacific Institute, based in Oakland, says it is neutral on the measure. But its concluding chapter strongly  suggests that the bond is likely to disappoint anyone who sees it as a game-changer for state water policy:

We note that nothing in this proposition will provide immediate relief from the current drought or offer short-term assistance to those suffering the consequences of current water challenges. If Proposition 1 passes, if the funds are designated for effective projects, and if those projects are well-designed and well-implemented, the long-term benefits could include a reduction in the risks of future droughts and floods as well as improvements in the health of California’s aquatic ecosystems. A key priority of the bond is to augment the state’s water supply and improve water supply reliability, with more than $4.2 billion in taxpayer funding dedicated to that priority.

As was the case with the 2010 bond, there is substantial funding in the 2014 bond for the public benefits portions of surface water or groundwater storage projects. The 2010 bond included $3.0 billion directly for water storage; the current language includes $2.7 billion. Because the total size of the 2014 bond is smaller than the 2010 bond, the proportion of total funding committed for storage increased from 30% to 36%. Beyond the eduction in the total allocation from $3 billion to $2.7 billion, the water storage language in the proposed 2014 bond is almost identical to the language in the original 2010 bond.

Far less of the bond funds are available for other water supply and demand management options, including recycled water, stormwater capture, and efficiency. Yet, these options can typically provide more water at lower cost than most storage projects. Funding for water conservation and efficiency is especially low, at only $100 million, or about 1% of the bond.

 A down payment on water future “at best”

The think tank also worries that once the bond money is in hand, allocation decisions may be poorly handled.

Ultimately, the effectiveness of Proposition 1 funds in addressing California’s overall water problems will depend on how the funds, if passed by the voters, are actually allocated and spent. If Proposition 1 passes, the Institute recommends that the California Water Commission develop a rigorous, independent, and transparent evaluation of the process governing the evaluation and quantification of the public benefits of proposed storage projects. It also recommends that decisions about the rest of the funds be made with a focus on meeting public and ecosystem needs for safe and reliable water, improvements in efficient use, and reductions in the risks of future droughts and floods.

If good projects are identified and supported, these funds can help move the state forward in the broader effort of designing, building, and managing a 21st century water system. But voters should not expect immediate relief from Proposition 1 for the impacts of the current drought; nor should they expect these funds to be the last investment that is needed for better institutions, smarter planning, and more effective water management strategies. It can be, at best, a down payment on our water future.

The obvious solution that may someday be forced on us

ws_infographics_outdoorI’ve always thought that California’s water problems are seen through a distorted lens — one which doesn’t acknowledge that if water use is prioritized, genuine nightmares harming our quality of life are easily avoided.

The U.S. EPA says one-third of residential water use goes to maintain lawns. That’s nearly 9 billion gallons a day. And much of that is wasted.

If we ever had a water shortage so severe that it threatened our economy, stopping the use of water for what might be called cosmetic purposes would be an obvious step. Sorry, but using precious water so folks can have a green lawn should be the lowest water priority of all if the megadrought some expect for the Southwest comes to pass.

Brown lawns or dead lawns, in the grand scheme of things, are not genuine nightmares.

This article was originally published on CalWatchdog.com

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Prop. 1 Roots Go Back to Water Bonds that Built California

October 19, 2014 By Joel Fox 3 Comments

You might say that Proposition 1, the water bond, carries the DNA of bonds that promoted a growing and prosperous California. Water bonds helped build the Los Angeles Aqueduct in the early 1900s to make possible the growth of one of the world’s great cities. Another bond helped build the State Water Project half-a-century later, which, among other things, helped spur the state’s agricultural abundance. With the state facing a drought of staggering proportions, Proposition 1 would continue California’s long history of providing and caring for precious water resources.

The seven-plus billion dollar bond contains money for protecting watersheds, cleaning contaminated groundwater, and water recycling among other projects. But unlike water bonds passed in the last decade, the heritage that the Prop 1 bond shares with the bonds that helped build California is the $2.7 billion set aside for water storage projects, dams and reservoirs, almost 40-percent of the total bond.

As Governor Pat Brown’s biographer, Ethan Rarick, points out his book, California Rising, the Life and Times of Pat Brown, the physical aspects of the Central Valley and Southern California are good for neither plants nor people. Rarick dedicates a chapter of the book to the history of the State Water Project and the campaign for the bond that narrowly passed. Pat Brown set out to, in his own words, “correct an accident of people and geography.”

Pat Brown’s State Water Project stored water behind dams and moved the water to where it was needed. The storage aspect of Proposition1 is essential for building up the water supply as the drought deepens.

The dams that stored the water to help create the California we know today were considered so important that President John F. Kennedy came out to California to help dedicate not one but two dams.

President Kennedy dedicated the San Luis Dam that created the San Luis Reservoir in August of 1962. He was back a year later to dedicate the Whiskeytown Dam six miles west of Redding before a crowd of 10,000 people. Fox and Hounds contributor Joe Mathews wrote a history of Kennedy’s visit to the Whiskeytown Dam on the Zocalo Public Square website last year, which you can read here.

Kennedy talked about conservation during his Whiskeytown Reservoir speech. But he also said the dam would allow water to be used to “irrigate crops on the fertile plains of the Sacramento Valley and supply water also for municipal and industrial use to the cities to the south.”

In environmentally conscience California, dam building has been controversial. It was in the 1960s and opposition has certainly grown over time. Interestingly, the State Water Project was built with revenue from both the bond passed by the voters and from state money earned from offshore oil wells. Can you imagine such a proposal being pushed today? Certainly, it would meet loud opposition.

Still, voters and politicians recognize the need to have a safe and adequate water supply. Pat Brown’s son, Governor Jerry Brown, recognized the need and included storage in the water measure he negotiated.

That day in Whiskeytown, President Kennedy, speaking of the dams and reservoirs, acknowledged “the wise decisions that were made by those who came before, and the wise decisions that you are making now.” We will see if the voters of today continue to make wise decisions about water.

This piece was originally published on Fox and Hounds Daily.

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