October 10, 2000 - From the October, 2000 issue

Angelides Advances Smart, Equitable Investment In Urban Infrastructure

In his first year as State Treasurer, Phil Angelides inspired many by turning the annual Debt Affordability Report into a resounding call and practical toolkit for using state infrastructure investment to incentivize sustainable and equitable development. This Smart Growth initiative was followed by The Double Bottom Line, which cogently argued the profitability of state and private investments in inner city markets. And last month, Angelides addressed the state's civic leaders at the Civic Entrepreneur Summit. TPR is pleased to provide an edited excerpt of Angelides' Q&A from the summit, which offers an update on the impressive array of new projects emerging from the Treasurer's Office.


Phil Angelides

In the State Treasurer we have a master at work in both conveying and implementing a narrative. The Treasurer has declared himself to be a passionate and committed advocate of sustainable development and urban reinvestment and everything he has done in his first year has begun to take root.

Phil Angelidesunderstands that he's responsible for the financial integrity of the State of California, and that issues such as infrastructure, planning and urban reinvestment, are issues that have to do with that financial integrity. Without further ado, I welcome our great leader and hero-State Treasurer Phil Angelides.

We are at a time of extraordinary opportunity in our State-extraordinary in the sense that we are the wealthiest nation on earth and enormously successful economically and socially. But we do have significant structural challenges ahead. And those challenges revolve around the growth we're going to experience in the next 20 years and the way in which we handle 12 million new Californians by the year 2020. It's a level of growth that will test our ability to sustain our environment and ultimately, our economy.

The second significant challenge is an ever-widening disparity of opportunity throughout our State-we have the 4th largest gap between rich and poor of all the states in our country. In January of 2000, the Center on Budget Policy Priorities did a state-by-state analysis of the widening opportunity gap, and it showed that in a time when the wealthiest 5 percent saw real income rise by 18 percent, the poorest 20 percent saw their incomes drop to $12,000 per year. This is reflected in the great gaps between our communities.

So as we stand in these times of great wealth, great entrepreneurial ability, great diversity and great energy in California, one of the central questions before us is: how are we going to bridge this gap between the overflow of opportunity for some and the dearth of opportunity, hope and economic vitality[for others in the balance of our society?

There are many levels on which we should be concerned. One is this pure notion of: How do we grow? Can we grow in ways that are environmentally sustainable? Can we grow in ways that impart opportunities throughout our communities?

There's another level of concern that makes this a matter of common interest. That is, as we look at the opportunity gap, we need to be deeply concerned about the fact that if we allow a growing underclass in this State, it will mean, in the most basic sense, a threat to democracy. As Lester Thoreau said, "How do you preach political equality in an economy of ever-growing inequality?"

We're now taking the first steps to imbue State government with a new way of thinking about how we apply resources and policy. Last year, we made our first move into this arena with the California Tax Credit Allocation Committee, which awards $450 million in federal and State tax credits for construction and rehabilitation of affordable rental housing. Our alterations encouraged quality housing within struggling neighborhoods, transit [oriented development and] public schools. And this year, we're going to move away from a county-by-county allocation system and focus on a regional allocation so that we get competition for resources within regions.

One of the interesting experiences in reforming this program has been that by setting public policy objectives in a very competitive environment, we now see a whole set of affordable housing deliverers-from non-profits to for-profits-regearing the kind of projects they get. One of our biggest problems [now] is too many projects, so we have to set the bar even higher.

Late last year, with great help from the California Futures Network, we achieved a breakthrough at the Infrastructure and Economic Development Bank, which had been capitalized by the Legislature with $475 million in funding. That money will allow us to undertake a program of low-cost financing for local infrastructure projects emphasizing the reuse of underutilized urban land within the urban fabric.

No matter what progress we've made in the public realm, we need to engage the private sector and the private capital markets in the battle for sustainability and community reinvestment. Capitalism is the only remaining economic structure in the world. We need to find better ways to help push our policy dynamic and shape our society.

In that regard, as many of you know, in May of this year we put out a new report called, The Double-Bottom Line: Investing in California's Emerging Markets, which posited the notion that sustainability is not a possibility unless we bring stability, growth, vitality and new economic opportunity to the communities we've left behind . One of the elements to achieving that is getting the capital markets in America to understand that there are opportunities in these emerging markets that far exceed the opportunities in overseas emerging markets . Our "struggling communities" are actually communities that have tremendous wealth, assets and potential to create new employment opportunities and new real estate opportunities for the 21st Century.

Let me tell you a couple things we've achieved in a few short months. In June of this year CALPERS adopted something called the California Initiative-a new $500 million venture fund that will target good returns for our system and create equity capital to grow businesses in inner-city communities. I've been all over the country now, and we fully expect that when we launch this fund early next year, we will be doing it with some of the most talented venture capital and lending institutions in America. We've increased our commitment to urban infill development in both CALPERS and the State teachers retirement system by $1.2 billion. It's an exciting time. I really believe that we're changing the world, and it's changing the nature of the way we grow.

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None of us should expect this movement to be a one-day, one-year, two-year, or even five-year movement. It's really a movement that ultimately will take hold over the decades ahead and create a more sustainable fabric.

Since your visit last year the regional collaboratives that have joined the Civic Entrepreneur Summit now number 19. Representing coastal and valley, urban and rural California, their community of interest lies in the common issues dominating their regional agendas: economic development, land use, educational reform, workforce development, and bridging the digital divide. They're more seasoned than when you spoke with them last year; some more optimistic and some more cynical about the dialogue at the State level regarding the issues they follow: fiscal, governance and land-use reform. With that in mind, could you first describe your approach to engaging Californians in the policy challenges of growth and equity?

I think that one of the most important things that we're trying to do is take this current philosophy and explain it in a way that makes common sense. Talking to people about the issues, positing the issues of sustainability and social equity and lifting them to the forefront is really elemental. When you get people to put down the NASDAQ or the NYSE and get them to think about the implications of the great economic gap in this country, most people are phenomenally receptive.

In other words, you can educate people to a certain level and then you have to say, "Will you join me?" What we're doing at CALPERS and with this California Initiative is constructing a venture vehicle that's very specific in asking our partners-with whom we invest hundreds of millions of dollars-to partner with us. We basically say, "Here is our task. Now how can we structure it?"

Picking up on your reference to the NASDAQ and the NYSE, if you were to think of the initiatives that you jump-started in the last year as stocks, which one of them would you say is performing better than the others? We want to know which to buy into.

The first dynamic of redirecting public resources-like the housing tax credit program, the infrastructure bank program, the library bond, etc.-is so basic and so important that I think the stock's moving well. We're making progress-legislators are finally understanding that we have to link public funding to sustainability and social equity. It's not brain surgery; if we do our work right, we're going to keep making solid progress. But public money must be redirected to meet policy objectives.

The stock that I think has great potential to soar, however, is the California Initiative. We got our CALPERS partner to start mobilizing some of the best, most progressive thinkers in the venture capital world to attempt to marry equity and their talent to help grow businesses in at-risk communities. For the first time, we got people who are controlling billions of dollars to think about this dynamic.

I then met with Ben Cohen of Ben & Jerry's, who just sold for $350 million to Unilever. He wants to create a venture fund that targets minority owned inner city businesses. So we talked to Ben about the possibilities of collaboration.

And then I met with Michael Porter, a professor at the Harvard Business School, who has devoted a lot of his work to the notion that there's great potential in "communities that struggle." In fact, as he put it, "There's a room full of books on urban poverty, and almost none on urban business and opportunity." He posits the very basic notion that we live in a country that's short of labor; yet we are filled with communities where people are dying to work and be part of the American economic system.

This is a long way of saying that American capitalism is a powerful instrument. It shapes so much of who we are and what we are that I think in many ways, of all the things we're working on, this is the one that has the most possibility for transformation.

What are the opportunities for regional leaders, like those at the Civic Entrepreneur Summit, to invest in your stocks? How can they ride this wave of success you've catalyzed?

We're all in this together. As each of us creates a model for successful integration of the above-mentioned dynamic, others can follow and build on that success. I hope you look at what we're doing and try to fashion programs in your regions that add new features. In the end, I hope that as you do things at the local and regional level, we at the State level can learn from what you're doing.

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© 2021 The Planning Report | David Abel, Publisher, ABL, Inc.