January 21, 2004 - From the January, 2004 issue

California BTH Sec. Sunne McPeak On Linking Transportation & Housing

In a time of unprecedented budgetary challenges and massive cuts to transportation funding, stretching the state's increasingly limited transportation dollar to its fullest is more important than ever. In appointing Bay Area Council CEO Sunne McPeak state Secretary of Business, Transportation & Housing, Governor Schwarzenegger made good on his promise to bring the best and the brightest into his cabinet. Metro Investment Report is pleased to present this interview with Secretary McPeak, in which she discusses the need to quantify the value of our transportation investments, the benefits of linking transportation and housing funds, and the need to promote regional economies as a way to get California back on the track of economic growth and prosperity.


Sunne McPeak

Secretary McPeak, the governor's cabinet, with you as point, has called for a link between state transportation dollars and housing construction. Some are saying that this governor is the first to promote such a nexus. Could you elaborate on what's being proposed?

There is not enough return on investment for the dollars we spend on transportation. Notwithstanding the fact that our current budget crisis has caused us to cut funding to transportation projects, we are very mindful of the fact that we need, in the future, to get a greater economic impact out of our transportation investments. Our very conservative numbers show that an investment of $1 billion in transportation will create 26,000 jobs in California and about 38,000 jobs in the country. We also stipulate that there is a high multiplier the transportation for investment because high-skilled jobs and high-value materials. There is also significant leverage, because there is the attraction of federal dollars and local dollars, usually, for many of the projects in which the state is a funding partner.

However, the essential question is this: After we have made the investment, has mobility been improved? Transportation investments do result in more "throughput" more passengers on mass transit, more vehicles accommodated on freeways. But we still are seeing, and every one of the Metropolitan Planning Organizations in the state is projecting, increased congestion. And that's not good enough. So we're tackling the issue of how to get more return on investment for the taxpayers' dollars in transportation projects by asking questions.

We are, right now, in a fact-finding mode. Our first order of business is getting the fiscal house in order. We can't have economic recovery with a budget that is not balanced. Second, while the budget calls for the suspension of Proposition 42, and the mid-year budget cuts call for the elimination of the Transportation Congestion Relief Program, the so-called TCRP program, we are going to be following the governor's directive committing the Administration to working with the transportation stakeholders, labor, and business communities in finding innovative solutions for transportation funding and financing.

We at the Business, Transportation & Housing Agency are embarking on implementing that directive in the following ways: First, we're doing the fact-finding on each one of the TCRP projects there were originally 141. We are going through and getting the status report on each of the projects, which contracts have been let, how many jobs and what kinds of jobs are associated with those contracts, and what is the plan for the next fiscal year. Then, we are going a step further by asking each project sponsor which kind and how many jobs will be represented when the transportation improvement has been completed. Further, what are the host jurisdictions doing to accommodate the housing that is needed for the population increase and job generation served by this transportation improvement? We're just trying to use common sense in evaluating the economic impacts associated with transportation investment.

Sunne, with the Governor's proposed budget eliminating what remains of the 2000 Transportation and Congestion Relief Program, a $3.9-billion dollar spending blueprint, are you putting jurisdictions on notice as to what the criteria used by the administration might be re allocating scare funds when available?

It is fair to say that we know we have to get more bang for the buck. We can't keep spending billions of dollars and ending up with increasing congestion. We must interrupt this cycle because it's not improving California's relative competitive position. If we are going to not just bring California back, but sustain California's greatness through long-term economic prosperity, we've got to keep our eye on the underlying fundamentals in our economy that make this great state a place for employers to do business.

In order to improve California's competitive position, we should follow the principles of common sense economics-how do we compare to other regions around the world? We've got to have not only improvement in our transportation system, but we've got to gain ground in mobility. Furthermore, we also need to have enough housing for our workforce, and housing located in the right places so we don't impact, unnecessarily, our environmental quality. A place that depends on high-skilled, knowledge-based jobs is place where people want a high quality of life. All of those issues have to be addressed with every one of our investments. We are aggressively sharing that perspective with local governments. Local officials are the ones who have been here before, in many parts of the state leading these efforts. We just need their colleagues to join in so we get a critical mass of local leadership, collaborating regionally, working with the state so that we can stimulate and accelerate economic recovery and sustain it.

Sunne, in both answers you've mentioned the word region. In the December issue of The Planning Report we interviewed CCRL's Nick Bollman about AB 857 and its incentives for regional planning. Should we expect leadership from the administration on linking land use planning, regionalism and transportation?

The reality of the state economy is that it's made up of regional economies. And, if we're going to optimize California's economic performance, we've got to work within the existing regional collaborative frameworks and recognize the relative strengths of each of the regions, from San Diego to the Los Angeles Basin, the Inland Empire, the Central Valley, the Central Coast, the Bay Area, the North Coast, Superior California, and the Mother Lode. All of those are distinctly different economies, but they all are California.

The economic strategy of the state is to play to our strengths and minimize our weaknesses. Our strengths vary from region to region based on the industry clusters of each individual economy. We want to augment them and play to them. We at Business, Transportation & Housing are reaching out to all of those economic collaboratives, having a conversation and acknowledging that we are going to partner with them. Earlier, we spoke about the budget cuts in transportation, looking at more return on investment in transportation. And, we spoke of how transportation mobility is inextricably linked to housing, which is the linchpin of smart growth: Prosperous Economy, Quality Environment and Social Equity.

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Earlier this month, the Administration made the decision to have me testify on housing. That's somewhat unusual, because secretaries generally do not testify before the Legislature. But I did because we were talking about the connections between housing and the economy. Richard Costigan, the Legislative Secretary for the Governor, and I made the decision that this would be one way to underscore how important housing is to the economy, and the connection of housing to every other facet of infrastructure and to the quality of life in the state. My testimony also put on the record, for the first time, the extent to which our constrained supply of housing is discounting our relative economic productivity in comparison to other states and counties. We've continually seen that relative productivity erodes principally because of the lack of an adequate housing supply in California overall, and a lack of an adequate housing supply within each region in the state.

Let's return to transportation. Might we assume that the Metropolitan Planning Organizations in our major metropolitan regions will argue that each of their Congestion Relief Program proposals meet your test of improving the regional and state economy. How are you going to distinguish and prod them to better link land use and housing issues?

For twenty years now, the Metropolitan Planning Organizations across the nation have produced forecasts for 20, 25 and 30 years of job generation and population. The population numbers are usually based on general plans, land use constraints, and therefore are just a reflection of what is the projected housing supply within a jurisdiction. The numbers for job generation have been relatively accurate. However, it's that jobs-housing imbalance that keeps causing inefficient land use patterns, pushing out farther and farther the next housing development to meet the demand to fill the jobs that also are being created as employers follow their employees to the outer communities where housing is available. It's that continual runaway spiral that we've got to interrupt.

Of course the transportation agencies think that all of these projects have value, and they all do. But they're not all as valuable as they could be, and they're not all equal in value. We have cited a couple of examples where high-profile projects on the TCRP list are right now going through communities that are planning for housing deficits in 20 years. So, although we would be investing in public transit, if we don't change current land use practices, we will be spending a lot of public money but ending up with less mobility.

Why? The communities in which we are making these transportation improvements are not producing enough housing to support the jobs served by these infrastructure investments. If the concurrent increase in housing is not achieved, the result probably will be that the freeway, serving the same jurisdictions will become a parking lot going right through the jurisdictions. That's the conversation we must have with the local officials and MPOs, however, I'm pretty confident that local officials will rise to the occasion and help lead on the solutions.

Senator Torlakson has already commented re your linkage initiative that, " this is a very progressive initiative, and the first time in this state's history that a governor has taken steps to tie together jobs, housing and investment and transportation projects." Does this signal bipartisan support in the Legislature for your proposals?

There are certainly Legislators in both parties who get this, and have for a long time. The Administration will need to work in partnership with members of the Legislature, of both parties, who want to make a difference in order to pull this off. I know, just based on the feedback and comments I get from Legislators of both parties that there already is a desire for bipartisan solutions. Certainly, the Governor has been leading in a new era of governance in talking about bipartisan cooperation, and we are following his lead. Coming from the local level where the local elected officials have party affiliations but are in nonpartisan offices, it's always been people of both parties and goodwill who have made a local city, county or school district work. So, if we don't understand that the direction we're going is not left or right, but forward, we're in trouble. We have to jump over that left-right axis and move ahead with solutions that are rooted in a sound analysis of how the California economy works, and therefore gives us the direction of how we bring back California.

On the March 2 ballot, along with the bonds for the governor's debt relief program, is a $12-billion state school facilities bond, and in many jurisdictions matching local school facility bonds. How do school bonds, which are funding the largest public works program in the state, link to your agenda of tying transportation, housing and land use together?

It's very important to understand the concept of schools as a key strategy to improving neighborhoods. Again, the data is very clear that when a family goes out to look for a place to live, they are looking for decent shelter they can afford, a safe neighborhood and good schools for their children. So education is always another facet of the notion of smart growth and of a quality neighborhood. We need to have that link to good schools and quality education as well for a vibrant California economy. I'm hoping that the full $26-billion is going to be used in flexible ways to support quality schools and neighborhoods and to be really innovative and creative about joint-uses of facilities, especially when we're also trying to promote maximizing or optimizing infill and refill ("refill" being the term that Dr. John Landis from UC Berkeley uses to talk about redevelopment). We need to be even more innovative about the design of schools and using the space that may be in a given neighborhood creatively in order to rebuild, improve and remodel quality schools, and recognize that when they become centers of community activity, that adds to the vibrancy of the neighborhood. And good neighborhoods are always good for the economy.

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