July 12, 2004 - From the October, 2001 issue

Infrastructure Investment and Governance Reform California's Future Is At Stake, Prof. Erie Argues

Prof. Steven Erie has studied California's governance system, its changing priorities and its evolution. He has seen what term-limits has done to infrastructure investment and what Prop. 13 has done to the financial capacity of municipalities. And after examining the lingering effects of Sept. 11 he has drawn the conclusion that now may be the most opportune time to change our flawed governance structure, implement real change to the State/local fiscal relationship and begin to make government work again. MIR is pleased to offer the following candid interview.

Prof. Erie, there are economic summits being planned for Los

Angeles and the Bay Area. What, if anything, is being planned in San Diego? And is there a sense of economic damage there, both on the private and public side?

I'm not aware of any similar summits planned for San Diego, but there is a growing understanding here that we face real economic damage. The effects are already being felt at Lindbergh Field, of course, but also at the border where heightened security has lengthened delays for goods and people. The most worrisome economic impact, however, may be on the horizon. San Diego is heavily dependent on tourism, and the transient occupancy tax (TOT) is an important source of local government revenue. Tourism has declined significantly since September 11th, and this has hurt the economy. If the downturn in tourism continues, the effects will ripple throughout San Diego. Civic projects slated to be funded by TOT funds such as the ballpark and downtown redevelopment will be enormously impacted.

The questions and focus of the Economic Summit planned for L.A. are similarly focused around the airport and tourism, as well as public works and infrastructure projects that are on the drawing board. We just carried an article, which you co-authored, about the need for an airport at El Toro. I'm wondering whether you see a revived interest in the speeding up of regional infrastructure projects, to try to jumpstart this economy.

Moving ahead with planned – and much needed – infrastructure projects would help the economy in the short term by creating numerous construction jobs, and in the long term by increasing the region's competitive advantage in global trade. The problem, however, is that there are two ways to interpret the ramifications of 9/11 for infrastructure projects. Proponents of El Toro, for example, focus on the economic benefits I've described. Opponents, on the other hand, are now claiming that because of the decline in air travel that there's no need for another airport in Southern California. I believe the opponents' arguments are shortsighted since air passenger and cargo demand will almost certainly continue its long-term upward trend over the next twenty-five years. Nonetheless, the events of 9/11 have clearly heartened both supporters and opponents of airport construction, and I don't see any consensus developing for a quick resolution of this contentious issue. The Orange County supervisors have just approved El Toro's environmental review, and opponents now will take the issue to the ballot and courts.

With the recent announcement of L.A. Mayor Hahn, that he wishes to scrap much of the LAX master plan and concentrate on security rather than growth, where do you predict the burden for operations and growth will be? Won't it be on the secondary airports that we're talking about?

The Mayor's announcement that he wants to scrap most of the LAX Master Plan and cap LAX at 78 million annual passengers (MAP) has two critical implications. First, LAX is the world's busiest origin and destination airport, which means most of the passengers start and end their journey here rather than just transferring to another plane. The key issue at LAX, therefore, is ground access, and removing the components designed to relieve traffic congestion such as the ring road and direct access to the 405 is probably a mistake. LAX will remain the region's premier airport for the foreseeable future, and failure to plan for that reality could hurt our global competitiveness. The other major implication is the flip side of the first; namely, our need to create a regional airport solution. There's a real equity issue here in terms of what we call "county fair shares." Places like Orange and San Diego Counties are heavily dependent on the L.A. airport system and don't really carry their fair share of the load. Looming ground congestion and access issues at LAX will create a powerful incentive for El Toro supporters by illustrating that Orange County cannot rely upon Los Angeles much longer.

Let's look at the situation in San Diego. Airport governance was an emerging theme before 9/11. Is it still a viable emerging issue in San Diego? What's the status of AB 93 and the Regional Airport Authority? And how is RGEC progressing?

With some reluctance, the Governor recently signed AB 93 creating a Regional Airport Authority. He cited three concerns: the authority needs to be subject to a countywide public vote, it needs land-use powers and, the transfer of Lindbergh Field from the United Port District to the authority is premature. At the governor's insistence the bill's authors have agreed to introduce urgency legislation in January to remedy these defects. Yet the real problem in San Diego is the lack of a new airport site. The 9/11 tragedy makes it less likely that the military will give up Miramar, south Camp Pendleton or North Island-the only viable alternatives to Lindbergh Field. Thus, San Diego winds up with an airport authority without an airport. As for RGEC, the Regional Government Efficiency Commission, the proposal to merge transportation and land use planning in San Diego is dead, at least for this legislative session.

What's the significance of those 2 efforts?

The San Diego Regional Airport Authority is the only semi-live birth to date of the State's most watched regional governance reform effort; it marks a tentative venture into regionalized governance with regard to airports. Both the Regional Airport Authority and RGEC are interesting because of a point they illustrate about forays into regional governance: the final bills drafted in Sacramento almost never resemble the discussions and recommendations made at the grassroots. Regarding the airport authority, for example, the final legislation is different from the original in three key areas: governance, appointments, and approval. Unlike the initial proposal, the legislation adds a highly paid executive committee to manage the airport system, eliminates the right of East County to appoint a board member, and bypasses a public vote.

What about the Southern California Regional Airport Authority?

The region's other Regional Airport Authority, as you probably know, has been sitting in suspended animation for about 20 years. Recently, however, opponents of LAX expansion resurrected it. In particular, several of the county supervisors were looking to breathe new life into Palmdale as an alternative to LAX expansion. The real question is whether the authority will ever amount to anything more than a bargaining chip in the battles over LAX, and actually contribute to a regional solution for the L.A. airport system. An acid test is whether it would be willing and able to advance the decision process with respect to El Toro.

Steven, the Governor's commission that's focused on infrastructure is supposedly within weeks of issuing their report. You've been looking at infrastructure in Southern California for some time now. How can that report and whatever recommendations come out of that be linked to economic revitalization in the State?

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As I said earlier, I think moving ahead with some truly worthwhile infrastructure projects would be a real positive step. I'm a member of the commission, and believe that a strong infrastructure building program can be a valuable economic catalyst. The events of 9/11 have delayed and reprioritized many things, including this report. Security considerations need to be addressed. It's not just a matter of protecting LAX from terrorist attacks; it's also the state's aqueducts, power grid, ports, etc. Our entire infrastructure is potentially at risk. With the changing environment, it's appropriate for the Governor's Infrastructure Commission to take some extra time to consider the security implications. Also, the report now can be released as a stimulus package.

Again, Professor, you've also followed the issue of State/local fiscal reform. Reports are coming out of the Capitol that we face, as a result of 9/11, a recession in the energy crisis, a shortfall going forward. Having been through these before, how do you see it playing out in terms of the capacity of local and State governments to be responsive going forward?

As you well know, Prop 13 and its successors fiscally hobble local governments. As a result, cities chase after sales and hotel taxes. And now with the growing shortfall in both, we could see local governments and their allies in Sacramento renew the push for a much different State/local fiscal relationship. Cities and counties are interested in more diversified and stable sources of revenue. To the extent that the recent tragedies hurt local governments fiscally – directly by reducing tourism-related revenues, and more generally by tipping the national economy into recession – the events of 9/11 may inadvertently help resurrect the whole fiscal reform movement.

Let's drill down with one more question in that area, and that's counties are even more dependent on sales tax in the State than cities, and their health departments and unemployment offices are going to be hit hard by the events following 9/11. Can you give us a sense about how counties are going to react?

When it comes to the fiscal health of local government in California, counties are like the canaries that miners used to warn of dangerous gas concentrations. They're the ones with the most mandates and responsibilities relative to their limited discretionary revenue sources. They're going to feel the effects of an economic downturn much sooner than cities. Thus, the first cries for change will come from the counties because the pressures they will feel will just be enormous.

Again, I want to close, Professor, by asking you what, proactively, we can expect public and private sector efforts to take, given the assessment we've just been discussing in this interview. Are there any ideas that you've picked up on your radar screen for what we can do to return to economic equilibrium?

This could be a real opportunity to fundamentally change our patterns of governance and finance. The ramifications of 9/11 go straight to the economic health of the State, our regional economies, and the public sector. The desire to deal effectively with the crisis could provide the needed impetus to tackle some of the shortcomings inherent in the very dysfunctional State/local relationship we have here in California.

It seems a bit Pollyannaish because we've been through times, in the previous decade, when the State had a shortfall and they weren't responsive. What gives you hope that they'll be responsive this time?

There is no guarantee we will ever improve the State/local relationship, but history suggests that change is most likely to occur during periods of crisis. Of course, we thought we were going to get some kind of change in the early 1990s, but it didn't materialize. This time, however, the time horizon is so truncated that the economic effects in areas like tourism and airports could quickly translate into a dearth of public revenue. If that happens, something will need to be done to help local governments continue functioning. The possibility of rapidly cascading negative impacts could provide a real incentive for local business communities and public officials to unite to press for needed changes.

Let's close with this. Both Peter Schrag in the State Capitol and David Broder in our nation's Capitol, have begun to note that the age of the triviality of government may have been ended on 9/11. How will that translate itself into a new and evolving agenda for the entities charged with providing the health, safety and welfare agendas for both the nation and our our cities?

While Schrag and Broder may now be realizing the worth of government, they have long been critics of California's grand experiment with direct democracy. But given the change in public mood and perception, this may be the perfect opportunity to use the ballot box to make some of these needed changes.

One way the agenda may change is if Californians recognize the need for a longer time horizon for planning public projects and move to repeal term limits. People like William Mulholland and Pat Brown provided the needed long-term visionary leadership for the projects that built California, and particularly Southern California, in the era before term limits. Today, term limits effectively curtail long-term infrastructure planning and finance because nobody is in office long enough to champion these projects from inception to conclusion. If we hope to use the events of September 11 to make some positive changes in California, we really need to start thinking about eliminating the restrictive rules under which we conduct the public's business.

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