December 14, 2005 - From the December, 2005 issue

Senate President Don Perata Sponsoring $10 Billion State Infrastructure Bond

The projected price tag for the necessary upgrades of California's transportation infrastructure are rising as traffic in the cities and on the highways slows ever more. Estimates of California's need reach up to $200 billion, and while a cash-strapped state cannot begin to pay the full amount now, proposals for incremental expenditures are arising. Furthest along is SB 1024, a $10 billion bond measure sponsored by Senate President pro Tem Don Perata (D-Oakland) that would allocate funds to a range of critical infrastructure projects, including highways, goods movement, and the precarious levees of the Bay-Delta. In this exclusive MIR interview, Sen. Perata details the provisions of SB 1024 and explains why its approval for the 2006 ballot and eventual passage is an essential first step in the effort to rebuild California.

Don Perata

Senator, perhaps we ought to begin by asking our State's Senate President Pro Tem why you have prioritized putting on the June ballot a state infrastructure investment bond for California this year.

Because it's needed is why I'm doing it. We have, for years, neglected California's infrastructure. Even though we've put before voters and passed a series of bonds for schools and open space and water, we have neglected the infrastructure most fundamental to our economy, and that's transportation. So, if we didn't do it now, I don't know when we'd do it. I waited until an opportunity came, and now that I'm leader of the Senate I can pretty much direct traffic as I see appropriate. This is clearly the top priority for me and for my caucus and, I think, the governor.

With an immense $200 billion dollar shortfall in our infrastructure statewide, what exactly will the proposed bond fund?

We have tried to go with the areas of greatest neglect. For example, the State Highway Improvement Program for the last five years has not been given any money. So that means that all basic projects for the state highway and interstate system have not been funded. So, we're going to fulfill that. We're also going to pay back the money that the legislature and the governor have taken from the Prop 42 account, which is the sales tax on gasoline. The voters wanted that money to go towards transportation, but there was an escape clause, and we've used it for the past number of years to balance the state budget. We want to pay that back completely.

Probably the most important item is goods movement. The goods movement industry and logistics have replaced manufacturing as California's staple industry. Yet, as a state we have put virtually no money into our ports. Cast against the problem it might not be a huge amount, but putting three or four billion dollars into goods movement is substantial. And then there's money for levee repairs, which even before Katrina became a great and obvious problem for this state. Our levee system has over 1,000 miles and if those levees snap, and we are at high risk at 27 points in that system, 24 million Californians could lose their drinking water. Finally, it includes money for infill housing as a way to provide incentives to streamline the process to allow for recycling of urban land to cut down on both sprawl and these intensely long commutes that people are facing right now.

That's basically the package. You could add a lot of other things, but the more you add the less likely it is to get voter approval because it looks like everybody is getting a little bit. We've been talking to the private sector investors, and they have told us that if we put a little money against a lot of different issues, then that result will be zero.

The voters of California have been generous over the last seven years passing $35 billion in state school bonds which is being matched, by way of example, in Los Angeles with another $13.5 billion in approved facility bonds. The voters have also approved billions of park bonds and library bonds. Why then has investment in our state's infrastructure -- transportation, levees, trade and goods movement -- been neglected so long?

That's a very good question and I'm not quite sure that I have the answer, but I think part of it is the so-called self-help county movement that has arisen over the past ten or 15 years. Nineteen counties have separately passed their own half-cent sales tax for transportation, and they have allowed the state to neglect its obligation. Instead, local governments have set their own priorities and gone ahead and funded projects themselves. Of course the idea was that the state would match it, but of course the state hasn't matched it. Unfortunately, those projects are all targeted within county borders and have nothing to do with the overall problems of this state, and I just don't believe that the state can neglect it any longer. It's glaring right now and every year we wait, the problem becomes geometrically more difficult. At some point, we are simple never going to be able to catch up.

Two of the questions that will surely arise, as they do with every bond measure, are: "How much debt can the State assume?" and "What financing incentives are you going to include to best leverage public indebtedness in order to meet our state's enormous backlog in infrastructure needs?" Please respond to both.

We've been told by a variety of investment bankers who have looked at our debt situation – frankly, Wall Street is what matters because they are the ones that loan the money or buy the bonds – that we have somewhere between $15 billion and $20 billion of debt capacity before we get to 6 percent of the general fund. Assuming we have that kind of debt capacity in the general fund then we are looking at what would be appropriate beneficial uses, that is, where people are going to be paying for the improvements that they benefit from directly. As an example, if we're going to deal with flood control, that benefits everybody in the State of California either directly, because they're in a flood plain, or indirectly, because the water they drink depends on a sound levee system. Well, that should really be born by the users. There ought to be a user's fee, a direct nexus between what the person uses and the cost of maintenance and reconstruction. A case could also be made that the shippers who are using the ports in California would benefit by a system that moves their goods faster from port to consumer, so we're looking at what possibilities and prospects we have there.

In short, I believe this bond has to be a combination of user fees and general obligation bonds. It's an election year. If I had my way, we would levy a general-purpose tax for transportation, but I know well and good that California politicians have become so conditioned to say that any new taxes kill your electoral chances for office, and nobody will consider it. I don't think the governor wants to consider that, and I would rather find alternative methods of payment for the bonds than try to risk it all on a tax measure that I don't think would pass.

Senator, you have assumed leadership of the State Senate with lengthy experience in the Legislature and in a era of term limits. Most of your colleagues will not be in office long enough to see proposed infrastructure projects completed. Given this reality, how do you foresee this infrastructure bond politically proceeding to passage, knowing the governor has an interest in this subject matter, knowing the assembly speaker has an interest in this subject matter, and knowing there are others in California that would like to put competing bond measures on the June ballot?


The conversations I've had with the governor and also with the speaker indicate that we believe that the leadership can make a deal or come to an agreement on an infrastructure bond. If we do that ourselves, then the second step is to sell it to our respective caucuses and also have the governor help condition the environment so others realize that this is his imprimatur, if you will, and his reelection prospects are directly linked to this bond. I believe that there is an opportunity for the legislature to do its own job. We have said that we should do this in June which means that we should have resolution to this bond by the end of April, because if it goes beyond June it would, first, have no direct benefit to the budget this year and, secondly and more importantly, once we get into November's campaign season everything will become a politicized election issue, and I don't think anything would get done.

There are those out there who have in the past and will continue to try to put bond measures on the ballot for their own purposes. There are so-called "pay to play" cases where a variety of interests get together, carve up an expenditure plan, then put that before the voters usually stamping it something like "Clean Water Act" so everybody will vote for it. We're going to have to prevent that from happening. Because of the California initiative system, it's relatively easy to put something on the ballot, so we're going to have to include a diversity of interests, people who are interested in urban parks, people who are interested in resource management, etc.

Probably the biggest constituency out there that we're going to have to bring in and make a deal with will be education because in Los Angeles Unified they just passed their third bond issue, $4 billion, and it's all matched money with the state. Well, the state fund is practically dry, so by re-funding that Los Angeles will be able to make good on its promise to the voters and to the next generation of students. That to me is an infrastructure issue that should be a companion to what we're doing with transportation.

Senator, you've been holding hearings, along with Senators Torlakson and Lowenthal, around the state on this bond measure. You have heard much testimony about the need for regional planning of infrastructure investment, smart growth and the desirability of urban infill. How will your bond measure and it's companion measure, SB 832, respond to this input?

SB 832 really is, as you note, the companion measure to the bond. It is trying to come up with ways to streamline the process by which approvals and construction can be fast-tracked in transit-oriented developments. In Los Angeles, if you look at what's going on downtown, they've just had a remarkable rebirth of the downtown area developing huge numbers of housing units down there. We need to be able to continue that not only in downtown Los Angeles but in all other urban areas where we're trying to recycle lands that have been lying fallow or are no longer valued at the use they previously did. In order to do that, we have to provide the infrastructure and provide the opportunity so it doesn't take forever and five days to get an approval process completed. If it's inner-city development vs. going out and tearing up another orchard, there's a lot more money to be made out there tearing up an orchard, so we have to make it easier and quicker for people to make inside investments if we hope to stop the sprawl from going any further.

High-speed rail appears to be included in your bond measure, as is the funding of repairs to our levees after the tragedies inflicted on the Gulf States by Katrina. Elaborate on these priorities and why they included in the bond.

Fortunately, Washington has realized that what happened in New Orleans can happen in other places. Senator Dianne Feinstein and Rep. Richard Pombo from the Central Valley have said that they are going to make flood control and prevention federal money available to California and make it a priority so we're putting probably $1.2 billion into that for the purposes of matching it up with the federal dollars. We're going to put enough money in there so that the federal government will see us as a top priority. The feds have been pretty stingy when it comes to giving California its fair share of federal dollars. However, if we are there with money in hand from the state and we have the disaster in the Gulf as an immediate example of neglect, we think the federal government will provide the assistance that is necessary for us to fix our own levee system.

Three years ago the Legislature passed a mandate to put a $9.5 billion bond measure on the June 2006 ballot for high-speed rail. It was more of a concept then than anything else, and the $9.5 billion was chosen because it sounded better than $10 billion. Really, it's a long-term project and probably pencils out at $40 billion or $50 billion and, as important as high-speed rail will be in the future, it is not a crushing priority now.

SB 1024 would rescind the mandate of three years ago, and, instead, provide about a billion dollars for planning. So rather than putting all that money into a bond, making it available when it's not going to be close to ready, we thought we would just take five years' worth of probable expenditures and money that could be used even if high-speed rail never becomes a reality. So, we're putting an amount of money in there, a billion dollars or so, that could used for purchasing right of way or, more immediately, grade separation so you don't have commercial trains breaking up communities during commute times.

With the special election concluded, the political gurus now believe that neither the governor's office nor the Democrats in the Assembly and Senate want the other to be a hero – to be perceived by the public as successful. How do you overcome this unhealthy competition? How do we find a way to move forward in a bipartisan way to tackle problems like infrastructure investment that have been too-long neglected?

I can only speak for myself, but I'm at an age and time of life both chronologically and in office that I don't care who takes credit for it as long as it gets done. I've been happy to take the lead for the last year. Frankly, the special election gave me a lot of free time because nothing else was going on in Sacramento, but the governor is the governor. He rightfully is the one who has the controlling hand in any effort that is going to come to the ballot through the legislature. I believe that there is enough opportunity and credit to go around for everybody. I want to get it done. I know what political credit is worth, and you can't cash it at the bank. In our environment today with term limits, I only have three years left to accomplish something that I came into the legislature hoping to do. So it means that if Arnold Schwarzenegger can take a victory lap and got done what he needed to get done, I'll be happy to be sitting in the passenger seat with him.


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