September 27, 2018 - From the September, 2018 issue

Candidate for Governor Gavin Newsom On What Will Drive His Policy Agenda

At a recent Los Angeles Business Council breakfast, Lieutenant Governor and gubernatorial candidate Gavin Newsom spoke about the need for affordable housing, building an innovation economy, rapidly advancing transportation technologies, addressing the volatility of the State’s tax system, and protecting California’s role as a leader on environmental protection. Interviewed by Conan Nolan, political reporter for KNBC, Newsom laid out a vision of how he plans to lead the state after Governor Jerry Brown.

Gavin Newsom

"We have to develop a new narrative that looks more sustainably at the issues, and I believe passionately that California can lead those conversations." - Gavin Newsom

Conan Nolan: The McKinsey Global Institute put out a survey stating that California needs 3.5 million homes by 2025. That breaks down to about 400,000 housing units per year. How are you, as Governor, going to advance that goal?

Gavin Newsom: The state’s current goal is to get to 180,000 housing units on an annual basis. That is an argument to fail more efficiently.

In the spirit of Michelangelo, I believe that the biggest risk is not that you aim too high, but that you aim too low and reach your goal. I could set a modest goal that doesn’t solve the problem—or I could come out with a high number and organize a strategy to see what we are capable of doing.

The imperative is addressing affordability. Poverty is at crisis levels in this state. New numbers show that California is the most impoverished state in America when you consider cost of living. We lead the nation above Florida and Indiana.

I’ve laid out a detailed strategy to help advance a goal that I recognize is audacious. The last time we approximated producing 400,000 housing units on an annual basis was when Roger Bannister broke the four-minute mile in 1954.

Localism is where this strategy will play out. The state of California is not going to go out and build 3.1 million housing units; it has to happen in municipalities. That requires some consensus, but more importantly, it requires leadership at the state level, as well as objectives, goals, and timelines. That has not been advanced by the governor’s office, arguably, in decades.

We have to address this issue head-on with Enhanced Infrastructure Financing Districts, land-use facilitation, linking transit dollars to housing production goals, more categorical exemptions, CEQA reform to address programmatic EIRs, and a collective effort to take our affordable housing tax credit crisis from $85 to $500 million.

Conan Nolan: The state doesn’t build housing; local governments do. We have 58 counties and 4,000 municipalities with different general plans, zoning laws, and regulations. To achieve your goal, the state would have to big-foot local governments, neighborhood councils, and the infrastructure that has been designed to stop housing from being built.

Gavin Newsom: The California dream is predicated on social mobility. Right now, that disparity is so pronounced that it is “the” issue. It manifests most acutely in the fact that we have 134,000 people living on the streets and sidewalks. Housing affordability is past the point of being a crisis. And with the dislocation that is coming from IT and globalization detonating at the same time, we are quickly becoming a two-class society.

We have to frame the solution around density and transit corridors, and we have to put pressure on local government to incentivize better behavior—or, yes, even penalize local government for bad behavior. One of the my most controversial proposals is to take discretionary regional transit dollars away from communities that don’t meet their housing goals, and send those dollars to those that do. I think we have to be tough.

Conan Nolan: San Francisco Senator Scott Wiener introduced the failed SB 827, which big-footed local government when it came to development along transit corridors. It was very controversial and got huge pushback from local governments. Would you endorse that kind of bill if it were reintroduced in the California Legislature?

Gavin Newsom: I was a strong advocate for what Scott was trying to do. He had a hell of a hard time trying to accommodate all the different jurisdictions, but what he attempted to do is jumpstart a conversation that is long overdue around the issue of local control and leadership. I applaud that, and I’m looking forward to working with him. He’s now part of my policy effort to reconstitute aspects of that bill in a way that could earn more favor at the local level.

The challenge is that each and every housing market in the state is unique, so having a statewide command-and-control approach is very difficult when you look at the world framed locally as bottom-up. That’s our burden.

But there’s no better way than density to accommodate our growth while reducing our greenhouse gas emissions and providing the quality of life that we enjoy in California. The only alternative is more sprawl, and that has a profound imprint on our low-carbon, green strategies. It is completely contradictory to our stated environmental goals.

Conan Nolan: You were in favor of high-speed rail when it was first introduced, but have since expressed concerns about it.

Gavin Newsom: When it started, I was a huge supporter of it. The northern terminus was going to be in my town—the Grand Central Station of the West Coast, the Transbay Terminal. It was going to be 2 hours and 46 minutes to Downtown LA from Downtown San Francisco. It was going to generate $1 billion in surplus with 55 million passengers. A third of the money was going to come from the private sector, a third from the feds, and we’d put up our third—the $9.95 billion bond approved by voters in 2008.

We got the federal money only because three other governors decided to get out of the high-speed rail business: Rick Scott, John Kasich, and Scott Walker. Joe Biden, who was very enthusiastic about high-speed rail, redirected their stimulus money to California. The $3.5 billion those governors gave away is all the federal money we’ve got, and I imagine that’s all we’re going to see for a long time.

That got us up to $13-14 billion. But then the project ballooned from $33 billion to $98.1 billion. We value-engineered it down to $66 billion, and now it’s back up to $77.3 billion at the low end. That number will continue to go up.

Moreover, this is no longer a project from Downtown LA to Downtown San Francisco. The first phase is now Silicon Valley to the Central Valley. And it’s still an open question how we’re going to get the train over and through Tehachapi and San Gabriel Mountains. That is a $4-6 billion question, for which not one dollar has been identified.

So, yes, I have questioned our capacity to deliver. But at the same time, I love the vision, and I’m committed to it. I think the only way we can achieve this vision is to get Phase I done and then to enlighten the private sector about the opportunity to help finance subsequent segments. Then we have to imagine a day when we have a more enlightened legislative leadership in Congress and the White House that might support that vision.

I am committed to the utilization of cap-and-trade money in addition to that $13.5 billion to advance this ideal. But I will do it in a much more transparent way. I don’t think we have been honest with you about what this project is and what it isn’t, and that will change.

Conan Nolan: Many argue that to combat the housing crisis, we need to connect Central Valley towns to the coast and to jobs. Is there a way to do that without a bullet train?

Gavin Newsom: That is the exact stated goal of Phase 1 of the high-speed rail in 2033: to connect one of the fastest-growing parts of the state, the Central Valley, with one of the most dynamic innovation economies in the world, Silicon Valley.

The jobs/housing link is a transportation issue. That’s why I always link transit and housing. High-speed rail needs to be an economic development opportunity, not just an expense.

We’re already seeing the fruits of upzoning in and around the corridor. There have been some amazing improvements in Fresno. It is real; this is actually finally happening.

My opponent wants to gut the project and give back to the Trump administration that $3.5 billion in federal money. I’d prefer not to do that, and to try to figure out a way to make this happen that doesn’t shortchange the legitimate concern about regional transit needs.


Conan Nolan: Is California done with freeway building?

Gavin Newsom: In the next iteration of mobility, drone technologies will not just be moving packages and goods, but also people. Sebastian Thrun, who started GoogleX, is taking preorders for flying cars. They have been testing that technology in New Zealand are now doing it right outside of Vegas. They’ll roll it out next year. Dara Khorowshahi, CEO of Uber, has told me about their commitment to democratizing flying autonomous taxis.

Something big is happening in the plumbing of the transit world. Mobility is going to radically change. That is going to require radically rethinking general plans and investments in parking structures, and a long-term reimagining of 21st Century Los Angeles.

Currently, 30+ percent of LA’s space is identified for automobile needs. But many of you will have kids who don’t know what the DMV is—who will not own a car, but will participate in a completely different mindset around how to move.

With new sensor technology, we’ll see caravans of driverless trucks come out in the next year or two on dedicated freeways. Ray Kurzweil, the futurist at Singularity University who’s been right about 70 percent of the time, says that within a decade, it will be illegal to drive on freeways. It will be equivalent to driving while texting. Autonomy is now moving that quickly, and for freeways in particular, it will be evident that that’s preferable.

The old industrial mindset—the Eisenhower frame of mobility—is giving way to something profoundly different in the next five to 10 years. That is very exciting.

Conan Nolan: Are you concerned about losing transportation infrastructure funding should the gas tax repeal, Proposition 6, pass in November?

Gavin Newsom: If you want to repeal the gas tax, you have a right to do it. But the notion that we will instead find efficiencies is illusory. For some people, the answer to every problem is cutting taxes and regulations.

There is no alternative to, not just the $52 billion generated by the gas tax, but hundreds of billions that that $52 billion leverages. State dollars are only one part of the picture; local, regional, federal, and private-sector dollars are all in play, as well. There are thousands of projects in the queue and hundreds underway, and we are being asked to take all of that away while being offered nothing in return.

Gas taxes are not a liberal conspiracy to fleece you. Just consider Deukmejian’s advocacy for gas taxes, as well as Wilson’s and Reagan’s—or the dozens of red states in this country that have recently passed gas tax increases. You’ve got to pay for infrastructure. It’s a user tax. I applaud the governor and the legislative leadership for doing the right damn thing. That rarely happens in politics, and it happened in California.

Conan Nolan: Returning to housing, have you taken a position on Proposition 10, which, if passed, would restore the ability of cities across the state to enact strong rent stabilization laws?

Gavin Newsom: I oppose it. I think it will have a chilling effect on new housing construction, particularly in the apartment space. If it passes, we’ll have to adjust our goal of 3.5 million new units.

There is a deal to be made. Affordability is not just a production issue; it’s also a preservation issue. We are not in a position to address the immediacy of housing needs. It’s an issue of preserving folks’ ability to afford to stay in their existing units. My biggest anxiety when it comes to those 134,000 people out on our streets and sidewalks is how we have gentrified so many of our urban and downtown cores.

There are abuses of Ellis Act evictions and owner move-in evictions. I lived through this: My mom lived in her apartment in San Francisco for 20 years. While she was in chemotherapy, the landlord evicted everybody through the Ellis Act. She died a year later—and nobody moved into the building for five years. I have no respect for folks like that who do these things to people like my mother.

I’m not suggesting that we shouldn’t address legitimate concerns about rent increases, but we need to do it in a sensible way that doesn’t make the problem exponentially worse. We’re 49th out of 50 states in per capita housing units. Half of the households in the state can’t afford housing.

There could be sensible regulations. But you need to make them through a legislative framework and not by fiat at the ballot. I would pursue that if Prop 10 were rejected, but it’s going to be a tough order—the polling does not suggest that we’re going to defeat this initiative.

Conan Nolan: Your policy agenda is based on a system that is funded by a tax base that is out of whack. The top 1 percent of wage earners in California pay 50 percent of the State’s income tax. Are you interested in addressing how California raises money for the public good?

Gavin Newsom: I’m not just interested in it; I’m committed to it. Volatility is our enemy. It’s often repeated that 144,000 taxpayers are responsible for 47 percent of the income tax in the state. I have real anxiety around that.

Our state has the highest corporate tax in the country at 8.84 percent; the highest sales tax in the country at 7.25 percent; and the highest income tax at 13.3 percent. Now, some of my colleagues are calling for a carried interest tax of 17 percent, and others want the corporate tax to be 15 percent.

We’ve got to be competitive. Other states, red and blue, are smoothing out volatility by expanding their tax bases with sales and service taxes. By some estimates, 85 percent of the economy in California is not taxed. What happens when you’re only taxing 15 percent? You go deep, and that creates volatility. A 3 percent macroeconomic downturn will impact our economy by about $20 billion. We have $13.9 billion in our rainy day reserve; that would be gone in the blink of an eye.

I am very concerned about this. The challenge is to create the conditions where we can have that conversation. That’s difficult in an environment where we all feel burdened by scarcity. But it is a requirement of the next governor and the next Legislature to have a multi-year conversation that advances the kind of tax reform that is necessary for this state to be competitive.

What are the trends that define this world? What can California do to take advantage of those trends? That’s what we need to look at to be truly competitive in a world that is radically reorganizing itself in real time.

There’s no issue that gives me more anxiety than the issue of work. By some estimates, 50 percent of our workforce in this country will soon be contingent workers who do not have the benefits commensurate with a fulltime job. This is the biggest issue in the United States, and no one is debating or discussing it.

There are 3.4 million cashiers who were not enthusiastic about Amazon’s announcement that they’re rolling out 3,000 cashier-less stores by 2021. There’s not a Teamster in the world who’s enthusiastic about the California-based company Auto, which drove 50,000 cans of Budweiser 149 miles in Colorado Springs without anyone in the drivers’ seat.

Something big is happening in the world of work—not just automation, but new work styles and arrangements. Our tax code has to meet that reality as well. We have to develop a new narrative that looks more sustainably at these issues, and I believe passionately that California can lead those conversations. That’s what I am here to advance.


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