Friday, December 9, 2022

Deceptive Proposed Initiative Would Disrupt Vital Infrastructure Projects in California

CommentaryAt a time when California is running far behind making even the basic investments in maintaining our vital infrastructure, a proposed 2016 ballot measure would seriously disrupt our ability to fix crumbling roads, improve water supplies, and build new schools and other public works.

It could also prevent timely fixes to infrastructure after natural disasters or major emergencies. This deceptive initiative would add an unnecessary level of cost, bureaucracy and delay to a process already bogged down, and further widen the infrastructure funding deficit plaguing our state.

Broad Consequences

Opponents of the state’s plan to build a reliable Delta water system are close to qualifying a constitutional measure for the November 2016 ballot that would require a statewide election each and every time the state or a state-local partnership seeks to issue revenue bonds exceeding $2 billion to pay for infrastructure projects. But this measure has consequences much broader than just the pipeline project.

If passed, the measure will take a widely used and fiscally responsible financing mechanism off the table for all sorts of infrastructure projects.

Revenue Bonds

General obligation bonds appropriately require a vote of the people, because the risk of default is on the taxpayers. But revenue bonds are not guaranteed by state or local taxpayers. Instead, bondholders shoulder all the risk for revenue bonds in return for earning interest.

Further, revenue bonds are repaid using designated funding streams associated with the projects they finance, and not the state’s general fund. A water recycling project would be funded by water users, a toll bridge by tolls on motorists using the bridge, and so on. As such, a statewide vote is entirely unsuitable for revenue bonds.

Because the measure does not provide a clear definition of the term “project,” it will lead to considerable uncertainty, litigation, delays and costs that would stall or derail infrastructure projects. The measure would encourage litigation and increase the ability of special interests to leverage major infrastructure projects for their own purposes.

Local Projects

It is hard to see why a statewide vote is appropriate for local projects. For example, if a state-local partnership in the Central Valley sought to issue revenue bonds for a local water storage project to be repaid by local water users, under this measure it would require statewide approval.

In other words, voters in Los Angeles, San Francisco and Redding would have to vote to authorize or reject a revenue bond that impacts only Central Valley water users. That makes no sense.

No Exceptions for Emergencies

Lastly, and most reckless, the initiative provides no exceptions for emergencies or natural disasters. If an earthquake or flood ruins roads, bridges, or water infrastructure, this initiative would effectively take state revenue bonds off the table to finance immediate repairs. That’s because the state would have to wait until the next general election to seek voter approval before financing — not to mention construction — could begin.

A broad coalition of business, labor and other leaders is coming together to defeat this deceptive and dangerous initiative that would greatly impede our state’s ability to make the public works investments that are vital to our economic health, quality of life and security.

Allan Zaremberg is president and chief executive officer of the California Chamber of Commerce. This commentary appeared as a post on Fox & Hounds Daily.

Allan Zaremberg
Allan Zaremberg
Allan Zaremberg retired as president and chief executive officer of the CalChamber at the end of 2021 after 23 years on the job. He took over the top staff position in 1998 after six years as executive vice president and head of CalChamber’s legislative advocacy program. He oversaw the CalChamber Business Services Division, which provides employment law expertise through handbooks, services and products, including HRCalifornia, a continually updated website.​ Before joining CalChamber, Zaremberg served as chief legislative advisor to and advocate for Governors George Deukmejian and Pete Wilson. Zaremberg holds a B.S. in economics from Penn State University and a J.D. from the McGeorge School of Law, University of the Pacific, where he was a member of the Law Journal.

Related Articles

Finance Director Says Budget Windfall Gives State Opportunity to Invest in Future

California’s revenues and economic conditions have continued to improve, enabling the state to address some of its greatest threats, such as climate change, the COVID-19 pandemic, homelessness and crime, state Finance Director Keely Martin...

The People’s Voice: Voters Prefer Better Rules for Telecommuting

The pandemic has changed how we live and work, certainly in the short term and probably longer. The seventh CalChamber poll, The People’s Voice, 2021, found that voters prefer policy changes to ease their...

ZEV Mandate Should Spur Policy Talks on New Revenues for Transportation

It’s full steam ahead for the Newsom administration’s zero-emission vehicle (ZEV) strategy. But this enthusiasm for a new generation of automobile technology may degrade the very roads they drive upon. The Governor kicked his clean...