$2.3 Billion Asked for Roads in State : Deukmejian Proposes 2 Bond Issues; Plan Would End User-Tax Precedent

Acknowledging that motorists now waste too much time stuck in traffic jams, Gov. George Deukmejian Saturday proposed a $2.3-billion, five-year plan to increase spending on California transportation projects by 40%.

The proposal was unique for two reasons: First, it would be the first time in modern California history that highway construction was financed by all taxpayers, not just motorists. Since virtually the moment the state began building roads for automobiles, all projects have been financed by “user taxes,” such as levies on gasoline and truck weights.

General Obligation Bonds

Under Deukmejian’s plan, the new highway construction would be financed by general obligation bonds to be repaid from the state’s General Fund, to which all taxpayers contribute.

Secondly, although neither he nor his advisers openly were talking about it, Deukmejian’s proposal would set up a dilemma for voters: whether to spend this General Fund revenue on transportation projects or possibly have it returned to them in the form of tax rebates.

The dilemma would occur because state government soon is expected to begin exceeding a spending limit imposed overwhelmingly by voters in 1979. When it does exceed that spending lid--called the Gann Limit for its author, tax crusader Paul Gann--excess revenue must be returned to the taxpayers. But bond financing is not included in the type of spending which is counted toward the limit, so the governor’s plan is a way of circumventing that spending lid to pay for highway construction.

Deukmejian’s plan, which immediately became controversial, would require legislative and voter approval of two bond issues--one for $1 billion in 1988 and another for $1.3 billion in 1990.

Highway construction would receive the lion’s share of the new funds, at least 75%, or $1.725 billion. The specific projects would be selected by the California Transportation Commission.

The remaining 25%, or $575 million, would go to local governments to be used for any transportation projects they desired--presumably roads primarily, but also transit. Additionally, high-tech traffic management systems would be developed in Los Angeles, San Diego and San Francisco.

Authority for Counties

Further, Deukmejian said he would continue to support legislation authorizing counties to raise their sales tax by up to one cent to pay for local transportation projects.

“Californians spend 300,000 hours stuck in traffic jams every day,” Deukmejian said. “That’s a terrible waste of time, productivity and energy. And besides, it’s not a very nice way to start or end the day.”

Deukmejian, under increasing pressure from motorists and manufacturers to deal with worsening traffic congestion and deteriorating highways, unveiled his proposal in the first of a new series of weekly Saturday radio broadcasts. The broadcasts were suspended in early 1986 when Deukmejian began running for reelection and all but two radio stations stopped carrying them because, in large part, they seemed too political.

The governor’s office said 17 radio stations carried Saturday’s broadcast, which had been taped Friday. Additionally, a television tape was made available to TV stations by satellite.

In defending his proposal to finance highway projects with general obligation bonds--not just “user taxes”--Deukmejian likened building roads to constructing schools.

“Bonds helped build our state, including the construction of our public schools, our colleges and universities,” he said. “Like schools, our freeways, roads and transit systems benefit everyone, not just the owners of vehicles.”

Beyond that argument, John K. Geoghegan, secretary of the state Business, Transportation and Housing Agency, contended in a prepared statement that “the gas tax is no longer a useful tool” for financing highway projects. “It has proven to be an unreliable, unresponsive revenue . . . subject to fluctuations as the sales and price of gasoline fluctuate,” he said.

Geoghegan, filling in details of the governor’s plan, said the bonds probably would be repaid over 20 years, although it is conceivable they could be retired earlier. Under a 20-year repayment plan, 70 cents in interest would have to be paid for every $1 borrowed. The state already during the next fiscal year is obligated to pay $620 million in debt service, out of a contemplated budget of roughly $39 billion.

Something for Schools

Deukmejian also has pledged to support on next year’s ballot a proposed $800-million bond issue for school construction.

The governor’s plan to ask all taxpayers to finance road building was immediately opposed by a key segment of the highway construction lobby. Al Shankle, president of the Associated General Contractors of California, said his organization “favors a pay-as-you-go and pay-at-the-pump approach.”

Switching to general obligation bonds, he said, “puts the long-term care and improvement of the highway system in jeopardy since every two years a new bond package would have to be approved.”

Shankle said his group would prefer increasing the gasoline tax--something Deukmejian flatly opposes--and excluding these revenues from money that counts toward the state spending limit.

Currently, motorists pay 18 cents a gallon in gasoline taxes--9 cents for the federal government and 9 cents for the state--plus a 6% sales tax. In other words, when a motorists pays $1 for a gallon of gas, 24 cents goes to taxes.

Richard Barrett, a highway development engineer and spokesman for the Automobile Club of Southern California, said his organization had “mixed feelings” about the governor’s proposal. “It’s a step in the right direction, but it’s just far short of what is really needed,” he said.

Club’s Position Cited

Barrett said the Auto Club also favors higher gasoline taxes and truck weight fees and possibly a sales tax increase.

Deukmejian’s push to win legislative approval of his plan began with some important bipartisan support. Democratic Sen. Wadie P. Deddeh of Chula Vista, chairman of the Senate Transportation Committee, agreed to scrap his own proposed $1.8-billion bond issue, which would have been repaid with “user taxes,” and sponsor the governor’s plan.

Answering the expected arguments that surplus General Fund revenues should be returned to the taxpayers, Deddeh asserted: “Does it make sense to send that money back to the people--giving them checks of $10, $20, maybe even $100--while at the same time running around and saying, ‘Folks, we want to raise your gas tax by 6 or 7 cents.’?”

He added: “A lot of people don’t have the slightest idea about the state of shambles that our transportation system is in.”

Democratic Assemblyman Richard Katz of Sepulveda, chairman of the Assembly Transportation Committee, agreed with Deddeh about the merits of spending money on highways rather than returning it to taxpayers. But he had reservations about asking all taxpayers to finance transportation projects.

“In the short term, it’s OK,” Katz said. “But in the long term, it’s not good policy. We’d have general taxpayers subsidizing trucking operations, for example.”

Better Management

Deukmejian said his aim is “to build more roads and highways more quickly and to better manage traffic on the roads we already have.”

He envisioned expanding a traffic management center in Los Angeles and developing two more in San Diego and San Francisco, using modern gadgets such as road sensors and closed-circuit monitors to provide motorists and officials with better information on highway conditions.

The governor said that right now only $5.2 billion is available from all sources--federal, state and local taxes--for California transportation projects during the next five years.

Illustrating the worsening problem of traffic congestion in California, Geoghegan said that delays on Los Angeles and San Francisco freeways are increasing at annual rates of 15% and 27% respectively. He also said that travel on California highways rose from 72 billion vehicle miles to 102 billion from 1977 to 1985.