Sponsor Tables Border Bonding Authority Bill : Legislature: Move comes in face of opposition from San Diego representatives who fear the plan to deal with the border infrastructure could lead to a kind of ‘junk bond’ crisis.
Pounded by questions from legislators and opposition from San Diegans, a controversial measure to establish a border bonding authority was unexpectedly held over in a crucial Assembly Ways and Means Committee Wednesday for further study.
Moments before the committee was to take a final vote, Assemblyman Richard Polanco (D-Los Angeles) asked to have his border proposal tabled for a few weeks so he could reassure uneasy colleagues and try to win over San Diego representatives, who sharply attacked his bill Wednesday by likening it to the “junk bond” crisis that swept Wall Street.
“I had the votes, but I want to continue to work with the city and other opponents,” Polanco told reporters after withdrawing his bill for consideration.
Polanco’s maneuver came after a sometimes emotional hearing on his proposal to form a nine-member California and Mexico Infrastructure Bonding Authority, which would be able to float revenue bonds and raise money to build roads, sewers, water pipes and other public improvements related primarily to the maquiladora industry south of the border.
As they have for months, Polanco and his supporters on Wednesday argued that the proposed bonding authority was necessary to break a governmental deadlock over the problems now affecting the maquiladoras-- American and foreign plants built in Mexico to take advantage of low-cost labor. Local jurisdictions such as the City of San Diego, they say, have been unable to come up with the cash or diplomacy to adequately grapple with infrastructure problems now threatening the growth of the maquiladoras .
“It is a first attempt to pay for the solutions that have been analyzed for years along the border,” testified Sam Palmer IV, an Orange County financial consultant who came up with the original plan for the bonding authority more than a year ago.
A number of other financial experts, appearing on Polanco’s behalf, also told committee members that stimulating the border economy in Mexico would not only enrich California businesses, but cut down on illegal immigrants and drug traffic.
“The more value added on the Mexican side, the less Mexicans will be on this side,” said Jose Garcia-Medrano, a vice president and senior economist for Merrill Lynch in New York. “The more flourishing, the more robust the economy, the less incentive there is for the underground (drug) economy.”
But San Diego representatives, long suspicious of Polanco’s border proposal, continued to protest the bill. City of San Diego lobbyist Kathryn C. Rees said members of the local legislative delegation were opposed to the measure--including Assemblyman Pete Chacon (D-San Diego), who is listed on the Polanco bill as a co-author.
Rees and Rudy G. Gonzales, a city economic development administrator, said the authority would be an unresponsive layer of government that would actually upset the fragile border economy by meddling in local planning decisions and imposing taxes on already financially overburdened border businesses and residents.
“The people who can least afford these structural improvements would be the ones to pay,” said Gonzales.
He also called attention to new amendments in the Polanco bill that would allow the authority, under certain circumstances, to waive public hearings and make unsecured loans to anyone who wants to build a border project. If the project goes belly-up, Gonzales said, the state may be held liable for paying back the bonds.
“I simply remind you of the junk bond issue and Drexel Lambert at this time,” Gonzales said.
Those comments were geared toward Ways and Means Committee members already worried over the details of how such a border authority would back up and pay off its bonds. At one juncture, an impatient Assemblyman Mike Roos (D-Los Angeles) interrupted a Polanco witness to ask pointedly: “What kind of paper would it be? Someone’s on the hook.”
Polanco said the bonds would be backed by the revenues--taxes and tolls--taken in by the projects themselves. While the authority could take over the projects and sell them off, it would be the bondholders’ hard luck if a border project fell short of its revenue projections, Polanco said.
“There’s no debt to the State of California,” he said.
Roos, committee chairman, also chided Polanco for submitting pages of amendments to his bill too late for a legislative consultant to read and analyze them in time for Wednesday’s meeting.
Despite those misgivings, Roos made the motion to pass Polanco’s bill out of the committee--a motion that was left hanging when the Los Angeles legislator withdrew his bill.
After the hearing, Polanco called San Diego leaders “short-sighted” for fighting against his proposed authority. “Unless they can come up with another potential funding mechanism, they ought not to walk away from the table,” he said.
“It’s different, it’s new, it has not been tried here and there are a lot of questions,” Polanco said about his proposal. “I believe we have been responsive to those questions.”
Meanwhile, one of Polanco’s witnesses acknowledged that it is conceivable his firm could end up selling the revenue bonds for the authority, if it is created by the Legislature.
“I think it’s too early to say,” said Garcia, the Merrill Lynch vice president. “Any investment house would have the possibility of selling them. If everything is properly presented, there would be a lot of people interested.”
He said the same would apply to Goldman Sachs & Co., a representative of which also testified on behalf of Polanco’s bill Wednesday.