Keeping 30/10 on track
Los Angeles Mayor Antonio Villaraigosa’s 30/10 plan may be in trouble. The proposal calls for borrowing from the federal government over 10 years the total amount expected to be raised and repaid over 30 years from a half-cent sales tax authorized by L.A. County voters in 2008. With the money, the Metropolitan Transportation Authority could complete transit and highway projects in 10 years instead of 30.
However, on March 29, Congress extended federal transportation spending for only 90 days -- the ninth such action since 2009 -- to avoid a complete shutdown of Washington-funded highway work. Funds for the mayor’s proposal were not part of the bill. The possibility of movement won’t come until after the November elections, and even that may be a pipe dream.
The 30/10 financing model, widely heralded among transportation experts, thus appears to be another hostage to partisan acrimony in Washington. A two-year bill, which passed 72 to 22 in the Senate, included financing for the 30/10 plan, but Democrats in the House could not force a vote on the legislation. Some House Republicans simply do not want to expand federal loan programs, which they believe encourage overbuilding and mismanagement.
There are options that do not depend on Washington pulling itself together. But Villaraigosa must first decide what is truly important about his plan: fast-tracking the money or developing a model for the federal government to do so. That’s a debate worth having because there are three options for fast-tracking money into Southern California to pay for our needed transportation projects.
The first is the California Infrastructure and Economic Development Bank, which has been around since 1994. Because California’s economy is bigger than that of most countries, it can finance much of its own infrastructure. The bank has an AAA credit rating and thus can offer competitive rates. It has helped fund some large projects, including the Bay Bridge’s deck replacement. Given its modest size, the bank probably wouldn’t bankroll more than a handful of projects at once, so Los Angeles would need to prioritize its projects. But then, nobody really expected the feds to finance the entire 30/10 wish list either.
Villaraigosa also could look overseas for some fast money. The European Investment Bank has lent money to 78 countries to build highways and transit projects, the bulk of it to member states of the European Union. Although the bank has not financed a project in the United States, its mission is to foster infrastructure projects that support EU goals, among them slowing global warming. The 30/10 plan has multiple transit projects -- the Westside subway and the Green Line/LAX extension -- that dovetail nicely with this environmental goal. Villaraigosa could make an unprecedented proposal to the European bank. What’s the worst that could happen? It says no and mocks our soccer teams ?
The private global capital market is the third financing possibility. Global infrastructure funds such as Meridiam and InfraRed might consider individual 30/10 projects. Meridiam has made some large investments, pouring more than $1 billion into a 50-year partnership with a high-speed rail line in France. Though none of the 30/10 projects is likely to yield ticket sales or tolls, which is what Meridiam usually seeks, the fund financed a portion of the state courthouse in Long Beach based on simple loan repayments. Infrastructure funds can benefit by diversifying their portfolios to include projects with low-risk revenue streams. And 30/10’s half-cent sales tax, given L.A.'s retail tax base, offers such a stream.
All three financing options would probably require Villaraigosa to break up his 30/10 plan into smaller, less ambitious financing proposals. They are also likely to be more expensive than borrowing from the federal government. But if the benefits -- new construction jobs and more transit options -- of building sooner rather than later are really as large as Villaraigosa contends, L.A. will need to pursue a new financing strategy. Otherwise, gridlock in Washington could turn the 30/10 plan into a 30/30 one.