Projects move too slowly

Capitol Journal

Don Perata remembers the mood and expectations when the Legislature passed a massive $37-billion public works program in 2006.

The mood was jubilant, the former Senate leader recalls. Legislators had acted in a very rare bipartisan fashion. And the expectation was that the record-size bond package — pushed hard by then-Gov. Arnold Schwarzenegger — would rapidly begin the rebuilding of California’s decaying infrastructure, creating tens of thousands of jobs.

“Everyone was feeling good about what happened. It was one of the high points of my time in the Legislature,” the Oakland Democrat says.


“The common goal was to get the projects out now and don’t let them get stuck with the bureaucrats arguing over whatever they argue about. We had just begun to realize that something was wrong with the economy.”

Voters overwhelmingly approved four bond proposals — for transportation, housing, education and flood control projects. They also passed a fifth bond for water facilities that had reached the ballot through the initiative process. That upped the total bond package to an unprecedented $43 billion.

“There was a sense of urgency,” Perata says, “and then we lost it.”

Five years later, only roughly half of the authorized bonds have been sold. And of the amount sold, about 30% has not been spent.

So much for pump-priming the economy in a severe recession.

As I wrote last week, Gov. Jerry Brown recently called on President Obama to launch a nationwide FDR-type public works program, asserting that without it, the economic slump would continue for another four or five years.

But California could have been stimulating its own economy by expediting the huge public works program that voters embraced.

As of mid-September, the Brown administration was holding $9.1 billion in various infrastructure bonds that had been sold but weren’t being used to fund projects and create jobs. That much borrowed money costs roughly $600 million annually in loan payments.


After the column, the governor’s office reported that Brown actually inherited a $13.4-billion stash of idle bond funds and gradually put $4.3 billion to work, the biggest chunk for school construction. The governor has pledged to further reduce the pile of unused money to $3 billion by next July.

Meanwhile last week, Treasurer Bill Lockyer sold another $1.8 billion in infrastructure bonds, 60% of it from the 2006 package. The governor promised to also spend that by next July.

But why must all this take so long?

The state still has voter authorization for $35 billion in infrastructure bonds that haven’t even been sold.

If there was ever a need for a public works blitz, it’s now. FDR would have been on the phone and kicking some rear.

California’s unemployment rate has dropped below 12%, barely, but it’s still the second-worst in the country.

“We don’t seem to have any problems spending money in other areas,” Perata says. “What I hope happens is that Jerry just leans on everybody. The bureaucracy will wait you out if they think they can wait you out. That’s what they do.”


I got an email from Republican Assemblyman Brian Nestande of Palm Desert, who asserted: “Our regulations and bureaucracy have become so tied in knots they’re strangling our ability to do even the things we all want.

“In the Coachella Valley we have five freeway interchanges being worked on right now. That’s great. However, each one has been in the planning stage for at least 10 years. Two years of construction, but 10 years of planning. We can’t continue like this.

“Oh, but we need more taxes. For what? To feed inefficiencies?”

Here’s one thing “for what”: To raise the money needed to repay loans for public works projects. Debt service is costly, consuming nearly 8% of the state General Fund, or almost $7 billion, the treasurer calculates.

Brown’s main focus has been on trying to balance the deficit-plagued state budget. Pump-priming hasn’t really been on his chart. The governor canceled a spring infrastructure bond sale largely to save money.

Yet, as California Chamber of Commerce President Allan Zaremberg points out: “Interest rates have never been lower. Prices have never been lower. And the cost of labor has never been lower. You can build so much more today for the same dollars as you could four years ago.

“So the question is: Are they doing everything they can? I don’t know.”

I suspect gubernatorial ambivalence and a bureaucratic bottleneck.

But you can also blame the recession for botching up public works funding. It reduced cash flow the state needed to initiate projects and make bond payments. And gimmicky budgeting lowered California’s bond ratings, jacking up interest rates.


Moreover, the state invoked a new bond disbursal system that gave more decision-making power to department heads. They grabbed money before they were ready to spend it. And that led to wasteful hoarding.

Schwarzenegger also can be faulted for not pushing bond money out the door faster.

“We [legislators] did our job. The voters did their job,” says Perata, who ran for Oakland mayor, lost and now is a consultant. “If Arnold had been as enthusiastic a cheerleader for building things as he was at telling people we needed to build things….

“But he got distracted trying to do a Mitt Romney knockoff on healthcare.”

At some point, Brown probably will ask the voters for more money. Some, in turn, may ask him how he used all that bond money they gave Sacramento.