A Preliminary Timeline of Activity Concerning What Will Be $9.95 Billion Borrowed through Proposition 1A Bond Sales for California High-Speed Rail

May 13, 2013 / / No comments
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It seems that 99.999% of Californians are unaware of how, when, and how much the State of California has borrowed for California High-Speed Rail by selling bonds to investors. My requests at two board meetings of the California High-Speed Rail Authority to be open and transparent about the details of the bond sales – even to the point of having an agenda item at each meeting dedicated to the topic – have been ignored, of course. Their strategy is to keep the public and the news media uninformed, probably because the details are not comforting.

It appears the California State Treasurer has sold about $700 million worth of Proposition 1A bonds to date. While early bond sales for California High-Speed Rail appear to be segregated from bond sales for other purposes, recent sales suggest that California State Treasurer Bill Lockyer was correct when he said the high-speed rail bonds were “mixed together” with bonds for other purposes. That was his response to my questions at the California League of Bond Oversight Committees annual conference on May 10, 2013. Someone in the bond industry told me this mixing was “unusual,” but perhaps we’re misunderstanding what’s going on.

People have asked me how the state was able to sell California High-Speed Rail bonds before the legislature and governor first authorized the sale of bonds in July 2012. I do not know.

I have not been able to figure out how much in interest has been paid so far, where the money was obtained to pay the interest so far (perhaps appropriations for the California High-Speed Rail Authority from the General Fund?), and the current debt service on the bonds.

Basically, we’re all ignorant peons left in the dark by the forces that control everything.

Here’s a preliminary timeline of activity concerning bond sales for California High-Speed Rail, with links to source documents. It’s nothing great, but it’s a step in the right direction for people to fill in the blanks and try to figure out what’s going on. If you see a mistake or know something to be added to it, please let me know.

Amount Borrowed Through Bond Sales (Principal, Does Not Include Interest) Date and Action Link to Source Documents
$0 August 26, 2008 – Governor Schwarzenegger signs into law Assembly Bill 3034, which puts the “Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century” (Proposition 1A) on the November 4, 2008 California ballot. According to the bill, the state would borrow $9.95 billion through bond sales in order to “encourage the federal government and the private sector to make a significant contribution toward the construction of the high-speed train system.” Borrowed money would be available for the California High-Speed Rail Authority to spend under specified conditions and criteria for planning, land acquisition, design, engineering, and construction. The California High-Speed Rail Authority would be required to pursue and obtain other private and public funds, including, but not limited to, federal funds, funds from revenue bonds, and local funds. The California State Treasurer would sell the bonds as authorized by an appointed California High-Speed Passenger Train Finance Committee under terms and conditions specified in committee resolutions. Bonds could have a maturity period as long as 40 years. The committee would consider program funding needs, revenue projections, financial market conditions, and other necessary factors in determining the term for the bonds to be issued. Each year, the state would collect taxes and fees for the General Fund that would pay principal and interest to bond investors. In addition, the board of the California High-Speed Rail Authority could request a loan from the Pooled Money Investment Board to make a loan against the amount of authorized but unsold bonds. Assembly Bill 3034 

Proposition 1A
$0 November 4, 2008 – 52.7% of California voters (including 78.4% of San Francisco voters) approve Proposition 1A. November 2008 Election Results
$0 January 16, 2009 – the High-Speed Passenger Train Finance Committee approves Resolution I under the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the principal amount not to exceed $32,010,000. The committee also approved Resolution II under the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, authorizing the issuance of State of California High-Speed Passenger Train Refunding Bonds in the aggregate principal amount outstanding not to exceed $32,010,000. January 16, 2009 Minutes

 

Resolution I

Resolution II
$0 February 1, 2009 – Long Term Bonds Outstanding State Public Works 2009
$0 April 6, 2009 – “The High Speed Rail Authority had been financed via a commercial paper issue.” April 6, 2009 Minutes
$0 April 15, 2009 – the High-Speed Passenger Train Finance Committee approves Resolution III under the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, (i) amending the provisions of Resolution I authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the principal amount not to exceed $32,010,000, and (ii) authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the principal amount not to exceed (a) the principal amount unissued under Resolution I of $32,010,000 and (b) an additional principal amount not to exceed $448,790,000, for a total principal amount not to exceed $480,800,000. The Committee also approves Resolution IV under the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, authorizing the issuance of State of California High-Speed Passenger Train Refunding Bonds in the aggregate principal amount outstanding not to exceed $480,800,000. April 15, 2009 Minutes

 

Resolution III

Resolution IV
$90,045,000 April 22, 2009 – the California State Treasurer sells $90,045,000 of Safe Reliable High Speed Passenger Train 21st Century Series A Build America Bonds, Federally Taxable.

CDIAC Number: 2009-0940

Standard & Poor’s Rating: A

Moody’s Rating: A2

Fitch Rating: A –

Term: 30 years

Rate: VAR%

At the August 6, 2009 board meeting, the Authority executive director noted that this money was a piece of a $4-5 billion state bond sale and would be used by the Authority in FY 2009-10.

 2009 Annual Report
$90,045,000 July 1, 2009 – Long Term Bonds Outstanding 2009 Treasurer Publication
$90,045,000 August 1, 2009 – Long Term Bonds Outstanding Official Statement
$90,045,000 October 1, 2009 – Long Term Bonds Outstanding Official Statement
$258,395,000 October 8, 2009 – the California State Treasurer sells $168,350,000 of Safe Reliable High Speed Passenger Train 21st Century Series B Build America Bonds, Federally Taxable.

CDIAC Number: 2009-1481

Standard & Poor’s Rating: A

Moody’s Rating: Baa1

Fitch Rating: BBB

Term: 30 years

Rate: 6.933%

 2009 Annual Report
$258,395,000 January 20, 2010 – the High-Speed Passenger Train Finance Committee amends Resolution III with resolution V and Resolution IV with Resolution VI. These two resolutions reflect changes to the General Obligation Bond Law that became effective January 1, 2010, and other technical amendments. January 20, 2010 Minutes

 

Resolution V

 

Resolution VI
$258,395,000 February 1, 2010 – Long Term Bonds Outstanding Official Statement
$258,395,000 June 30, 2010 – Long Term Bonds Outstanding Official Statement
$258,395,000 October 1, 2010 – Long Term Bonds Outstanding Official Statement
$309,060,000 November 19, 2010 – the California State Treasurer sells $50,665,000 of Safe Reliable High Speed Passenger Train 21st Century Series C, Federally Taxable.

CDIAC Number: 2010-1714

Standard & Poor’s Rating: A-

Moody’s Rating: A1

Fitch Rating: A –

Term: 30 years

Rate: 7.438%

 2010 Annual Report
$410,050,000 November 22, 2010 – the California State Treasurer sells $100,990,000 of Safe Reliable High Speed Passenger Train 21st Century Series D. 

CDIAC Number: 2009-1695

Standard & Poor’s Rating: A-

Moody’s Rating: A1

Fitch Rating: A-

Term: 30 years

Rate: 5.133%

 Official Statement 

see earlier

 

Official Statement
$410,050,000 June 30, 2011 – Long Term Bonds Outstanding 2011 Annual Report
$410,050,000 September 21, 2011 – High-Speed Passenger Train Finance Committee approves Resolution VII, which amends Resolution III authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the principal amount not to exceed $480,800,000, and (ii) authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the principal amount not to exceed (a) the principal amount unissued under Resolution III of $70,750,000 and (b) an additional principal amount not to exceed $59,250,000, for a total principal amount not to exceed $130,000,000. The Committee also approves Resolution VIII under the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, authorizing the issuance of State of California High-Speed Passenger Train Refunding Bonds in the aggregate principal amount outstanding not to exceed $540,050,000. September 21, 2011 Minutes

 

Resolution VII

 

Resolution VIII
$410,050,000 August 1, 2011 – Long Term Bonds Outstanding Official Statement
$499,285,000 October 25, 2011 – the California State Treasurer to sell $91,225,000 of Safe Reliable High Speed Passenger Train 21st Century bonds as Series E. Official Statement
$499,285,000 November 1, 2011 – Treasurer Lockyer Comments on Revised High-Speed Rail Business Plan. November 1, 2011 Press Release
$499,285,000 January 1, 2012 – Long Term Bonds Outstanding Official Statement
$499,285,000 February 1, 2012 – Long Term Bonds Outstanding Official Statement
$499,285,000 June 30, 2012 – Long Term Bonds Outstanding 2012 Annual Report
$499,285,000 July 18, 2013 – As required under Proposition 1A, Governor Jerry Brown signs into law Senate Bill 1029, which appropriates $2,609,076,000 in Proposition 1A funds plus $3,240,676,000 in federal funds for the first operating segment of the High-Speed Rail between Madera and Bakersfield, $1,100,000,000 for “Bookend” funding, $106,000,000 to CalTrans for capital improvement projects to intercity and commuter rail lines and urban rail systems that provide direct connectivity, and an appropriation of $713,333,000 for “Connectivity” funding. Senate Bill 1029 (2012)
$499,285,000 February 1, 2013 – Long Term Bonds Outstanding Official Statement
$499,285,000 March 18, 2013 – California High-Speed Rail Authority approves Resolutions #13-03 and #13-04 requesting the California High-Speed Passenger Train Finance Committee to authorize the sale of $8,599,715,000 in bonds. Resolution #13-03 

Resolution #13-04
$499,285,000 March 18, 2013 – the High-Speed Passenger Train Finance Committee approves Resolution IX and Resolution X to authorize sale of $8,599,715,000 in bonds. Resolution X
$499,285,000 March 29, 2013 – the High-Speed Passenger Train Finance Committee previously adopted Resolution III authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the Principal Amount Not to Exceed $480,800,000 (“Resolution III”) and Resolution VII authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the Principal Amount Not to Exceed $130,000,000 (“Resolution VII”). As of March 29, 2013, the State had issued $100,990,000 State of California High-Speed Passenger Train Bonds, Series D, currently outstanding in the principal amount of $99,000,000 (the “Resolution III Bonds”) pursuant to Resolution III. $38,775,000 remains in principal amount of bonds or commercial paper notes under Resolution VII, and the Committee now desires to authorize the issuance of bonds to refund any bonds issued from time to time under Resolution VII (the “Resolution VII Bonds”). Resolution XI
$538,060,000 April 11, 2013 – the California State Treasurer to sell $38,775,000 of Safe Reliable High Speed Passenger Train 21st Century bonds as Series F. Official Statement
$703,530,000 April 11, 2013 – the California State Treasurer to sell $165,470,000 of Safe Reliable High Speed Passenger Train 21st Century bonds as Series G. Official Statement
Category: Government Fiscal Issues, Public Debt - State of California / Tags: , , , , , , , , ,

2013 Annual Conference of California League of Bond Oversight Committees Highlights Current Controversies on Municipal Bond Sales for Schools (and High-Speed Rail)

May 10, 2013 / / No comments
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I’m on the Advisory Board of the California League of Bond Oversight Committees (CalBOC), which held its annual conference today (May 10, 2013) in Sacramento. To improve public accountability for California K-12 and community college construction programs funded by money borrowed through bond sales, this non-partisan organization improves the training and resources available to bond oversight committees; educates the state legislature, local school boards, and the public about the oversight and reporting authority of bond oversight committees; and advocates on a state level, where appropriate, on issues of common concern to bond oversight committees.

California League of Bond Oversight Committees Logo 2013

Citizens’ Bond Oversight Committees were established through a section of Proposition 39 in 2000 that became California Education Code Sections 15278-15282. Michael Day, president and co-founder of the California League of Bond Oversight Committees, said that attendees should “go with the knowledge that you’re doing good things” as ordinary California citizens. Day kicked off the 2013 conference by asserting that ”spending wisely shouldn’t be a partisan issue.” (I would have added that spending foolishly doesn’t seem to be a partisan issue.)

Presenting first at the conference were two finance and business administrators from the Santa Ana Unified School District, which is getting criticized for borrowing $35 million in 2009 by selling Capital Appreciation Bonds at an almost 10:1 debt-service-to-principal ratio. In addition to suggesting that Capital Appreciation Bond sales can be a valid business decision under certain conditions, they insinuated that school districts know best how to sell their bonds, and perhaps the state legislature is needlessly interfering in their own local affairs. To boost their case, they asked two rhetorical questions to show the arbitrary nature of the provisions in Assembly Bill 182 that would restrict school district sales of Capital Appreciation Bonds:

1. What’s the proper maximum maturity period for school bonds?

(AB 182 proposes 25 years)

2. What’s the proper maximum ratio of debt-service-to-principal on school bonds?

(AB 182 proposes 4:1)

Following their presentation was Assemblywoman Joan Buchanan (D-San Ramon), who introduced Assembly Bill 182 to restrict the sale of Capital Appreciation Bonds. (The bill passed the Assembly on April 8, 2013 with a 75-0 vote.) Catching my attention during her speech was her assertion that the legislature should expand state-mandated performance reviews for school bond measures to include such items as an examination of the school district’s labor compliance program. Knowing how the old labor compliance program laws and regulations had changed starting in 2009, I asked what she meant. Assemblywoman Buchanan said that the State Allocation Board had discovered that some school districts had applied for and received state reimbursement for labor compliance program expenses but weren’t actually following the state requirements and didn’t deserve the reimbursement.

California State Treasurer Bill Lockyer Speaks at 2013 California League of Bond Oversight Committees Conference

California State Treasurer Bill Lockyer speaks at the 2013 California League of Bond Oversight Committees annual conference.

California State Treasurer Bill Lockyer was the keynote speaker. He declared that the Poway Unified School District officials who engineered its notorious 2009 Capital Appreciation Bond sales were “stupid” and should be fired or recalled. Many people in the meeting room clapped in response, although I don’t know what the representatives from the Poway Unified School District did.

Lockyer sees “a whole industry that lives off of this” scheme for Capital Appreciation Bonds and detects “an odor” of underwriters and other financial management firms engaged in “corrupt practices” and taking advantage of school districts through bond sales. He said he heard a story about how an underwriting firm turned down a school district’s request for handling a ill-advised, foolish Capital Appreciation Bond sale, and then the school district asked another firm with fewer scruples, which was pleased to do it for a fee.

Lockyer noted that the 4:1 debt service to principal ratio for school bonds indicated in Assembly Bill 182 was a political compromise among various parties, including some special interests that demanded either absurd ratios (such as 9:1) or no ratio at all. He actually supports an outright ban on Capital Appreciation Bond sales by school districts. (Michigan enacted such a ban in 1994.)

At the March 18, 2013 meeting of the board of the California High-Speed Rail Authority, chairman Dan Richard told me to ask the State Treasurer about the details of the bond sales for the California High-Speed Passenger Train for the 21st Century. So I was ready with the first question for Bill Lockyer: when will the authorized High-Speed Rail bonds be sold, what will be the rate, will they be 35-year bonds as authorized, and will some of them be sold as Capital Appreciation Bonds?

Lockyer answered by revealing that California High-Speed Rail bonds will not be issued separately but will be “mixed in” with general state bond sales (such as the state bond sales in mid-April 2013). Then to my surprise, he said that a small amount of the high-speed rail bonds had already been sold! I sent out a tweet that’s now getting some attention:

California Treasurer Bill Lockyer says small amount of bonds for California High-Speed Rail have been sold already. Did anyone know this?

He also told me that the market sets the rates – a clever answer from an experienced politician who knows how to evade the tough questions.

Regarding state K-12 school bonds, Lockyer said about $2 billion was left from the state school bond measures approved in the 2000s and that it was likely that the state legislature would put another school construction bond measure on the November 2014 ballot. (Three school bond measures approved by California voters in 2002, 2004, and 2006 authorized the state to borrow $35.8 billion by selling bonds. The State Allocation Board disperses the grants.)

Finally, in response to an excellent question from Kern County Taxpayers Association executive director Mike Turnipseed, Lockyer said that perhaps some of very old voter authorizations for bond sales that never happened in the end could be “erased” or cancelled, thus eliminating the state’s liability for repaying the principal on those bonds.

Kevin Carlin of the Carlin Law Group in San Diego made a presentation about single-source alternative construction procurement methods, including design-build and lease-leaseback. The presentation was routine until he began advancing his view that there’s a “proliferation of illegal lease-leaseback school contracting” in California and cited the Sweetwater Unified School District in Chula Vista as an example. A vocal faction in the audience – primarily school district officials and an attorney for school districts – disputed these claims. During the question-and-answer session, I told Carlin that his only ally in the state legislature was the self-interested Professional Engineers in California Government union and that his best chance for addressing the problem was to add provisions to law that ensure better public access to bidding and contract documents on design-build and lease-leaseback projects. (See California Public Contract Code Section 20133 (g).) Supporters of lease-leaseback complained that I wasn’t asking a question.

Joel Thurtell Speaks on Capital Appreciation Bonds at 2013 California League of Bond Oversight Committees Conference

Joel Thurtell speaks on Capital Appreciation Bonds at the 2013 California League of Bond Oversight Committees annual conference.

Retired Detroit Free Press reporter Joel Thurtell, now a blogger at www.JoelontheRoad.com, was the last speaker at the conference. His investigative report ”Michigan Schools Load the Future with Debt” was the headline story in the April 5, 1993 Detroit Free Press, and it led to a 1994 state law banning Michigan school districts from selling Capital Appreciation Bonds.

One of the reasons why the article was effective in changing public policy was the directive of a Detroit Free Press editor to Thurtell to produce a “Big Graphic” showing the extent of Capital Appreciation Bond sales by Michigan school districts. Thurtell had to perform many days of tedious paper-based research at the state treasurer’s office in Lansing, but the result was stunning. (Likewise, I believe that the graphic elements of the www.VoiceofSanDiego.org articles on Capital Appreciation Bond sales by California school districts was a major factor in finally bringing state and national attention to the issue.)

In January 2009, Thurtell posted the text of his old Detroit Free Press articles on his web site. Nothing more happened with them until March 2012, when Alicia Minyen, a member of the Board of Directors of the California League of Bond Oversight Committees (CalBOC), found his articles with a web search using the terms “Capital Appreciation Bonds” and “ban.” At this time the word was beginning to spread about the astonishing 10:1 debt service to principal ratio for bonds sold in 2009 by the Poway Unified School District, and the Los Angeles County Treasurer was publicly warning against Capital Appreciation Bond sales.

Joel Thurtell and Alicia Minyen

Champions of fiscal responsibility: Joel Thurtell from Michigan and Alicia Minyen from California.

Minyen contacted Thurtell and then reported on what she learned at the 2012 California League of Bond Oversight Committees. I heard Minyen’s presentation on Capital Appreciation Bonds and then reported it on my blog on May 11, 2012 as Please Read This, Even If You Think Municipal Bonds Are Really BORING: We’re Setting Up the Next Generation of Californians to Pay Staggering Property Taxes, apparently being the first Californian to post a journalistic report on the web about this practice in California.

Thurtell noted today that the worst abuse of Capital Appreciation Bonds in Michigan was at a school district that even used bond proceeds to buy personal computers. I immediate thought about how California school districts are using bond proceeds to buy electronic tablets, with Los Angeles Unified School District and San Diego Unified School District being two prominent examples.

Category: Construction Labor Issues / Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Project Labor Agreement Activity in California Since the November 2012 Election – My Timeline on www.UnionWatch.org

May 8, 2013 / / No comments
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My May 7, 2013 article Election Gains for California Unions in 2012 Drive Push for Project Labor Agreements is posted on the www.UnionWatch.org web site. It includes a timeline of Project Labor Agreement activity on government projects in California since November 6.

A complete list of Project Labor Agreements on government projects in California and links to the actual agreements can be found at Project Labor Agreements Imposed on California Government Projects (1993-2013), Listed by County and Year.

The best study done on the cost of government-mandated Project Labor Agreements is Measuring the Cost of Project Labor Agreements on School Construction in California, produced in 2011 by the National University System Institute for Policy Research, based in San Diego.

Category: Construction Labor Issues, Government Fiscal Issues, Project Labor Agreements / Tags: , , , , ,

Webinar: Do Project Labor Agreements Hurt Our Economy? Wednesday, May 8, 2013 at 8:00 a.m. PT

May 7, 2013 / / No comments
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The Franklin Center for Government & Public Integrity, based in Alexandria, Virginia (near Washington, D.C.), is hosting a webinar on Wednesday, May 8, 2013 at 8:00 a.m. Pacific Time entitled Do Project Labor Agreements Hurt Our Economy?

I’m the featured presenter at this webinar. Register for it here: https://www2.gotomeeting.com/register/690162138

Do Project Labor Agreements Hurt Our Economy? 

Please join us for an important webinar on the truth behind project labor agreements and the impact they have on a state’s economy & infrastructure!

Kevin Dayton of the Dayton Public Policy Institute and an expert on employment and labor issues (particularly for the construction industry), environmental issues, and tax and budget issues will be joining us.

Register Today! If you have specific questions you’d like addressed, please email them to Jennifer Ridgley at Jennifer.Ridgley [at] FranklinCenterHQ.org.

Category: Construction Labor Issues, Project Labor Agreements / Tags: ,

My Article in www.FlashReport.org – Know Thyself, Republican: You Could Be the Next Nathan Fletcher

May 7, 2013 / / No comments
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My commentary Know Thyself, Republican: You Could Be the Next Nathan Fletcher was posted today (May 7, 2013) in www.FlashReport.org. It’s a warning to Republican elected and appointed officials and candidates that we are all susceptible to accepting excessive government activism if we don’t develop, refine, examine, and test our principles concerning the purpose and limits of government.

The ordinary American sees government as a benevolent agent that can solve problems and make the world a better place. The ordinary American is also frustrated by the structural checks and balances of federalism and the separation of powers, the conflicts inherent in a multiparty legislature, and the obstacles to social progress established by the Bill of Rights.

They want solutions, now! Pragmatism over principles!

Unchecked, that belief will first lead to what seems to be a visionary social democracy, but then it will lead to tyranny.

As a general rule, Republicans seem to be more inclined to recognize the flawed nature of humanity and be leery of how those human flaws could be reflected in a government of the people. But some politicians who identify themselves as Republicans never seem to think about such fundamental issues, and they are the ones who sail whichever way the wind is blowing, good or bad, to solve the latest problem that grabs the attention of the people.

Category: Reform of California Republican Party / Tags: , ,

Newly Obtained Documents Reveal Which Elected Official Was the Catalyst for the Project Labor Agreement on California High-Speed Rail: Fresno Mayor Ashley Swearengin

April 29, 2013 / / No comments
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Residents of California’s Central Valley from Merced to Bakersfield are still asking how unions obtained costly monopoly control of the first construction segment of the California High-Speed Rail through a Project Labor Agreement that all contractors must sign as a condition of work. The union requirement was inserted in late December 2012 as Addendum 8 in the bid specifications for the project, without public comment or scrutiny. Here are some of the mysterious circumstances behind this Project Labor Agreement:

  1. The board of the California High-Speed Rail Authority never voted on the Project Labor Agreement or even discussed the concept as a scheduled board item.
  2. The U.S. Department of Transportation’s Federal Railroad Administration apparently never approved the Project Labor Agreement, even though it awarded a American Recovery and Reinvestment Act (Obama stimulus package) grant in 2010 of $2,552,556,231 for construction of the first segment.
  3. No local elected officials in the Central Valley have taken responsibility or credit for the Project Labor Agreement; in fact, elected officials either express opposition to the Project Labor Agreement or avoid mentioning it.
  4. The head of the State Building and Construction Trades Council of California was on the board of the California High-Speed Rail Authority while Fresno civic leaders developed a local hiring program that eventually transformed into a union agreement.
  5. A select group of professional staff and appointed officials in Fresno seemed to be the driving force for the Project Labor Agreement, and they developed the policy and made the decisions without accountability to the people.

Today I obtained several documents through my California Public Records Act request to the Fresno County Workforce Investment Board. These documents reveal that agitation for a Project Labor Agreement was coming from the Fresno Works consortium, described on its web site as “an unprecedented coalition of officials from the County of Fresno, City of Fresno and the Council of Fresno County Governments, working together with the education, labor and business communities to ensure the success of the California High-Speed Rail initiative and its heavy maintenance facility in Fresno County. This group has come together in support of this effort to bring forward a technically responsive and compelling expression of interest in locating the heavy maintenance facility in Fresno County.”

Somehow a lobbying effort to get the California High-Speed Rail Authority to place the highly-coveted Heavy Maintenance Facility in Fresno was used as the agent to get unions a Project Labor Agreement for construction of the Madera to Fresno segment of the rail line. One of the organizations listed in the consortium is the International Brotherhood of Electrical Workers (IBEW), and the photo on the home page shows local union officials standing in the background. As noted below, Chuck Riojas, the head of the local International Brotherhood of Electrical Workers (IBEW) Local No. 100, spoke before the board of the California High-Speed Rail Authority in November 2012 about a proposed targeted hiring program that became the Project Labor Agreement.

The other individual who seems to play a prominent role in the process to get a Project Labor Agreement is Fresno Mayor Ashley Swearengin, who had run for mayor in 2008 and was re-elected in 2012 with a platform of supporting fair and open competition on city construction projects. Mayor Swearengin had worked extensively with unions when she was the top executive for the Fresno Regional Jobs Initiative, and during that time union officials tried to use the Regional Jobs Initiative as an agent to recommend policies to local governments that favored unions for public works construction. (See documents concerning a 2005 controversy at the Fresno Regional Jobs Initiative concerning apprenticeship requirements.) Her June 2012 letter to the Secretary of the U.S. Department of Transportation asking for comments about a Project Labor Agreement ended up being a centerpiece of the process to implement it.

June 19, 2012 letter from Fresno Mayor Ashley Swearingen to DOT Secretary Ray LaHood - California High-Speed Rail Project Labor Agreement

Here are summaries of the documents leading to a Project Labor Agreement on the first segment of California’s High-Speed Rail:

The Acting Chief Counsel of the U.S. Department of Transportation’s Federal Railroad Administration (FRA) sent a letter dated January 6, 2012 to the Chief Counsel of the California High-Speed Rail Authority. It opened with this opinion:

This letter is in response to your request for the Federal Railroad Administration’s (FRA) views of the proposal described in the September 8, 2011 Memorandum to the Fresno Works Consortium (Memorandum) from the Fresno Regional Workforce Investment Board (FRWIB) staff recommending that the California High Speed Rail Authority (CHSRA) implement a “Targeted Unemployed Worker” Program and “First Source” transparency requirements for the California High Speed Rail Project (Project) funded in part by the Federal Railroad Administration (FRA). For the reasons set out below, we have concluded that while not specifically precluded as a matter of applicable Federal law, the “Targeted Unemployed Worker” Program conflicts with the U.S. Department of Transportation’s (U.S. DOT) – and FRA’s – general disapproval of local or in-state geographic preferences because of the potential negative impacts on open and competitive procurement procedures.

Meanwhile, an unrelated federal review of a government-mandated Project Labor Agreement for regional highway construction in Southern California would become a key justification for a Project Labor Agreement on the California High-Speed Rail. The Chief Counsel of the U.S. Department of Transportation’s Federal Transit Administration (FTA) sent a letter dated February 7, 2012 to the Chief Administrative Services Officer of the Los Angeles County Metropolitan Transportation Authority (LACMTA).

The letter indicated that the federal agency reviewed the LACMTA’s Project Labor Agreement and its associated “Construction Careers Policy” and concluded that the LACMTA would not violate the federal requirement that federal grant recipients “conduct federally assisted procurements using full and open competition.” The board of the LACMTA had already approved the Project Labor Agreement and Construction Careers Policy at its January 26, 2012 meeting. A group closely aligned with unions called LAANE (Los Angeles Alliance for a New Economy) had worked with Los Angeles County Supervisor Mark Ridley-Thomas to impose this union requirement on all significant transportation projects in the county. The head of the local International Brotherhood of Electrical Workers (IBEW) Local No. 11 is on the board of directors for LAANE.

In a memorandum to the Acting Chief Executive Officer of the California High Speed Rail Authority dated March 21, 2012, Blake Konczal – the co-chairman of the Education Committee of the Fresno Works Consortium and the executive director of the Fresno Regional Workforce Investment Board - proposed a set of revised “Targeted Unemployed Worker” Hire Criteria and “First Source” Transparency Requirements. In its list of proposed requirements, the proposal included these references to unions:

A mandate that to the extent that said jobs will be drawn from organized labor, that such hiring criteria also be reflective of union apprenticeship requirements.

Coordination with unions. The Contractor(s) and their sub- contractors that have an agreement with a construction union shall use the following procedures and shall inform each relevant union of these requirements:

While these provisions do not indicate that unions will be the sole source of construction trade labor, the proposal includes a reference to a Project Labor Agreement:

d. If a project labor agreement is negotiated to cover this project, such an agreement shall include a provision requiring the parties to adhere to this Targeted Unemployed Worker Program. The Contractor(s) and their subcontractors shall promptly notify the CA-HSRA of any union that fails or refuses to refer Targeted Unemployed Workers and/or Disadvantaged Workers for construction jobs on this project.

So when this memo was written, the idea was circulating in Fresno to require construction contractors to sign a Project Labor Agreement with unions as a condition of working on the California High-Speed Rail project. And at some time between March 21, 2012 and June 19, 2012, Fresno Mayor Ashley Swearengin learned that the U.S. Department of Transportation had declared that the Project Labor Agreement for the Los Angeles County Metropolitan Transportation Authority did not violate federal laws. In a June 19 letter to the Secretary of the U.S. Department of Transportation, Mayor Swearengin wrote the following comments:

it has come to my attention that Mr. Dorvel R. Carter, Chief Counsel of the Federal Transit Administration, approved language put forward by the Los Angeles County Metropolitan Transit Administration (sic) (LACMTA) and the Los Angeles/Orange Counties Building and Construction Trades Council which is very similar to the Fresno Works targeted hiring program. This language focuses on establishing targeted hiring criteria in project labor agreements…we have modified our initial proposal to more closely comport with the LACMTA language that has been approved by USDOT-FTA and respectfully request that USDOT work with us to institute this revised proposed, the “National Targeted Hiring Program,” for the Initial Construction Section of the California High Speed Rail program…I look forward to discussing it with you and your team at your earliest convenience.

Copies of Mayor Swearengin’s letter calling for the Project Labor Agreement were sent to Fresno County Supervisors Susan Anderson and Henry R. Perea and California High-Speed Rail Authority board members Dan Richard and Tom Richards, who is listed as the chairman of the Fresno Regional Workforce Investment Board and is also the chairman and CEO of The Penstar Group, a Fresno-based real estate investment, development and construction company. Presumably this letter would have alerted them to the proposed Project Labor Agreement, although they probably already knew that a Project Labor Agreement was in the works.

Obviously the Obama Administration works quickly when unions are involved. A letter sent from the head of the Federal Railroad Administration at “Secretary LaHood’s request” dated June 29, 2012 assures Mayor Swearengin that “we would respect the choices of CHSRA in adopting a variation of a targeted hiring program so long as the program is consistent with the California state procurement policies and procedures that CHSRA uses in the expenditure of its non-Federal funds.” The letter also expressed some concerns:

We are happy to work with CHSRA to examine the revisions to the targeted hiring program and the program advanced by Los Angeles County Metropolitan Transit Administration’s (LACMTA) and approved by the Federal Transit Administration (FTA). One distinction I note is that LACMTA, as a local government entity, is covered by 49 C.F.R. §18.36(b) through (i) while CHSRA, as a state entity, is governed by§ 18.36(a). Additionally, FRA looks forward to reviewing any final findings or recommendations resulting from the CHSRA subcommittee study of the Fresno Works proposal and CHSRA’s proposal for adopting a targeted hiring program in implementing the HST project.

The general counsel for the Fresno Regional Workforce Investment Board then sent a memorandum dated August 8, 2012 to the executive director of the Fresno Regional Workforce Investment Board summarizing a proposed ”National Targeted Hiring Program” that would pass muster with the federal government. He notes the following:

The legality of the National Targeted Hiring Program is further evidenced by the U.S. D.O.T. Federal Transit Administration’s prior approval of a similar hiring program included in a project labor agreement proposed by the Los Angeles County Metropolitan Transportation Authority (“LACMTA”). The LACMTA’s project labor agreement included contractor requirements nearly identical to those proposed in the Fresno Works National Targeted Hiring Program.

In summary, the general counsel of the Fresno Regional Workforce Investment Board uses two letters as the basis to declare to the general counsel of the California High-Speed Rail Authority that the Fresno Works Consortium’s National Targeted Hiring Program is legal: (1) the Federal Transit Administration’s February 7, 2012 letter to the Los Angeles County Metropolitan Transportation Authority about the acceptability of the Project Labor Agreement and (2) the U.S. Department of Transportation’s June 29, 2012 letter to Fresno Mayor Ashley Swearengin.

Notice three things at this stage of the development of the Project Labor Agreement:

  1. The Federal Railroad Administration never explicitly approved the Project Labor Agreement. The national office of Associated Builders and Contractors (ABC) realized this and sent a letter dated January 17, 2013 to the head of the Federal Railroad Administration asking for more information. A letter back to ABC from the Federal Railroad Administration dated March 26, 2013 stated that “We have received CHSRA’s analysis demonstrating that the proposed CBA is consistent with California’s procurement practices and policies and is otherwise consistent with state law” and also that “FRA understands the CHSRA is evaluating whether the HST project meets the criteria established in the Executive Order.”
  2. The union Project Labor Agreement itself is mentioned only in passing, even though by this time it is to be the vehicle for any alleged efforts to hire any “targeted” workers.
  3. The hiring policy no longer focuses on employment opportunities for workers in the Central Valley, where the construction will be performed.

According to the transcript of the November 14, 2012 meeting of the board of the California High-Speed Rail Authority, the executive director of the Fresno Regional Workforce Investment Board – speaking on behalf of the Fresno Works Consortium – made a presentation in conjunction with Chuck Riojas, a union official with the International Brotherhood of Electrical Workers (IBEW) Local No. 100. Blake Konczal told the following to the board:

…we were able to find out the Los Angeles County Metropolitan Transit Authority in working with the Federal Transit Administration rather was addressing the same question. And through the Chief Legal counsel at FTA, at the Transit Administration, a man by the name of Dorvel Carter, an opinion was put forward that said it was possible to have focused or targeted hiring for areas of high long-term unemployment nationally. We were able to get ahold of the legal reasoning that went into that opinion. And through elected representatives in Fresno, a request was put forward to the Secretary of Transportation LaHood that it seemed that what the FTA was granting to Los Angeles County Transit was what the FRA was denying in our request. So Secretary LaHood asked there be a unified federal policy across the different administrations and we were able to generate a revised positive findings from Federal Rail Administration legal counsel Melissa Porter. I should mention the letters I’m referencing, I have copies if you want all went them. I can give them to you. We were ecstatic. We found a policy. We revised our policy to comport with the language that Los Angeles County had submitted and been analyzed. And then we communicated that information back to your Board.

Mr. Konczal does not mention how “we were able to find out” about the letter from the Federal Transit Administration to the Los Angeles County Metropolitan Transportation Commission about the acceptability of the Project Labor Agreement. (Communication among officials of the International Brotherhood of Electrical Workers might be a good guess.) Nor does he name Fresno Mayor Ashley Swearengin as the local elected official who sent the inquiry to the U.S. Department of Transportation about using the language of that Project Labor Agreement for the California High-Speed Rail.

Mr. Konczal also added the following:

And to be clear up front and to clear up any misconception about what we’re proposing, we are not recommending a local hire program. We are not mandating the Authority or its contractors hire on the basis of any geographical region.

He is correct – the Project Labor Agreement subsequently included in the bid specifications for the Madera to Fresno segment as Addendum 8 is not a local hire program. Other than one passing reference in the preamble, there is nothing mentioned about Central Valley residents getting jobs. It is a UNION hire program, so it’s not surprising that Mr. Konczal introduced a representative of the unions to speak:

MR. KONZCAL: If I could ask Chuck Riojas to come up from the local IBEW also with the Fresno, Madera, Tulare, Kings - I think that’s all of them – Building Trades Council.

Mr. Riojas then talks about union apprenticeship programs and pre-apprenticeship programs. He claims he’s “here not to speak as a union electrician” and that “This isn’t I’d like to stress a union or non-union document” because it would give “people the opportunity to come into the respective apprenticeship programs, be it union or non-union in any apprenticeable craft.” This is not true, of course: Article 1.2 of the Project Labor Agreement specifies that apprentices shall be registered and participating in Joint Labor/Management Apprenticeship Programs.

And in fact California High-Speed Rail Authority chairman Dan Richard concludes discussion of the proposal by noting “there had been a lot of very positive discussions with the construction trades, the represented union, and making sure that this program dovetails with what is the normal course of business there.” He has no qualms about the union requirements.

At their December 6, 2012 meeting, the board of the California High-Speed Rail Authority approved a “Community Benefits Policy” that contained no references to a Project Labor Agreement. That policy was then incorporated internally and administratively into the Project Labor Agreement with the State Building and Construction Trades Council of California, which was added to bid specifications in late December 2012.

Here are questions that remain to be answered:

  1. Is the Project Labor Agreement for California High-Speed Rail actually acceptable to the U.S. Department of Transportation’s Federal Railroad Administration?
  2. Did Fresno Mayor Ashley Swearengin know that she was submitting an inquiry to the Secretary of the U.S. Department of Transportation asking about the acceptability of a union Project Labor Agreement for the California High-Speed Rail? Why did she help the effort to give unions a monopoly on this project?
  3. Is there a connection between the quest of the Fresno Works Consortium for a Project Labor Agreement and the quest of the Fresno Works Consortium to get Fresno selected as the site for the California High-Speed Rail Heavy Maintenance Facility?
  4. Why is there so little overt involvement of the California High-Speed Rail Authority Board of Directors and staff in the development of the hiring policy? Was this to avoid an apparent conflict of interest involving the board member who was head of the state’s construction unions? Or are there reasons not yet known that might be troubling to the public if revealed?
  5. To what extent did Fresno-based California High-Speed Rail Authority board member Tom Richards know about the union Project Labor Agreement?
  6. Who tipped off the Fresno Works Consortium that it should adopt the Project Labor Agreement and associated Construction Careers policy implemented at the Los Angeles County Metropolitan Transportation Authority?
  7. Does this process build public confidence in California High-Speed Rail?
Background and Sources:

Project Labor Agreement for California High-Speed Rail

Analysis of the Phony Community Benefits and Other Provisions in the Union Project Labor Agreement for the First Segment of California’s High-Speed Rail - www.LaborIssuesSolutions.com – January 11, 2013

Community Benefits Policy for California High-Speed Rail

Project Labor Agreement for Los Angeles County Metropolitan Transportation Authority

Construction Careers Policy for Los Angeles County Metropolitan Transportation Authority

Fresno Regional Workforce Investment Board (FRWIB) Board of Directors

Fresno Works Consortium

Fresno Mayor Ashley Swearengin

January 6, 2012 Federal Railroad Administration Letter – California High-Speed Rail – Targeted Hiring

March 21, 2012 Fresno Works Consortium Revised Targeted Hiring Program for California High-Speed Rail

June 19, 2012 Letter from Fresno Mayor Ashley Swearengin to Federal Railroad Administration – Inquiry on Applying Project Labor Agreement to California High-Speed Rail

June 29, 2012 Letter from Federal Railroad Administration to Fresno Mayor Ashley Swearengin on Targeted Hiring Program for California High-Speed Rail

August 8, 2012 Legal Analysis for Fresno Regional Workforce Investment Board of California High-Speed Rail Targeted Hiring Program

Transcript of November 14, 2012 Board Meeting for California High-Speed Rail Authority – Hints of Project Labor Agreement

January 17, 2013 Letter from Associated Builders and Contractors (ABC) National Office to Federal Railroad Administration on California High-Speed Rail Project Labor Agreement

March 26, 2012 Letter from Federal Railroad Administration to Associated Builders and Contractors on California High-Speed Rail Project Labor Agreement

April 11, 2013 Letter from Fresno Regional Workforce Investment Board – Public Documents – Process Leading to Project Labor Agreement on California High-Speed Rail

California High-Speed Rail Authority Keeps Union Deal Out of Public Forums - my article in www.FlashReport.org – February 10, 2013

www.CaliforniaHighSpeedRailScam.com – your centralized source for key information about the debacle that is the California High-Speed Passenger Train for the 21st Century.

Category: Construction Labor Issues, Project Labor Agreements / Tags: , , , , , , , , , , , , , , , , , , , , , ,

Antics and Resolutions at the 2013 California Democratic Party Convention – More Monitoring Is Needed

April 20, 2013 / / No comments
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My article Union Influence in the California Democratic Party’s 2013 Convention Resolutions was posted on www.UnionWatch.org on April 16, 2013. It includes a link to the actual resolutions approved by the California Democratic Party and my annotated version of the resolutions approved by the California Democratic Party, as well as my analysis of some of the union-related resolutions.

Here are some of my other thoughts about party conventions in California in 2013.

Controlling the Image: Democrats Did Good Job, Republicans Flopped

I sent this Tweet on April 13, at the end of the first day of the 2013 California Democratic Party convention:

Kevin DaytonKevin Dayton ‏@DaytonPubPolicy13 Apr

Not 1 report of inflammatory lit or remarks at California Democratic Convention. Truly they’ve evolved to a higher plane foretold in sci-fi.

Why do the California Republican Party’s semi-annual conventions constantly generate embarrassing and unflattering images to the public, while the California Democratic Party manages to minimize reports about their own oddball characters and inflammatory statements?

  • Typical answer from the Left: Republicans are old, white, backwards, and ignorant, while Democrats are diverse, progressive, educated, and enlightened.
  • Typical answer from the Right: the news media is biased against Republicans.
  • My answer: Democrats do a much better job in researching, identifying, and exposing the flaws of Republican leaders and activists than Republicans do with Democrats.

One obvious comparison is the use of social media (web sites, Facebook, Twitter, etc.)

Using Twitter: Democrats Did Good Job, Republicans Flopped

Again, from my tweets during the California Democratic Convention:

Tons of critical tweets during #CAGOP convention; ZERO during CA Dem Convention. Anyone? I just tweeted against Social Impact Bond proposal.

Kevin DaytonKevin Dayton ‏@DaytonPubPolicy13 Apr

Does it matter? Stunning contrast: substantial Twitter activity from California Democratic Convention versus minimal from #CAGOP convention.

Who will analyze? Positive & negative Tweets: 3/1-3 #CAGOP convention compared to positive & negative Tweets: 4/12-14 #cadem2013 convention.

I haven’t seen an analysis produced yet by anyone, but one person claimed 3400 tweets related to the California Democratic Party convention.

steveolsonsteveolson ‏@steveolson14 Apr

there’ve been nearly 3400 tweets on #cadem13 & #cadem2013 but only 7 vines. (2 were mine) #nerdery #p2

I’m not sure there were 100 tweets in total related to the 2013 California Republican Party convention, even including the negative and oblique perspectives. It didn’t even have a standard hashtag. (Five tweets were sent using #CAGOP2013, one with #CAGOP13.)

It appears I was the only person tweeting from a critical perspective during the California Democratic Party convention. I started after I saw that California State Senate President pro Tem Darrell Steinberg and others were tweeting positive things about Steinberg’s bizarre proposed scheme for corporations to buy “Social Impact Bonds” from educational districts (Senate Bill 594), even though at the same convention there was a resolution condemning corporate involvement in school reform.

After that, I checked every once in a while for tweeted news media reports and for tweeted announcements from Democrat leaders and activities. I counter-tweeted an opposite or skeptical viewpoint when appropriate. I was alone in doing this.

Maybe there will be an organized effort next year to use Twitter to question the tax increases, new government programs, new regulations, and other intrusions on economic and personal freedom that are promoted and celebrated at the California Democratic Convention. Letting these bad ideas circulate without a response makes these ideas credible to the public.

Category: Changing How California is Governed, Reform of California Republican Party / Tags: , , , , , ,

California High-Speed Rail’s Approval Rating Should Be 30% – My Article in www.FlashReport.org

April 19, 2013 / / No comments
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In an April 12, 2013 post in www.FlashReport.org, I ask this question:

Why does a significant minority of Californians STILL support California High-Speed Rail after all of its financial and management fiascoes?

I conclude that some Californians are unaware of what’s happening with this project. I encourage readers to provide the uninformed citizen with ten reasons not to support it. See the reasons at California High-Speed Rail’s Approval Rating Should Be 30%.

For more detailed information about California High-Speed Rail, see www.CaliforniaHighSpeedRailScam.com and follow @CaHSR_scam on Twitter.

Category: Government Fiscal Issues, Public Debt - State of California / Tags: , , ,

Orange County Project Labor Agreements: One Advances, One Gets Jammed – My Article in www.UnionWatch.org

April 10, 2013 / / No comments
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Within three days last week, elected boards of two of the four community college districts in Orange County, California voted on proposals to require their construction contractors to sign Project Labor Agreements with construction trade unions as a condition of work.

I write about the April 1, 2013 vote results at Rancho Santiago Community College District and the April 3, 2013 vote results at Coast Community College District in my April 9, 2013 www.UnionWatch.org article Orange County Project Labor Agreements: One Advances, One Gets Jammed. The article also includes a complete list of news media coverage.

Here is my additional writing on these Project Labor Agreement threats:

Pugnacious Defense of Economic Freedom in Orange County Can Inspire California’s Free-Market Activists - www.FlashReport.org - March 11, 2012

How Union-Only Project Labor Agreements Rip Off the Taxpayers - www.NewSantaAna.com - April 3, 2013

Category: Construction Labor Issues, Project Labor Agreements / Tags: , , , , , , ,

Reported Project Labor Agreements for Proposed California Tribal Casinos

April 8, 2013 / / No comments
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Below is a list of reported Project Labor Agreements or union-only construction agreements for tribal casinos in California. These were reported by the tribes, unions, or news media. The list is probably not complete. Tribal casinos are private projects, and I have only one of the alleged Project Labor Agreements in my possession.

When California voters considered Proposition 5 in November 1998 concerning “state-tribal agreements governing Indian gaming,” campaign literature from the State Building and Construction Trades Council of California asserted that casinos would be built with union workers.

Of the seven projects listed below, only the Graton Rancheria Resort and Casino has moved forward with construction; it is under construction now for a planned November 2013 opening. Casino opponents claim that the casino management, contractors, and union leaders are ignoring the Project Labor Agreement. (See Local Union Members Laid Off Promised Casino Construction Jobs as Out-of-Area Labor Force Takes Over – www.StoptheCasino101.com – January 15, 2013 and see a brief reference to such rumors in Union Jobs Get Boost from Casino Rising in Rohnert Park – Santa Rosa Press-Democrat – December 4, 2012.)

1. Federated Indians of Graton Rancheria - Graton Rancheria Resort and Casino (Rohnert Park in Sonoma County) – 2002

2. Gabrielino-Tongva Tribe (aka San Gabriel Band of Mission Indians) - Tongva Entertainment Facility (Compton in Los Angeles County) – 2004 [not built]

3. Lytton Band of Pomo Indians – Casino San Pablo (San Pablo in Contra Costa County) – 2004 [not built]

4. Buena Vista Rancheria of Me-Wuk Indians – Buena Vista Casino (Ione in Amador County) – 2005 [not built]

5. North Fork Rancheria of Mono Indians - North Fork Rancheria Resort (North Fork in Madera County) – 2005 [not built]

6. Estom Yumeka Maidu Tribe of the Enterprise Rancheria - Enterprise Rancheria Casino and Hotel Resort Project Labor Agreement (Marysville in Yuba County) – 2009 [not built]

7. Guidiville Band of Pomo Indians - Point Molate Resort and Casino (Richmond in Contra Costa County) – 2009 [not built]

Category: Construction Labor Issues, Project Labor Agreements / Tags: , , , , , , , , ,

Stockton’s Path to Bankruptcy and the Secretive $1 Million Neil Diamond Show

April 6, 2013 / / 2 comments
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UPDATE (April 20, 2013): ”What an honor it is to be here today.” – Neil Diamond showed class and support for Boston and all Americans by asking to sing “Sweet Caroline” at Fenway Park today.

Boston Red SoxBoston Red Sox ‏@RedSox6h

The one and only Neil Diamond flew to Boston today to lead us in “Sweet Caroline” #BostonStrong http://instagram.com/p/YVtjSgM6Dq/ 

Retweeted 2764 times

UPDATE: The notorious $1 million Neil Diamond show continues to haunt the City of Stockton, as shown in this April 8, 2013 Stockton Record article It Started in a Hush-Hush Meeting: Quiet Gathering Over Tax Leads to Public Snipefest:

Sgt. Kathryn Nance, president of the Stockton Police Officers’ Association…also fears pressure the tax may put on Stockton’s fragile general fund, impacting the city’s bankruptcy fight. On the flip side, a general tax could fall into unsafe hands a decade from now under the next generation of leaders, she said.

“We could be paying Neil Diamond to play again,” Nance said. “Who knows? We can’t have that.”

There is a danger. In ten years Neil Diamond will be 82 and may still be performing, as he is now.

In a March 12, 2006 Los Angeles Times article “Barry, Going the Distance,” Barry Manilow described his career:

“I’m good, not great,” he said as the plane streaked toward the state line. “I know the difference. Sinatra is great. Judy [Garland] is great. Tony Bennett is great. I’m pretty good. But you can go far on pretty good if you work hard and pay attention.”

Manilow’s description of his own work (which does NOT include composing “I Write the Songs” – a member of the Beach Boys wrote it) could be applied to the songwriting of Neil Diamond. “Solitary Man” and “Girl, You’ll Be a Woman Soon” were good enough to be better cover songs for other performers. But by the time I was old enough to pay attention to popular music, schlock such as “America” and “Heartlight” played on my parents’ AM radios.

Stockton - nine exits on Highway 99 going south.

Stockton – nine exits on Highway 99 going south.

Nevertheless, Stockton city officials proudly announced on December 2, 2005 that Neil Diamond would be the featured performer when the city inaugurated its brand new arena on January 15, 2006.

Stockton had been planning its ballyhooed new arena for four years. (See a City of Stockton PowerPoint presentation based on a February 19, 2004 consultant’s report analyzing the proposal and financing of the arena - the report itself is not available on the city’s web site.) I’ve found reported costs of $60 million, $64 million, $65 million, and $68 million for this project.

Rumors still circulate in Stockton about the motivations for this selection. I was puzzled about it and a little embarrassed for Stockton, as I had not heard about Neil Diamond since UB40 remade his song “Red Red Wine” in 1988.

The selection of Neil Diamond in a city with a white non-Hispanic population of under 25% was also mystifying. Apparently other people besides me weren’t excited about paying a lot of money to hear a “song she brang to me” and other lyrics from Neil Diamond identified in Dave Barry’s Book of Bad Songs as some of the worst of all time. Comments from Stockton residents in the December 2, 2005 Stockton Record article announcing Neil Diamond’s visit hinted at the trouble to come: “she’s not a fan and most likely won’t go to the concert” and “It would be nice if they had something to appeal to all age groups.”

A December 20, 2005 Stockton Record article (Neil Diamond Fans Paying a Higher Price to See Him in Stockton) was another ominous warning that ticket sales that had started on December 17 might not be going well. Yet all official reports continued to proclaim an expected sell-out for the concert.

By the beginning of January 2006, it became clear to the public that something was going horribly wrong. A January 4, 2006 Stockton Record article Stockton Secretive Over Cost of Show revealed that the city did not intend to comply with the newspaper’s request under the authority of the California Public Records Act to obtain the contract cost for Neil Diamond’s appearance.

The Howard Jarvis Taxpayers Association was also on the city’s case about the concert. It was preparing to sue the City of Stockton because it was using city utility fees to fund the construction of the arena and an adjacent baseball park, in violation of Proposition 218. (The Howard Jarvis Taxpayers Association won the case [Howard Jarvis Taxpayers Association et al. v. City of Stockton], but the city’s bankruptcy in 2012 may prevent city taxpayers from getting back the inappropriately obtained $31.5 million.)

Stockton City Hall

Stockton City Hall

At its January 10, 2006 meeting, the city council – apparently in closed session – determined that the cost had to be provided to the public. And on January 11, the Stockton Record reported on the $1 Million Man: Stockton Taxpayers Pay Premium for Neil Diamond Concert. (I’ve been unable to obtain the actual contract, so it’s unclear how the city revealed the cost.)

All that the public heard at the January 10, 2006 Stockton City Council meeting was a comment from Vice Mayor Gary Giovanetti celebrating Stockton for now being able to attract performers such as Neil Diamond:

During that week, some tickets were discounted. Vice Mayor Giovanetti said after the concert that “he could imagine that some concertgoers who had paid the original price might be angry over the two-tiered ticket pricing.” Giovanetti’s support for the Neil Diamond concert rightfully became a major issue in his 2008 campaign for San Joaquin County Board of Supervisors, as shown by this union campaign mailer. He came in fourth out of five candidates.

Stockton Arena - Site of $1 Million Neil Diamond Concert in 2006

Stockton Arena – Site of $1 Million Neil Diamond Concert in 2006

The concert on January 15, 2006 went off without a hitch, except for the $396,000 estimated loss. See the Stockton Record article “It’s Show Time - Neil Diamond Breaks in the Stage at Stockton Arena.”

The January 18, 2006 Stockton Record article City Manager Fired reported the next step, an immediate termination of the city manager:

The City Council, in an unexpected closed meeting, voted 6-1 to oust the manager, finding his spending money without council approval and his contentious relationship with the media, among other things, were unbearable, Mayor Ed Chavez said. Vice Mayor Gary Giovanetti dissented…

Council members – a majority of whom supported the manager publicly until recently – routinely granted Lewis widespread discretion to spend money. But they distanced themselves from him after forcing him to disclose how much the city paid singer Neil Diamond to perform Stockton Arena’s first concert Sunday. City Hall, after initially pledging the show would make money, acknowledged late last week that the concert likely would cost taxpayers $396,650 and make nothing for the Stockton Parks and Recreation Foundation, the charity billed as the beneficiary of the event.

A common theme in this whole matter was a lack of openness and transparency from city council members and staff about decisions and costs. And the city remained consistent in this behavior in its subsequent management of the new arena.

From the beginning, the arena lost money for the City of Stockton. (You know that a publicly-owned entertainment facility is a money loser when the local newspaper has to obtain financial records through a request under the California Public Records Request.) The Stockton Record reported the losses in its February 16, 2007 article Stockton Arena Experiencing Growing Pains:

The arena lost $2.1 million in 2007, about $600,000 less than in 2006, according to documents provided by the city in response to a California Public Records Act request.

The loss was greater than the City Council once anticipated – even in its first year, the arena was expected to lose no more than about $1.7 million – but was less than the city resigned itself to lose after the facility posted a $2.7 million loss in 2006. The city had expected to lose $2.3 million last year.

Financial losses continued annually and reached a total of $7 million by the end of 2009, as reported in the February 16, 2010 Stockton Record article Still Seeing Red: Stockton Arena Posts $2 Million Loss for 2009. In January 2011, the City of Stockton paid $1.2 million to get out of its arena management contract and adopt a new contract. Losses continued and became one of many factors leading to the city’s bankruptcy.

Poster on vacant building in Downtown Stockton.

Poster on vacant building in Downtown Stockton.

Meanwhile, a lot of people were incredulous when Neil Diamond claimed in 2007 that his song “Sweet Caroline” was about Caroline Kennedy, who was four years old when the song was written. (In August 2012, “Sweet Caroline” was taken off Penn State’s song playlist at Beaver Stadium because of the lyric “touching me, touching you.”)

Note: you are welcome to take the photos in this article for personal or commercial use.

Category: Government Fiscal Issues, Public Debt - Local / Tags: , , , , , , , , , , , , , ,

Reality of Crushing Public Debt from Bond Sales Eclipses the Fantasy Vision of California High-Speed Rail

March 30, 2013 / / One comment
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Originally presented to Californians as a $45 billion statewide high-speed rail system to transport people between major metropolitan areas, the “Safe, Reliable California High-Speed Passenger Train for the 21st Century” has been distorted by the state’s leftist ideologues and corporate and union special interests into the California High Speed Rail Scam.

My article California High-Speed Rail: One-Way Ticket to Debt in www.FlashReport.org on March 25, 2013 described my experience speaking at the March 18, 2013 meetings of the California High-Speed Rail Authority and the California High-Speed Passenger Train Finance Committee. I asked pivotal questions about how the State of California planned to sell the $9.95 billion in bonds authorized by 52.7% of California voters through Proposition 1A in the November 2008 election.

My questions were reported throughout the state in a March 18, 2013 Associated Press article Board Seeks $8.6 Billion in California High-Speed Rail Bonds:

Several speakers challenged the timing of the authorization during the board’s public comment period, asking why the board was acting on the bulk of the bonds approved by voters now when it could be years before the money is needed. Kevin Dayton, a public policy consultant from Roseville, questioned whether the board was rushing to beat the outcome of the lawsuits attempting to block the railroad.

“That’s the obvious question that comes up,” Dayton said. “I think it’s reasonable to assume they’re very worried about it.”

TV viewers also saw (and read) my comments in Nannette Miranda’s story Board Seeks $8.6 Billion in California High-Speed Rail Bonds for various local news programs of ABC affiliates throughout the state:

“What’s your current estimate of the total amount of debt that will be assessed including the interest on this?” high speed rail opponent Kevin Dayton asked the board.

During media interviews after the board meeting, California High-Speed Rail Authority chairman Dan Richard claimed the cost of interest payments for the entire project could eventually reach $700 million per year. He also claimed that interest on the first $2.61 billion in bond sales authorized by Senate Bill 1029 (2012) would cost $175 million per year over 30 years.

As stated in this article California Bullet Train Clears One Obstacle; Land, Legalities Remain, “It all depends on Wall Street, but for estimation purposes, the state is using a 6.5 percent interest rate for 35 years.” This was the rate cited by Chairman Richard during the media interviews. According to California Municipal Bond Advisor, yields for State of California 30-year general obligation bonds were 4.80% on September 20, 2012 and 5.03% on October 19, 2012.

My Questions Reveal One Surprise: Truckers Will Pay for the Bond Interest

California High-Speed Rail Authority chairman Dan Richard responded to my comments by declaring that my questions should be addressed to the California State Treasurer, Bill Lockyer. But later in the meeting, he said that the state would pay interest on the bonds NOT from the general fund, but from vehicle weight fees paid by truckers.

Fox News 11 in Los Angeles reported on this revelation with its March 28 story Money Shell Game? Potholes or High Speed Rail. I was interviewed for the story, and an excerpt from the interview appears in the segment. I am also quoted in the associated article:

Those are fees paid when trucks are too heavy. And that money is supposed to go to highway construction projects. This is typical of the entire way the rail authority operates. Things change. You don’t know what’s going on, there’s very little transparency and openness. Essentially, all they’re doing is taking the money, transferring it into another fund and pretending the general fund is not paying for it. In reality, California taxpayers are still paying the interest.

Assembly Bill 105 (2011) authorized vehicle weight fees to pay interest on bonds for transportation projects. The March 13, 2013 California Legislative Analyst’s Office Overview of Transportation Funding explains how vehicle weight fees will pay interest in 2013-14 on transportation-related bonds:

In addition to ongoing revenues from fuel taxes, the state has issued general obligation bonds in order to pay for transportation projects. The largest such bond measure was Proposition 1B (2006), which authorized the state to sell $20 billion in bonds to finance transportation projects. The Governor’s budget estimates that the debt-service costs on Proposition 1B and other outstanding transportation bonds will be about $1.1 billion in 2013-14.

Vehicle weight fees are used to pay the debt-service cost on transportation bonds rather than the General Fund. For 2013-14, the Governor’s budget uses all $946 million in weight fees to benefit the General Fund. Of this amount, $907 million is to pay debt service and $39 million is loaned to the General Fund and set aside for future debt service.

In addition, the Governor’s budget proposes to use miscellaneous revenues in the SHA to pay transportation debt service on an ongoing basis.

I asked this question in a tweet during the California High-Speed Rail Authority meeting on March 18 after the Authority chairman talked about paying interest from vehicle weight fees:

Does California Trucking Association @Caltrux know truck weight fees to pay interest Prop 1A bond sales for high-speed rail? $10 billion.

This response came on March 28 after the Fox News 11 story aired:

@DaytonPubPolicy we are well aware that the weight fees we pay to maintain roads now go to non-road projects. Trucks pay their share.

(They certainly do, and more – trucks are a favorite target of the Left in California.)

What Were the 2008 Cost Estimates for Interest Paid on the Bonds?

The official legislative analysis of Proposition 1A provided voters with an estimated cost of selling bonds with a 30-year maturity:

If the bonds are sold at an average interest rate of 5 percent, and assuming a repayment period of 30 years, the General Fund cost would be about $19.4 billion to pay off both principal ($9.95 billion) and interest ($9.5 billion). The average repayment for principal and interest would be about $647 million per year.

A July 7, 2008 Senate Appropriations Committee analysis estimated the cost of selling bonds with a 40-year maturity:

AB 3034 would extend the maximum allowable bond maturity term from 30 years to 40 years. Assuming the same interest and inflation rates, this bill could result in an increase in total General Fund costs of $3.78 billion if the term of the bonds is extended to 40 years (to a total cost of $23.2 billion). Annual debt service payments would be $580 million for 40 years.

According to Section 5.02(b)(vii) of the resolutions passed on March 18, the Treasurer is now authorized to borrow the $8.6 billion by selling bonds with a maturity period of 35 years

So does the Governor’s proposed 2013-14 budget adequately account for interest to be paid after the state borrows money for California High-Speed Rail through bond sales? It depends on how the California State Treasurer intends to structure and market them.

Category: Government Fiscal Issues, Public Debt - State of California, Taxes and Fees / Tags: , , , , , , , , , , , , , , , , , , ,

Latest Scheme for Career Technical Education: School Districts Borrowing Money with “Social Impact Bonds” – Unions on Board

March 23, 2013 / / No comments
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On March 19, 2013, California State Senate Pro Tem Darrell Steinberg led a press conference to promote Senate Bill 594 (California Career Pathways Investment, also known as the High School Dropout Reduction & Workforce Development Bond Act of 2013) meant to encourage partnerships among school districts, corporations, and unions for career technical education in California K-12 schools and community college districts.

Senator Steinberg also promoted this bill on March 22 at Redevelopment Forum: Revitalizing our Neighborhoods in a Post-Redevelopment Era, hosted by the San Diego Foundation. SB 894 is apparently a serious initiative.

It establishes an unfunded mandate for K-12 school districts and community college districts to create a new pool of money called a ”Career Pathways Investment Trust Fund.” These districts can borrow money for the program by selling ”Social Impact Bonds” (a concept promoted by the “progressive” Center for American Progress) for which investors can earn ”Career Pathways Investment Credits.” This will be overseen by a new state government board called the “California Career Pathways Investment Committee.” The appointments of the Assembly Speaker and Senate Rules Committee to this committee will likely be union officials.

Senate Bill 594 exemplifies the foolishness of governance in the California State Legislature:

  • bizarre and incomprehensible financing schemes
  • borrowing money (with interest) without consideration of cumulative debt service
  • unfunded state mandates
  • forcing the state’s local governments to create and manage another pool of money
  • inviting more corruption at local governments
  • creating another state government board
  • tax breaks to corporations for ambiguous purposes
  • intrusion of corporations and unions into the public school system
  • brilliant suggestions that freed-up funds from a few cuts in the state budget can be transferred to pay for it
  • lack of concrete evidence that there is a problem (in fact, testimony during the press conference suggested the big problem is a lack of jobs, not lack of training)
  • government solutions for something that could be handled by the free market if there was real demand

When Governor Schwarzenegger promoted his Career Technical Education initiative in 2007, he considered it worthy enough to propose paying for it out of the general fund through the annual state budget. His efforts were not deemed worthy of mention at the SB 594 press conference.

Here’s my March 20, 2013 article in www.UnionWatch.org about the press conference and Senate Bill 594: Businesses Can Make a “Social Impact Bond” with Unions - www.UnionWatch.org – March 20, 2013.

The Sacramento Bee posted an article on March 21, 2013 about Senate Bill 594, Steinberg Pushes Privately Funded Career Training Program, which quotes me as a skeptic:

But skeptics wonder how the career readiness programs would be funded.

“They need to stop coming up with new funds and new schemes paid for by borrowed money,” said Kevin Dayton, head of the consulting firm called Labor Issues Solutions. “New things like this are just a big distraction. If they want to do career education they should fund it in the general budget.”

I posted these comments under the article:

Do you want your K-12 school district or community college district to establish a “Career Pathways Investment Trust Fund” and oversee yet another pool of money? It’s a mandate.

Let’s create another state government board: the “California Career Pathways Investment Committee!” The appointments of the Assembly Speaker and Senate Pro Tem will certainly be union officials.

Do you want your K-12 school district or community college district to sell “Social Impact Bonds?” Who will pay the interest on these bonds? Who will make the money on the interest?

“Career Pathways Investment Credits” – how about just focusing on an efficient, responsible government with a simple tax structure?

As another comment indicated, “the State has funding for apprentices (it contributes about 5% of the cost to train an apprentice – the rest coming from employers)…”

I also mentioned this in my comment:

One is led to believe Senate Bill 594 is needed because California businesses can’t find skilled workers. But notice the nurses’ association representative says the problem is that trained nurses can’t find jobs in California and therefore need to move out-of-state. And is there really a shortage of skilled construction workers in California right now? Are there no longer 20%-30% unemployment rates in the building trades? Or is SB 594 for training disadvantaged union workers to build the California High-Speed Rail under the Project Labor Agreement?

Los Angeles Times columnist George Skelton wrote positively about the general concept of encouraging career technical education (he avoids the politically correct phrase and simply calls it “shop”), but his column (Reinvigorating ‘Career Tech’ a Worthy Goal - Los Angeles Times – March 20, 2013) also reveals that the supporters don’t understanding the funding scheme:

Steinberg’s legislation is a bit convoluted — at least the financing part — and needs much work…Steinberg is suggesting several financing methods, including tax credits and foundation grants. But the main money source involves bonds. The state would sell “workforce development bonds” — say, for $1 million a crack — to businesses in areas “with the greatest potential for high-wage job growth.” The bond revenue would pay for the career-tech programs. The bond-buyers would earn a rate of return based on a program’s results, as judged by some committee. “I’m not sure I completely understand it,” Zaremberg [Allan Zaremberg, President & CEO of the California Chamber of Commerce] told me. “Why don’t we just fund this out of existing resources? Is this not a priority? … like Zaremberg, he [Jack Stewart, President of the California Manufacturers & Technology Association] doesn’t quite grasp the bond idea.

Dan Walters is another California commentator who has written much over many years about the need for stronger career technical education programs in California public schools. (For example, see Technical Education Fight Rages – Sacramento Bee – November 19, 2007)  I look forward to reading his perspectives on Senate Bill 594.

Category: Apprenticeship and Training, Career Technical Education, Construction Labor Issues, Government Fiscal Issues, Labor Issues in Academia, Public Debt - Local, Public Debt - State of California / Tags: , , , , , , , , , , , , , , , , , , ,

2004 Revisited in 2013: Hartnell Community College District in Salinas Once Again Considers a Requirement for Contractors to Sign a Union Project Labor Agreement

March 18, 2013 / / No comments
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The Hartnell Community College District Board of Trustees in Salinas discusses the imposition of a government-mandated Project Labor Agreement with unions at its March 19, 2013 meeting.

The Hartnell Community College District Board of Trustees in Salinas discusses the imposition of a government-mandated Project Labor Agreement with unions at its March 19, 2013 meeting.

UPDATE (March 20, 2013): At their March 19, 2013 meeting, the Hartnell Community College District board of trustees was sharply-divided on the proposal to require contractors to sign a Project Labor Agreement with unions to work on the new science building. After public comments from union officials in support and contractors and contractor representatives in opposition, the board deliberated but took no action. The next meeting is scheduled for April 2, 2013.

News Coverage:

Conflict Surfaces Over Hartnell Project - Salinas Californian – March 19, 2013
 

Hartnell President Willard Lewallen acknowledged Tuesday that “this seems to be a very polarized issue”…Conflicts arose in the past over Hartnell’s use of PLAs on other publicly funded projects, such as the school library and parking garage, both of which were completed in 2006. (See below for a detailed history.) 

The March 19, 2013 agenda for the board of the Hartnell Community College District in Salinas includes the following item:

VI. CONSTRUCTION OF SCIENCE BUILDING
B. PROJECT LABOR AGREEMENT
The board will receive a presentation on project labor agreements and give direction to the administration.

Here’s a report from a local political activist:

Hartnell is getting ready to build a new science building. The Unions have presented (quietly and sneakily) a proposal that the board adopt a Project Labor Agreement for this project. Some (not sure if it is four or not = majority) of the board members are automatically in favor of this proposal. This is about a $25 million dollar project. The board is taking this up on Tuesday at 5:00 at the Hartnell CALL building location. This will be a workshop style presentation…

This is the second time that Hartnell Community College District has been entangled in a Project Labor Agreement. In 2004, the construction-manager-at-risk for the college’s Measure H construction program negotiated a Project Labor Agreement with union leaders WITHOUT the consent or even the knowledge of the board of trustees and some college administrators.

Associated Builders and Contractors of California and other groups called for the Project Labor Agreement to be considered in a public forum so taxpayers, businesses, and students could express their viewpoints and so that representatives of the people (the board of trustees) could vote on it. In the end, the Project Labor Agreement was rescinded by the elected board.

Detailed History of the Implementation and Rescinding of a Project Labor Agreement at Hartnell Community College District in 2004

On November 5, 2002, 65.7% of Monterey County voters approved Measure H, which authorized Hartnell Community College District in Salinas to borrow $131 million for campus expansion by selling bonds to investors.

At the August 17, 2004 meeting in Stockton for the board of trustees of the San Joaquin-Delta Community College District, a union official claimed that Hartnell Community College District was requiring its contractors to sign a Project Labor Agreement to work on projects funded by its bond measure. Another speaker announced that the Project Labor Agreement was negotiated between the San Francisco-based construction manager DPR and the unions. He claimed he was at the college board meeting when the Project Labor Agreement was approved.

I did not know about this, so I obtained (via fax) the minutes of the college board meetings from May 4, June 1, June 29, July 13, and August 3. There was no indication that the board approved a Project Labor Agreement as an independent action item. I made two phone inquiries on two consecutive work days with DPR’s project executive for the construction program funded by Measure H. I also left a message for the college’s Vice President of Administrative Services, who was overseeing construction. The phone calls weren’t returned.

Officials at the Salinas Valley Builders Exchange (now part of the Central Coast Builders Association) also became suspicious, because DPR never provided the organization with plans and specifications for the parking garage and learning resource center. Not surprisingly, college board members were expressing concern at their meetings that not enough local companies were getting work. Low bidders listed for the parking garage and learning resource center were mainly big union companies that work throughout the Bay Area.

On August 27, 2004, representatives of the Salinas Valley Builders Exchange and the Golden Gate Chapter of Associated Builders and Contractors (now the Northern California Chapter of Associated Builders and Contractors) attended a monthly meeting on Measure H construction. They surprised college officials there by asking some tough questions: Is there a Project Labor Agreement? When did the board of trustees vote on the Project Labor Agreement? Can you provide a copy of the pre-qualification questionnaire, bid specifications, and wrap up insurance program? What are you doing to encourage local contractors to bid on these projects?

One official at the meeting said the college were considering a Project Labor Agreement, but another admitted the college already had a Project Labor Agreement in place. Business organizations began alerting their members to what was apparently happening. Meanwhile, I submitted a public records request to the president of the college to get the truth.

On August 30, 2004, I received a call from a representative of the San Francisco-based project manager TMI (Townsend Management, Inc.) who told me that DPR was indeed negotiating a Project Labor Agreement with unions for Phase I of the Measure H construction, which consisted of the parking garage and the learning resource center. Two unions were holding out: the Painters and the Plasterers, and the Project Labor Agreement would not in effect until those unions signed on. He claimed that bid specifications indicated that contractors would have to sign a Project Labor Agreement with the unions. He said that an official at Hartnell Community College told DPR it was acceptable to negotiate a Project Labor Agreement with unions. He did not know which official authorized it, nor if the board of trustees was ever informed about it. Finally, he told me I would need to get a copy of the bid specifications, the pre-qualification questionnaire, and the Project Labor Agreement directly from DPR. However, he faxed a copy of the list of local contractors DPR claimed to contact about bidding.

Eric Christen of the Coalition for Fair Employment in Construction became involved and reported this: “[The TMI representative] is very nervous and tried to tell me that I needed to contact the college to get the list of contractors who were supposedly contacted. I told him that it was his job and he said he would call me back.”

Contractors began emailing this message to the district’s board of trustees and top administrators:

I have learned that your construction manager DPR has negotiated a Project Labor Agreement with unions for Phase I of Measure H construction at Hartnell Community College. Many local contractors will not sign a Project Labor Agreement with unions for construction, which is perhaps one reason why most of the contractors that have won bids so far have come from the Bay Area.

When did the board of trustees approve this Project Labor Agreement? I’m sure you would have had a parade of local contractors and business leaders at your meeting to oppose the Project Labor Agreement if it was listed on your agenda as an action item. Who at the college authorized this Project Labor Agreement?

Also, I do not believe my company was ever contacted by DPR about bidding on Measure H projects. Is there a list available of local contractors contacted by DPR about working on this construction? What kind of contact did DPR have with the Salinas Valley Builders Exchange?

This is not a good way to start your Measure H construction program. I recommend you put an item on the September 7 agenda to investigate what happened with this Project Labor Agreement, why it is being used, and why so few local contractors are working on construction paid for with our tax dollars.

On August 31, 2004, I received a phone call from the president of Hartnell College. He told me there was a negotiated Project Labor Agreement between the DPR and the unions, the board of trustees did NOT vote to authorize it, and DPR was apparently authorized to negotiate the Project Labor Agreement by the college’s Vice President for Administrative Services. He scheduled a meeting on September 7 for him, the college vice president, TMI personnel, and DPR personnel to discuss the Project Labor Agreement and local bidding with a representative of the Salinas Valley Builders Exchange and myself. The college president also told me that he was sending a memo to the college board of trustees asking them to hold off on any action regarding these issues until after our meeting was held on September 7.

Additionally, a member of the board of trustees called me to report that the college president told him that he knew nothing about the Project Labor Agreement until I had sent him my public records request asking for it.

The meeting on September 7, 2004 was attended by three college administrators and several officials from DPR and the project management firm TMI. Besides myself, the meeting included representatives of Associated General Contractors (AGC) and Salinas Valley Builders Exchange.

An official with DPR launched the meeting by declaring that all unions had now signed the Project Labor Agreement, and it was in effect for remaining construction on three major building projects. I told them I was angry about how the college and its construction management firm held us off while scurrying to get all the unions signed onto the Project Labor Agreement. I then declared that the Project Labor Agreement had been implemented without approval from the elected board of trustees and that Associated Builders and Contractors would ask the trustees to revoke it.

In seven years with Associated Builders and Contractors in Northern California, I had fought more than 50 Project Labor Agreement proposals. This was the first time I had seen a Project Labor Agreement imposed on a public works project without the elected board voting on negotiations and the final document and without allowing the public to express their views on such a controversial proposal.

How seedy was this case? Associated Builders and Contractors exposed under-the-table negotiations, at which time the unions quickly signed the Project Labor Agreement for implementation without authorization from the elected board of trustees. When Associated Builders and Contractors and other business associations objected, unions and the college administration argued that the elected board did not need to approve the Project Labor Agreement. It was the right of the construction management firm to do it.

For the reminder of the day, I notified local contractors, local news media, and the Salinas Valley Chamber of Commerce about the Project Labor Agreement. A prominent local union contractor that had prequalified for the next Measure H project and had even obtained a contract with DPR pointed out that a Project Labor Agreement was NOT mentioned in the bid specifications. The company was concerned that the prequalification process would have to be redone once a Project Labor Agreement was in place.

On that evening of September 7, 2004, I spoke, along with a contractor and an Associated General Contractors representative, during public comment at the monthly board meeting against the Project Labor Agreement. I handed out a copy of the Project Labor Agreement to the trustees, thus proving to the board that the rumors were true.

The board of trustees at the time was Mark Dierolf (President), Aaron Johnson, John Martinez, Berna Maya, Brad Rice, Steve McShane, and Bill Freeman. The board president (a member of the Libertarian Party) contended that the board handled policy, not management, and therefore the Project Labor Agreement did not need authorization from the board. This was the same position now held by the college president.

DPR officials and union leaders defended the Project Labor Agreement, and they also brought two lawyers to argue that the trustees did not legally have to approve the Project Labor Agreement because the trustees had given all decision-making authority to the construction manager-at-risk.

The public became aware of what was going on. I talked about the Project Labor Agreement during a morning talk radio show on KION 1460 AM in Salinas for about 20 minutes on September 20, 2004, and the Salinas Californian published its first story about the Project Labor Agreement on September 23, 2004.

On October 5, 2004, the board of the Hartnell Community College District scheduled formal presentations for and against the Project Labor Agreement secretly negotiated between its construction manager-at-risk DPR and construction unions. A union attorney made a presentation in support and I made a presentation in opposition. Representatives of Associated General Contractors, the Salinas Valley Chamber of Commerce, and the Salinas Valley Builders Exchange urged the board to vote on the Project Labor Agreement and rescind it. The story was reported in the October 6, 2004 Salinas Californian.

On October 11, 2004, several opponents of the Project Labor Agreement attended the college’s bond oversight committee meeting with the goal of convincing the committee to take a position against it. The committee turned out to be a joke: the meeting did not have a quorum (reportedly bond oversight committee meetings for Hartnell College never had a quorum) and the committee did not fulfill the requirements for membership under the California Education Code. (An educational district cannot have a bond measure approved under the Proposition 39 voter threshold of 55% unless it follows certain laws regarding the oversight committee.)

Meanwhile, a vote was scheduled for the board’s October 15, 2004 meeting on a resolution: “Endorsement of the Concept for a Project Labor Agreement Contract by Its Construction Manager, DPR, for Construction of the Project Up to and Including the CALL Building.” But on the day before the meeting, the resolution was removed from the board agenda.

On October 15, 2004, I filed another public records request with Hartnell College to obtain a copy of the construction manager-at-risk contract between DPR and the college. It turned out that the DPR contract approved on May 1 by the board of trustees only applied to the learning resource center and the parking garage. It was unclear to me how the board of trustees could approve a Project Labor Agreement between DPR and the unions for the CALL Building when DPR did not even have the contract to be construction manager-at-risk for this project. In addition, the Project Labor Agreement provided to me by the college only covered the learning resource center and the parking garage.

More board discussion of the Project Labor Agreement occurred at the November 2, 2004 meeting.

After four straight board meetings where the Project Labor Agreement was addressed or on the agenda (including two specially scheduled meetings), the board of trustees finally considered a resolution at their November 29, 2004 meeting to endorse a Project Labor Agreement imposed by DPR for construction of projects up to and including the CALL Building. This resolution meant that the Project Labor Agreement would be required on five small remaining contracts totaling $3 million on the $65 million parking garage and library, and it would also apply to all contracts on the large CALL Building yet to be constructed.

On a 4-3 vote, the board of trustees bucked the unions and administration and amended the resolution to eliminate the Project Labor Agreement requirement for the CALL Building. Then they passed the amended resolution on a 6-1 vote. (The threat of contract delays caused by litigation from DPR or the unions was a factor in the final vote.) There was also direction from trustees to the administration that the elected board must approve future Project Labor Agreement proposals.

While there was regrettably a Project Labor Agreement on five small contracts totaling $3 million, opponents of the Project Labor Agreement stopped the under-the-table deal from applying to future projects. We also made an important statement that unions and construction-managers-at-risk will be made accountable to elected boards if they ignore democracy and secretly negotiate Project Labor Agreements on publicly-funded construction.

Category: California School Construction, Construction Labor Issues, Project Labor Agreements / Tags: , , , , , , , , , , ,

Message to California High-Speed Rail Authority and California High-Speed Passenger Train Finance Committee: No 40-Year Bonds, No Capital Appreciation Bonds, What If You Lose Lawsuit?

March 15, 2013 / / One comment
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March 18, 2013 is a big day for the People of California: the Day of Debt.

There will be two votes at two meetings three hours apart to authorize the sale of the bulk of the $9.95 billion Prop 1A bonds. (Several hundred million were approved in 2010 and 2012, FYI.)

At 11:00, the California High-Speed Rail Authority will meet to authorize borrowing $8.6 billion through the sale of bonds authorized by 52.7% of California voters in November 2008 as Proposition 1A. Here is the meeting agenda:

http://www.cahighspeedrail.ca.gov/WorkArea/DownloadAsset.aspx?id=2147483707

At 2:00, the California High-Speed Passenger Train Finance Committee will meet at the same location to authorize borrowing $8.6 billion through the sale of bonds authorized by 52.7% of California voters in November 2008 as Proposition 1A. Here is the meeting agenda:

http://www.treasurer.ca.gov/financial/2013/20130318/1a.pdf

At these meetings, I will ask for amendments to the resolutions to prohibit the sale of 40-year bonds (this maturity term is allowed in statute, by the way, see California Streets and Highways Code Section 2704.11(b)) and prohibit the sale of Capital Appreciation Bonds. I’m also going to ask about what happens if the state sells the bonds and then the Authority loses the lawsuit alleging its failure to conform to the terms of Proposition 1A.

I also sent this message electronically to the California High-Speed Rail Authority (boardmembers@hsr.ca.gov) and the California High-Speed Passenger Train Finance Committee:

Dear California High-Speed Rail Authority leadership:

At your Monday, March 18, 2013 meeting, you will consider a resolution as part of the procedure to direct the state to borrow $8.6 billion for high-speed rail by selling bonds authorized under Proposition 1A (2008) to investors:

4. Consideration of request to the High-Speed Passenger Train Finance Committee to approve resolutions under the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, authorizing the issuance of bonds and commercial paper notes as follows: Resolution IX, authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the principal amount not to exceed $8,599,715,000. ($8.6 billion)

I am requesting you to add language to these resolutions that does the following:

1. Prohibit these bonds from being sold with 40-year terms of maturity.

2. Prohibit these bonds from being sold as Capital Appreciation Bonds.

Assembly Bill 3034, enacted in 2008, authorized sale of the Proposition 1A bonds as 40-year bonds. The bill analysis for the July 7, 2008 Senate Appropriations Committee indicated that the maturity extension from a 30-year to a 40-year term would increase interest payments and increase the overall cost at an estimated amount of $3,777,000,000 ($3.7 billion) in 2008 dollars, assuming 5 percent interest and 3 percent inflation. (Source: http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_3001-3050/ab_3034_cfa_20080707_114445_sen_comm.html)

These estimates were produced at a time when the official cost was estimated at $45 billion. Now the figure of $68 billion is being officially cited. Why add another $3.7 billion to the cost?

Also, in the Official Voter Information Guide for the November 2008 election, the Legislative Analyst’s Office stated this about the cost of the proposed Proposition 1A bond sales authorized under the Safe, Reliable High-Speed Passenger Train Bond Act:

The costs of these bonds would depend on interest rates in effect at the time they are sold and the time period over which they are repaid. While the measure allows for bonds to be issued with a repayment period of up to 40 years, the state’s current practice is to issue bonds with a repayment period of up to 30 years. If the bonds are sold at an average interest rate of 5 percent, and assuming a repayment period of 30 years, the General Fund cost would be about $19.4 billion to pay off both principal ($9.95 billion) and interest ($9.5 billion). The average repayment for principal and interest would be about $647 million per year. (Source: http://voterguide.sos.ca.gov/past/2008/general/analysis/prop1a-analysis.htm)

The voter guide leaves the voter to assume that the state would maintain the current practice of selling 30-year bonds. It does not even mention the cost of 40-year bonds!

Regarding the Capital Appreciation Bonds, you are surely aware of the controversy surrounding California’s school districts selling these bonds for construction rather than the traditional type of general obligation bond (current interest bond). Please don’t hide the cost of this project by delaying repayment to investors with costly bonds that accumulate compound interest.

This project will assess huge debt burdens on future generations of Californians. Please avoid schemes that hide the cost from this generation.

Finally, at your March 18, 2013 meeting, please address what would happen if the state sells the Proposition 1A bonds and then the California High-Speed Rail Authority loses the court case John Tos v. California High Speed Rail Authority (Case No: 34-2011-00113919) (aka “the Kings County lawsuit”) regarding conformity to the provisions of Proposition 1A. A hearing in this case is scheduled for May 31, 2013 in Sacramento County Superior Court.

Kevin Dayton
President and CEO
Labor Issues Solutions, LLC
www.laborissuessolutions.com

 

We’ll see if the California High-Speed Rail Authority and the California High-Speed Passenger Train Finance Committee can explain their plans for borrowing money through bond sales in a simple, transparent manner at their meetings in Sacramento on Monday, March 18, 2013.

Category: Government Fiscal Issues, Public Debt - State of California / Tags: , , , , ,
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