Tag Archive for Dan Richard

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

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 15278-15282Michael 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.

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

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, 2013 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.

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

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.

The Plot Develops to Require Contractors to Sign a Project Labor Agreement with Unions to Build California’s High Speed Rail

UPDATE: News Coverage of the Project Labor Agreement for California High-Speed Rail

‘Needy’ Workers Will Get Jobs on High-Speed Rail – Fresno Bee – December 7, 2012 (reveals that all five prequalified bidders for the first segment of the California High-Speed Rail project have signed a Project Labor Agreement with unions)

High-Speed Rail in Bed with Unionswww.CalWatchdog.com – December 7, 2012 (provides a thorough background on union officials seeking a monopoly on construction of the California High-Speed Rail project and cites the Dayton Public Policy Institute as a source)


The agenda for today’s (December 6, 2012) meeting of the California High Speed Rail Authority included an item to approve a policy concerning “enhanced community benefits” for construction of the high speed rail system. Construction industry observers believe the High Speed Rail Authority will use this policy as justification for contractors to sign a Project Labor Agreement with unions for construction of the rail system (including related structures such as stations).

The policy, approved unanimously by the board this morning, is here: California High Speed Rail Authority – Community Benefits Policy for Construction – December 6, 2012. The approved resolution to approve the policy is here: California High Speed Rail Authority – Community Benefits Policy for Construction – Resolution – December 6, 2012.

This “community benefits” policy seems innocuous on the surface. It is supposed to enhance employment opportunities for economically disadvantaged and low-income workers, veterans, youth, unemployed, homeless, single parents, people with criminal records, etc. and “ensure that California benefits as much as possible,” according to staff. During discussion of this policy at today’s meeting, staff emphasized that it would help with the hiring of veterans and the adoption of pre-apprenticeship programs. (These are customary union talking points in support of Project Labor Agreements).

Staff also reported at the meeting that the policy would be implemented in various ways with “different stakeholders.” I’ve long predicted that the politically powerful stakeholder known as the State Building and Construction Trades Council of California would use a scheme like this to get a monopoly on High Speed Rail construction through a Project Labor Agreement.

The High Speed Rail Authority will be awarding construction contracts using a “design-build” bidding procedure, which means it can use somewhat subjective criteria, in addition to price, as the basis for selecting its construction contractors. This approach to implementing a Project Labor Agreement will allow the board and union officials to avoid controversial and high-profile votes for the High Speed Rail Authority to negotiate and implement a Project Labor Agreement directly with union officials. In addition, the public will remain generally unaware of the Project Labor Agreement, because reporters will have difficulty researching and explaining this complicated procedure.

The High Speed Rail Authority will also avoid accountability for the Project Labor Agreement. It can portray the agreement as a private and voluntary business decision that originates internally with the design-build contractor. There are recent precedents for this approach on large government projects in California.

As I reported last month, Clark Construction has signed Project Labor Agreements for the San Diego Convention Center Expansion Phase III and the new Governor George Deukmejian Courthouse in Long Beach. The City of San Diego and the California Administrative Office of the Courts even claim that the Project Labor Agreements are not a matter of public record, and Clark Construction declines to provide them to the public.

Staff told the board that prospective contractors will indicate in their bids how they will fulfill the policy. There will be a monitoring program handled through the High Speed Rail Authority’s auditing committee, and contractors will be penalized for failing to comply.

Marvin Dean calls for fairness and opportunities for all at California High Speed Rail Authority Board Meeting - December 6, 2012.

Marvin Dean calls for fairness and opportunities for all at California High Speed Rail Authority Board Meeting – December 6, 2012.

Eric Christen of the Coalition for Fair Employment in Construction spoke at the meeting today during public comment against a Project Labor Agreement, along with Nicole Goehring of the Northern California Chapter of Associated Builders and Contractors and Richard Markuson, representing the Western Electrical Contractors Association (WECA), the Plumbing-Heating-Cooling Contractors Association of California (PHCC), and the Air Conditioning Trade Association (ACTA). In addition, Marvin Dean of the Kern Minority Contractors Association spoke during public comment and asked that both union and non-union contractors have the opportunity to work on the High Speed Rail.

Chairman Dan Richard (a former board member of the Bay Area Rapid Transit District – BART) concluded discussion of the proposed policy by remarking on the public comments against a Project Labor Agreement. Richard declared that while no decision has been made about how this policy will be implemented, he attended a meeting yesterday with the minority community, which expressed very strongly that a Project Labor Agreement was the way to achieve the policy objectives. He also claimed that Project Labor Agreements are effective in improving the efficiency of project delivery, reducing the number of conflicts, and providing a way for minority contractors to get work.

Mr. Richard also took a moment after public comment to recognize two important people in the audience: Bob Balgenorth, outgoing head of the State Building and Construction Trades Council of California and former High Speed Rail Authority board member, and Robbie Hunter, the head of the Los Angeles-Orange County Building and Construction Trades Council, who is the incoming head of the State Building and Construction Trades Council of California.

This Project Labor Agreement Scheme Has Long Been Expected…

See California’s Top Construction Union Officials Love the State’s $100 Billion High-Speed Rail Project, my January 12, 2011 blog post on www.TheTruthaboutPLAs.com that provides a history of union involvement with the High Speed Rail.

I’m not the only observer who sees what’s going on. Here’s the text of a notice sent this morning by the Coalition for Fair Employment in Construction:

PLA ALERT!: CA High Speed Rail Authority to Vote on Union-Only Project Labor Agreement TODAY!

Today at 10:00am at City Hall in Sacramento, the California High Speed Rail Authority will be doing something we have warned about ever since this ill conceived, deceitfully presented plan to create a slower and more expensive way to travel verses flying was concocted: Have this 19th Century choo-choo train built with union-only labor by way of a Project Labor Agreement or “PLA”.  That should help keep this projects runaway costs down.

Because of CFEC’s pointed questioning of Authority staff and board members at previous meetings regarding a PLA, they have been forced to state there would’t be a PLA.  So what they have done now is give this PLA the euphemism “Community Benefit Agreement.”

You can watch the proceedings live by going here.

CFEC and others have been warning taxpayers, owners, and workers for years about the fact that the California High Speed Rail Authority is a prime target for a union-only Project Labor Agreement (PLA).

With Senate Bill 1029 having passed the State is set to spend $5.85 billion to acquire land and build the “initial operating segment” of the California High-Speed Rail. This month the California High-Speed Rail Authority is scheduled to award several contracts for this first segment through an alternative bidding procedure called design-build. Five entities that are conglomerates of major engineering and heavy construction infrastructure corporations have qualified to bid under this procedure with “a goal” to have 30 percent of the work go to small businesses.

Instead of awarding contracts to design the project and then awarding contracts to the lowest responsible bidder to build it, the California High-Speed Rail Authority is authorized to award contracts to qualified corporate entities that combine project design AND construction work.

The California High-Speed Rail Authority will select the design-build entities using a somewhat subjective list of “best value criteria” that could result in design-build entities winning contracts without being the lowest price. The State Public Works Board, which will oversee the awarding of the project, and the California Department of Finance, will approve the criteria to award the design-build contract.

As required by SB 1029, by October 1, 2012, prior to awarding a contract to start construction of the first segment of the California High-Speed Rail, and prior to advertising additional contracts to be awarded in September 2013 and October 2013, the California High-Speed Rail Authority will provide a comprehensive staff management report that includes a list of “proposed steps and procedures that will be employed to ensure adequate oversight and management of contractors involved in the construction contracts funded in this act.” The California High-Speed Rail Authority will also need to submit a report with the same content requirements before additional contracts are awarded in March 2017.

With the eight-member Board of Directors of the California High-Speed Rail Authority including or having included union bosses like Bob Balgenorth, recent head of the State Building and Construction Trades Council of California, this was pretty easy to see coming.  But we will continue to expose it to California taxpayers and fight it.

At today’s meeting CFEC’s Eric Christen, among others, will be asking tough questions about the CBA. The meeting will be held at 10:00am at Sacramento City Hall located at 915 I Street in downtown Sacramento.

Contact Eric Christen at (858) 431-6337 for more information.

News Media Coverage:

Approved Policy Targets Disadvantaged People for High-Speed Rail Jobs – Fresno Bee – December 6, 2012