Tag Archive for California Trucking Association

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.

Looks Like CEQA Reform Talks Are Underway…Good Luck People.

Senator Michael Rubio (D-Bakersfield) was the California state legislator who was poised to introduce the gut-and-amend Sustainable Environmental Protection Act to amend the California Environmental Quality Act (CEQA) in the waning days of the 2012 legislative session. (See my articles A First Crack at Analyzing the Proposed CEQA Reform: “The Sustainable Environmental Protection Act” of 2012 and CEQA Reform is Over for This California Legislative Session: Sustainable Environmental Protection Act May Return in 2013.)

Senator Rubio is now preparing a CEQA reform proposal for 2013. He tweeted this message on December 17, 2012:

Michael J. Rubio ‏@michaelrubio

Just leaving a mtg w/ 30 CEO’s and fellow legislators where we discussed modernizing CEQA. Thank you @CarlGuardino and SunPower for hosting!

Carl Guardino (@CarlGuardino) is the CEO of the Silicon Valley Leadership Group, the group that has been leading the charge at the California state legislature for CEQA reform. SunPower is a solar energy company that has sought approval to build power plants in the San Joaquin Valley. SunPower has signed Project Labor Agreements with unions to build some of these solar power plants.

After hearing about this meeting, someone sent me a cynical email:

Never happen. Too good a thing for union bosses to give up.

Considering that in the last legislative session, Senator Rubio introduced and pushed the construction union-backed Senate Bill 922 and Senate Bill 829 to nullify or discourage Fair and Open Competition policies prohibiting local governments from requiring Project Labor Agreements, I agree it is quite unlikely that Senator Rubio will proposed any legislation that hinders the ability of construction unions to use CEQA as a tool in extorting Project Labor Agreements from developers. (See It Didn’t Take the First Time: Governor Brown Signs Union Bill #2 to Discourage Voters and City Councils from Banning Project Labor Agreements.)

Who else cared about this meeting? Senator Rubio’s tweet was retweeted or favorited by two journalists and also by the following people:

@ArnoHarris – CEO of Recurrent Energy, one of North America’s leading solar project developers, Board Chair of #SEIA and Board Member of #AEE.

Recurrent Energy is another solar energy company that has sought approval to build power plants in the San Joaquin Valley. Recurrent Energy has signed Project Labor Agreements with unions. California Unions for Reliable Energy (CURE) has targeted proposed projects of Recurrent Energy.

@chrisshimoda – Manager of Environmental Policy at the California Trucking Association.

This reminds me that the Teamsters Joint Council 7 union filed a CEQA lawsuit in 2010 court to stop construction of Madison Dearborn’s VWR International Laboratory Equipment Distribution Facility in Visalia. They claimed to be concerned that trucks would execerbate global waming, but what they really wanted was a collective bargaining agreement for the truckers.

@joe_lacava – land use consultant with the firm Avetterra in La Jolla (in San Diego)

Marcela Escobar-Eck@SanDiegoLandUse – keeping San Diego informed of breaking trends in Land Use, Community Development Issues and Regulatory trends…. and a few other things. A land use consultant with Atlantis Group in San Diego.

Robert Cruickshank@cruickshank – “Welcome back to the fight. This time I know our side will win.” Left Coast

Cruickshank does a lot of diverse policy and political consulting for the Left in a model similar to what I try to do for the Right, but he seems to be more successful at it, perhaps because his side is winning now.

@MrJacobMejiaPublic Affairs representative for the Pechanga Indian Reservation near Temecula. The tribe owns and operates the Pechanga Resort & Casino and directly employs more than 5,000 people.

In November, this tribe recently came to an agreement with Granite Construction Company to resolve a seven-year dispute over a proposed gravel quarry. CEQA was central in that fight. See Pechanga to Buy Quarry SiteSan Diego Union-Tribune – November 15, 2012.