California’s Legislators Lack Private Sector Experience

Back in the days of adding machines and manual ledgers, final election results in California were usually done by midnight on election day. Sometimes there would be a few precincts counting ballots into the wee hours of the morning, and you wouldn’t know a result till the next day. Fast forward to 2018, and the age of global interconnectedness, with instantaneous algorithmic management of everything from power grids to Facebook feeds, yet here in California the complete results of the 2018 midterms won’t be available until December 7th. Go figure.

While California’s ability to count ballots runs contrary to the otherwise dazzling march of progress, by now we have enough information to offer a pretty good look at California’s state legislature for 2019-20. The Democratic supermajority has been reestablished. With 28 confirmed seats in the Senate, and 56 in the Assembly, the Democrats hold 70 percent of the seats in both houses. Even if Republicans achieved the unlikely capture of all four Assembly seats that remain too close to call, nothing would change. Overall, so far there are 84 Democratic legislators, and only 32 Republicans.

How Many State Legislators Have Private Sector Experience?

Three election cycles ago, a California Policy Center analysis compared the biographies of California’s state legislators, asking how Republicans and Democrats differ in terms of what they did before they became politicians. To repeat this exercise, 2018 election results were obtained from the California Secretary of States “District Races” page for the Senate and the Assembly. For incumbents who were reelected, biographies were obtained from the Senate and Assembly websites. For newcomers, a trip to Wikipedia, Ballotpedia, or their campaign websites was sufficient.

When one considers the professional background of California’s politicians, a clear pattern emerges. And while compiling this data requires some degree of subjective interpretation, no reasonable interpretation would fail to reveal dramatic differences in experience between Democrats and Republicans.

California State Legislature, 2019-2020 Membership
Business vs. Government Background

As seen on the above table, in California’s 2019-20 state senate, 79 percent of the Democrats have no private sector experience. On the other hand, 58 percent of the Republicans had no public sector experience prior to running for elected office, although most of them ran for local offices prior to running for state senate. The same story applies with California’s state assembly, where 73 percent of the Democrats have no private sector experience, and 55% of the Republicans have at least some private sector experience.

Before continuing, it’s interesting from this perspective to compare this 2019-20 state legislature to the 2013-2014 state legislature. Back then the proportions were generally the same, but there were almost no Democrats – only five in both houses – compared to 14 of them today. Conversely, back in 2013 there were 25 Republicans who had an exclusively business background prior to holding elected office, compared to only 15 today. Over the same period, the number of Republicans with only public sector experience prior to holding office has more than doubled, from four back in 2013 to 11 today. Overall there are now even fewer Republicans – down from a paltry 36/120 six years ago to a vanishing 32/120 today.

California State Legislature, 2013-2014 Membership
Business vs. Government Background

What might explain this tepid drift to the center, at least in terms of more Republican state legislators with public sector experience, and more Democratic state legislators with private sector experience?

One explanation could be the open primary, which makes it less likely an extreme candidate will survive the general election. Another could be the decision made around 2010 by California’s beleaguered business community to start supporting pro-business Democrats. Finally, as Republicans in California fade further into irrelevance, the alliances and allegiances formed in public sector work offer Republican candidates with that background a better chance of electoral success.

Public Sector Unions Pick Public Sector Careerists to Run for Public Office

Back in the 1950’s and 1960’s there were plenty of pro-business Democrats, so called “Pat Brown” Democrats, who worked with Gov. Brown Sr. to build freeways, bridges, power plants, and the finest system of water storage and conveyance the world had ever seen. Those same Democrats cooperated with Republican Governor Reagan a few years later to build the finest public university system in the world. The opportunities available to California’s middle class were unrivaled. What happened to these Democrats?

The problems began in the 1970’s when public sector unions were allowed to form. Steadily acquiring political power through automatic dues deductions, they used taxpayer’s money to lobby for the interests of government workers instead of the interests of the people they serve. Increasingly, business-backed candidates started losing races to candidates backed by government unions. Almost invariably, unions backed Democratic candidates. The more powerful these union-backed candidates became, the more laws they enacted to further consolidate their power. Today government union rule in California is absolute.

The tragedy of unionized government is not merely that they have taken over California’s state legislature and nearly every city, county and school board in the state in order to pursue their membership’s interest above the public interest. It is that most elected officials no longer understand business. These union anointed elected officials come from government agencies, union bureaucracies, nonprofits, activism, and public education. Most of California’s legislators have never had to balance a budget, make a payroll, or convince a customer to voluntarily purchase a product so they could earn a precarious profit in a competitive market.

California’s lawmakers, to the extent they are elected with the support of public sector unions and to the extent they lack business experience, not only face a conflict of interests every time they have to deal with a reform that threatens the power of the unions. They are also less qualified to understand the financial and operational realities that apply in any  efficiently ran, productive organization, large or small. They are in over their heads.

To exemplify this, consider how California’s democrats are crowing over a $6 billion budget surplus. Compare that $6 billion surplus to the nearly half-trillion in bond debt that California’s state and local governments have piled up, including another $23 billion on Nov. 6th. Compare that $6 billion surplus to, by most reasonable estimates, the more than half-trillion in unfunded retirement benefits that are going to blow sky high in the next market downturn.

Hint. A trillion is a thousand billion.

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California’s Voters Approve New Taxes and Reject Tax Repeal

Although hundreds of election results remain to be decided across California, thanks to millions of vote-by-mail ballots still being counted, we can already project with reasonable accuracy the total amount voters approved in new taxes and borrowing. At the local level, new taxes nearly always are approved by voters. In 2016, out of 224 local tax proposals, voters approved 71 percent, adding $2.9 billion in new taxes. As shown on the table, if a similar percentage of November 6, 2018 local tax measures are approved by voters, California’s taxpayers will be providing local governments with another $1.6 billion per year.

Total Estimated New Annual Taxes Approved by California Voters
November 2018, $=Millions

While these new local taxes add billions – over time, tens of billions – of additional burden on California’s already beleaguered taxpayers, state ballot measures often offer even more significant tax increases. This November, voters turned down an opportunity, via Prop. 6, to eliminate an estimated five billion in new gasoline taxes. In all, California’s voters enabled another $6.1 billion in annual taxes, in a state that already has among the highest overall tax rates in the U.S.

California’s Total New Debt

The impact of new taxes is immediate. Rates go up, revenues increase, and government budgets swell. Compared to taxes, the impact of bonds is greater in the long run, but harder to recognize. In reality, bonds are just deferred taxes. From a financial perspective, it would almost be preferable to use taxes to fund many projects that currently rely on borrowing, because at least taxpayers would only be paying principal, and not interest. For example, if you assume 3 percent inflation, the present value of the payments on a $1.0 billion bond (5% interest, 30 year term) is $1.3 billion. That is, in real dollars, using a typical example, bond financing costs taxpayers 30 percent more than paying for services using operating funds. But the seduction of borrowing is hard to resist: big money today, while mortgaging tomorrow.

Total Estimated New Borrowing (incl. Annual Payments) Approved by California Voters
November 2018, $=Millions

As it is, this November, voters mortgaged a lot of tomorrows. And as always, the big money in the case of new bonds was almost all local. In 2016, of the 193 new local bond measures, voters approved a whopping 94 percent of them. This added $32 billion in new debt, equating to an estimated $2.1 billion in new annual principal and interest payments. As shown on the table, if a similar percentage of November 6, 2018 local bond measures are approved by voters, California’s taxpayers will owe another $15.5 billion. The principal and interest payments on this new debt will cost taxpayers another $1.0 billion per year.

At the statewide level, despite rejecting Prop. 1, the water bond, voters approved three new major state bond measures totaling $6.5 billion. Adding that to the likely $15.5 billion in local bonds, Californians this November will have added $23.0 billion in debt, costing $1.5 billion per year in annual payments of principal and interest.

California’s Total Accumulated Debt

Who was it that said, “a billion here, and a billion there, and pretty soon we’re talking about serious money”? That would describe California’s total state and local government debt. When you look at what constitutes California’s total debt, accumulated over decades, it puts the relentless drive for higher taxes into context. The next table summarizes California’s total debt, as estimated by California Policy Center researchers Marc Joffe and William Fletcher in a 2017 study entitled “California’s Total State and Local Debt Totals $1.3 Trillion.”

Added in column two of this table is the estimated annual payments on this debt. As can be seen, the conventional debt – bonds, loans, and other contractual debt – paid back over 30 years at an interest rate of 5 percent, is costing California’s taxpayers $27.7 billion per year. Add to that, of course, annual payments of another $1.5 billion on new debt approved by voters earlier this week. But it’s in the unfunded liabilities for public employee retirement benefits where truly serious money burdens California’s taxpayers.

California’s Total Estimated State and Local Government Debt
2018, $=Billions

The story of how California’s taxpayers ended up on the hook for unfunded retirement pension liabilities easily in excess of a half-trillion dollars defies glib explanations. Anyone wanting to dig deep into California’s public sector pensions is encouraged to read the California Policy Center primer “Resources for Pension Reformers” and click on the many links for in-depth analyses of this complex topic. Simply put, an unfunded pension liability is the difference between the assets being managed by a pension fund at any time, and the present value of all promised future payments to retirees and active workers that have been earned up to that same point in time.

Over nearly three decades, some critical mistakes were made in California’s public employee pension fund management. Pension benefits were increased, again and again, by politicians eager to curry favor with public employee unions, but didn’t want to blow their current year budgets by granting salary concessions. Instead, they sweetened future pension benefits which did not incur significant immediate costs. Then the required annual costs to fund pensions were underestimated. Rates of return on invested pension fund assets were overestimated. Life expectancies were underestimated. And as the assets of California’s state and local pension systems began to fall well behind the value of their liabilities, creative accounting was employed to understate the amounts needed to reduce that debt.

Because of all these unknowns, there is a wide range of estimates of California’s total public sector pension debt. At the least it totals over a quarter trillion; at most, about triple that amount. This much is reasonably certain: if there is an economic downturn, and if pension benefits aren’t further reduced, it is likely that payments on pension debt will need to be in excess of $50 billion per year. In all, absent reforms and an epic continuation of the bull market, Californians are likely to be paying over $90 billion per year to service their state and local government debt. More than half of that will be to pay down unfunded pension liabilities.

The Public Sector’s Insatiable Desire for More Money

It is impossible to view California’s relentless pattern of tax increases apart from its public sector pension crisis, which is just beginning. Currently, the estimated annual payments on unfunded pension liabilities in California is estimated at $17 billion. Imagine the impact of that amount soaring to over $50 billion. And, of course, the taxpayer cost for pensions isn’t just to pay down the unfunded liability. The “normal cost,” that amount each year that has to be paid to fund the future pension benefits just earned in that year, is also rising. Based on modest adjustments to the assumptions governing projections of pension solvency, and based on official announcements already made by California’s largest pension fund, CalPERS, the normal costs for pension benefits plus the unfunded payments for pensions are estimated to rise from $31 billion in 2017 to $59 billion by 2024. No tax increase, anywhere so far, not even all of them added up, are sufficient to cover this shortfall.

If analysts find California’s looming pension funding crisis alarming, public employees who receive these pensions find it terrifying. That’s why, when a new local tax or bond measure is on the ballot, local governments use taxpayer funds to engage in “information campaigns” aimed at their voters that come very close to being political advocacy. Sometimes they cross that line. After such activities in support of a local sales tax increase in Los Angeles County, the California Fair Political Practices Commission found cause to charge the county, as well as the individual members of the Board of Supervisors, with 15 counts of campaign finance violations.

Californians had a chance to apply vigorous pressure to its elected officials by passing Prop. 6, which would have repealed the gasoline tax. That repeal would have cost state and local governments $5.0 billion per year. Why wouldn’t Californians seize an opportunity to lower what are the highest gas taxes in the U.S.? The answer reveals more about how far California’s public sector is willing to go in its desperate need for more revenue.

Earlier today and in the aftermath of the Nov. 6th election, Carl DeMaio, a former member of the San Diego City Council, who launched the Prop. 6 campaign, described the tactics of the opposition. California’s attorney general is responsible for reviewing ballot initiatives and approving the final wording of these initiatives as they appear on the ballot. According to DeMaio, rather than objectively describing the intent of Prop. 6, which was to repeal the new gasoline tax, the attorney general’s office used focus group research to compile a title and summary for the initiative that was worded in a manner more likely to get people to vote no. But it didn’t end there.

Not only is California’s attorney general alleged to have doctored the language of Prop. 6 to draw down voter support, California’s public sector unions spent millions on an opposition campaign. Overall, the opposition to Prop. 6 spent $50 million on their campaign, compared to only $2.6 million spent by its proponents.

Even in California, $50 million buys a lot of airtime. Lost on California voters, sadly, was the irony of a veteran firefighter who made $324,000 in 2017, serving as the main television spokesperson opposed to Prop. 6 which would have lowered taxes. California’s public sector unions collect and spend at least $800 million per year. They can, quite literally, spend as much as they need to spend to defeat candidates and propositions that do not favor their own interests.

Why don’t California’s voters and policymakers overcome high taxes and an unaffordable cost of living? Partly it’s due to the grip that public sector unions have on politicians, which prevents the state legislature from ever getting spending under control. Partly it’s the lack of any effective opposition, since the supposedly tax averse Republican party in California is a hollow shell, lacking on-the-ground infrastructure, strong candidates, or a shared and compelling political agenda. Saddest of all, it’s because the media in California is entirely unwilling to make the connection between public sector compensation, the power of public sector unions, and the punitive taxes and living costs that are its consequences.

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How to NOT Solve California’s Housing Crisis

There are obvious reasons the median home price in California is $544,900, whereas in the United States it is only $220,100. In California, demand exceeds supply. And supply is constrained because of unwarranted environmental laws such as SB 375 that have made it nearly impossible to build housing outside the “urban service boundary.” These laws have made the value of land inside existing urban areas artificially expensive. Very expensive. Other overreaching environmentalist laws such as CEQA have made it nearly impossible to build housing anywhere.

Then there are the government fees attendant to construction, along with the ubiquitous and lengthy permitting delays caused by myriad, indifferent bureaucracies with overlapping and often conflicting requirements. There is a separate fee and a separate permit seemingly for everything: planning, building, impact, schools, parks, transportation, capital improvement, housing, etc. Government fees per home in California often are well over $100,000; in the City of Fremont in 2017, they totaled nearly $160,000 on the $850,000 median value of a single family home.

This is a shakedown. It has caused a politically engineered housing shortage in California that enriches billionaire property developers that have the financial strength to withstand decades of delays and millions in fees, because they reap the extreme profits when they sell these homes at inflated prices. Also enriched are the public servants whose pay and pensions depend on all taxes – definitely including property taxes – and all fees being as stratospheric as humanly possible. Public employee pension funds also benefit from housing scarcity, as their real estate investment valuations soar into bubbleland.

When litigious environmentalists, insatiable public sector unions, and an elitist handful of left-wing oligarchs control a state, artificial scarcity is the consequence. Welcome to California.

REJECTED POLICY – REAL SOLUTIONS TO THE HOUSING CRISIS

To decisively solve California’s housing shortage, some of California’s more than 25,000 square miles of rangeland, currently occupied by cattle, would have to be approved for suburban development. California is only 5 percent urbanized, although if you listen to environmentalists, you might get the impression it only had 5 percent remaining open space. You could fit ten million people onto half acre lots in four person households and you would only use up 2,000 square miles – that’s only 1.1 percent of California’s land area. Why aren’t massive new housing developments spreading out along California’s 101, I-5 and 99 corridors?

Real solutions to California’s housing crisis would also require increasing the capacity of California’s water infrastructure and transportation infrastructure. In both cases, investment would be cheaper if this expansion was done on raw land. Real solutions to California’s housing crisis would mean rescinding the mandatory rooftop solar requirement on new home construction, and instead recommissioning and expanding the nuclear power complexes at Diablo Canyon and San Onofre, and embracing development of additional nuclear power and natural gas power plants. In a less confiscatory regulatory environment, the private sector could fund all of this while lowering costs to consumers.

Reforming environmental restrictions and unleashing private sector development of homes and infrastructure is the fastest, easiest way for home prices in California to return to near the national average. In turn, that would solve nearly every problem associated with a shortage of housing. California’s families would be able to afford to buy homes, or pay affordable rent. California’s employers, most definitely including government agencies, would be able to attract workers at prices that would not break their profits or their budgets, which would benefit the economy. And far fewer people would be rendered homeless.

APPROVED POLICY – COMPLETELY USELESS “SOLUTIONS” TO THE HOUSING CRISIS

As long as environmentalist litigators, public sector unions, and left-wing oligarchs run California, none of these real solutions will ever happen. What are they proposing instead?

To summarize, all politically viable housing solutions in California involve densification, i.e., cramming ten million more people into existing urban areas, and, predictably, more taxes, bonds, fees, subsidies and government programs.

Rent Control, Government Subsidized “Affordable Housing” and Government Funded Homeless Shelters

California is the epicenter of America’s “progressive” power structure. In California, in addition to controlling the public bureaucracy through their unions, progressive ideologues control the press, social media, search media, K-12 public education, academia, most corporations, the entertainment industry, and virtually all serious political campaign spending. As a result, California’s progressives can use ballot initiatives to con a brainwashed populace into approving their latest housing policy agenda. The common thread? Government control; government funding. For example, on the ballot this November are propositions to permit cities and counties to enact rent control, issue state bonds totaling $4 billion to build “affordable housing,” and use state tax revenues to build more government-run homeless shelters. It is possible all three of these measures will pass.

Already in progress is the implementation of California state laws that took effect Jan. 1 – AB 2299 and SB 1069 – which amend existing state laws governing “accessory dwelling units.” These new laws force California’s counties to streamline the process whereby homeowners can construct additional homes in their backyards. Does that sound good? Not so fast.

Doubling Suburban Population Densities ala Government Subsidized “Accessory Dwelling Units”

There’s a reason people work hard for decades to pay off their mortgages so they can own homes in spacious suburbs. It’s because they value the leafy, semi-rural atmosphere of an uncrowded suburban neighborhood. AB 2299 and SB 1069 will effectively double the housing density in these neighborhoods, violating the expectations of everyone living there who relied on the zoning rules that were in effect when they bought their homes.

If zoning laws in existing suburbs were relaxed at the same time as zoning restrictions were lifted on the urban periphery, the impact of these new rules might be mitigated. But every policy California’s elite and enlightened geniuses come up with is designed to maintain “urban containment.” And to add to the disruption these laws will inflict on quiet neighborhoods, California’s cities – starting with Los Angeles – are providing subsidies to homeowners to build these homes, then encouraging them to rent the properties to low income families wherein the government will pay the rent via Section 8 vouchers.

This is an expensive, utopian scheme that oozes with compassion but is fraught with problems. Doubling the density of suburbs is already problematic. But doubling the density of suburbs by subsidizing the settlement of people on government assistance into every backyard, invites social friction. It is forcible integration of people who, for whatever reason, require government assistance to support themselves, into communities of taxpayers, who, by and large, are working extra hard to pay the mortgages on overpriced homes in order to provide their children with safe neighborhoods.

As usual, when it comes to enlightening the public, neither the media, nor the urban planning experts in academia, ever offer much beyond pro-densification propaganda. A glowing New York Times article, entitled “A Novel Solution for the Homeless: House Them in Backyards,” raves about this entire scheme, already being tried in Los Angeles, Portland and Seattle. The article includes a quote from Vinit Mukhija, a professor of urban planning at UCLA, who says: “The value [of subsidized accessory dwelling units] goes beyond that, though, because it is finally somewhat of a departure of the purity of single-family housing in the region. It’s a good step to change what people here really consider a dogma of private housing.”

The “dogma of private housing.” That epitomizes California’s elitist hostility towards ordinary families owning detached homes with spacious yards.

The incentives created by such a project are perverse. California’s elite has made homes unaffordable. Then, to the people who sacrificed so much to buy these homes despite their punitively high prices, the government offers them subsidies and Section 8 payments, if they are willing subdivide their lots and turn over half their property to people supported by the government. Inevitably, many financially struggling homeowners will be forced to accept this cruel bargain if they want to keep their homes.

Finally, just like in 2008, there will eventually be another economic downturn, when many distressed homeowners will be forced to sell their properties. And when that happens, just like in 2008, investment banking speculators will move in and buy homes by the thousands. This next time, however, these institutional investors will be salivating at the prospect of collecting government subsidies so they can operate two rental units on a single piece of property.

Demolishing Homes to Build High Rises Near Transit Stations

Another way California’s elites – many of whom live in gated communities with homeowner covenants prohibiting nasty things like accessory dwelling units in backyards – propose to solve California’s housing crisis is to force demolition of single family dwellings in the vicinity of mass transit stations. They support this mass destruction of vintage neighborhoods in order to make room for high density apartments and condominiums up to five stories in height. While an attempt in 2018 to enact this draconian solution was beaten back, California’s coercive utopian lawmakers will bring it back in 2019. Some form of this law is likely to pass.

There’s nothing wrong with gradually increasing the population density in the core of large cities. That is a natural and organic process. But it is the job of legislators and local officials to moderate that process, protecting established neighborhoods. Instead, again, the policy consensus in California is to cram ten million new residents into existing urban areas.

Government Subsidized Homeless Shelters on some of the Most Expensive Real Estate on Earth

Perhaps the most misguided housing policies coming out of California concern the homeless. Despite years of bloviating by the compassionate elite, almost no good data is available on homeless populations, much less any good policies. Press coverage of the homeless centers on the family unit; small children, parents forced out of their home by high rents. These are gut wrenching stories. But accompanying the legitimate cases of families or individuals coping with undeserved hardship, there are the willfully indigent, along with criminals, drug dealers, sexual predators and perverts. Again, the City of Los Angeles offers a striking example of bad policy.

In Venice Beach, which is within Los Angeles city limits, along one of the most expensive, touristy stretches of coastline in the world, there are now permanent homeless encampments. To address the challenge, Los Angeles city officials are fast-tracking the permit process to build a homeless shelter on 3.2 acres of vacant city-owned property less than 500 feet from the beach. This property, nestled in the heart of Venice’s upscale residential and retail neighborhoods, if commercially developed, would be worth well over $200 million. Imagine what could be done with that much money if the goal was to truly help the homeless. And by the way, the proposed shelter will be a so-called “wet” shelter, meaning that drugs and alcohol will not be permitted inside the shelter, but intoxicated homeless individuals will be allowed inside. Go in, get a bed, go out, shoot up, come back in.

That a solution so scandalously inefficient could even be considered by the do-gooders running City Hall in Los Angeles offers additional insights into the minds of California’s progressive elite. Solving the homeless crisis isn’t their goal here. Rather the intent is to create additional government-owned properties, hire additional government bureaucrats, while preening in front of television cameras and pretending to solve a problem. Should the Venice Beach property be developed as currently proposed, well connected construction contractors will rake in government funds, so eventually “up to 100” homeless people will find shelter. Meanwhile, thousands will remain outdoors.

California’s housing is unaffordable because of restrictive laws such as CEQAAB 32SB 375, and countless others at both the state and local level. At the same time, California’s political elites are are inviting in the world’s poor en masse to come and live here. An estimated 2.6 million illegal aliens currently live in California. But the rhetorically unassailable compassion expressed by these sanctuary policies does nothing to alleviate hardship in the nations where these refugees originate, because for every thousand who arrive, millions are left behind.

The result? While California’s visionary rulers engineer a shortage of housing supplies, their welcoming sanctuary policies engineer a burgeoning housing demand. This is the deeply flawed agenda they have implemented in California and are actively exporting to the rest of America.

The biggest lie of all is the compassionate facade that overlays every housing solution California’s elite promote. Because their solutions, however viable they may be politically, will not work. They defy basic economic sense. They create additional drain on public funds while doing nothing to alleviate the high prices that are caused by scarcity. They are sustained by an impossible assumption, that urban densification, and all the destruction that densification will bring, will in itself be sufficient to restore a supply and demand equilibrium for housing. And they reject the obvious solution, suburban expansion to complement higher densities in the urban cores, based on environmentalist objections that are overwrought. In practice, the solutions being implemented to resolve California’s housing crisis are not compassionate. They are cruel.

Eventually, enough Californians are going to realize they’ve been conned. They will recognize that government subsidized densification is financially unsustainable and ruinous to their way of life. They will support politicians who are willing to stand up to environmentalist litigators, government unions, and the left-wing oligarchy that profits from scarcity. Hopefully that will happen before it’s too late.

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The FPPC Finally Charges a Government Agency with Illegal Political Advocacy

This column has, over the last several years, exposed multiple examples of government entities using taxpayer dollars for political advocacy, a practice that is clearly illegal under both state and federal law.  The free speech clauses of the federal and state Constitutions prohibit the use of governmentally compelled monetary contributions (including taxes) to support or oppose political campaigns since “Such contributions are a form of speech, and compelled speech offends the First Amendment.”  Smith v. U.C. Regents (1993) 4 Cal.4th 843, 852.

Moreover, “use of the public treasury to mount an election campaign which attempts to influence the resolution of issues which our Constitution leaves to the ‘free election’ of the people (see Const., art. II, § 2) … presents a serious threat to the integrity of the electoral process.” Stanson v. Mott (1976) 17 Cal.3d 206, 218.

While taxpayer organizations have been successful in several lawsuits involving these illegal expenditures, that hasn’t stopped either the state or local governments from continuing to push the envelope into political advocacy. However, there is a secondary legal issue that may actually prove to be more effective when government engages in political advocacy. Beyond the First Amendment implications, California has a strict regimen of campaign finance laws and regulations. These laws both limit a wide range of political contributions and impose strict reporting requirements. Thus, when government agencies engage in illegal political activity under First Amendment grounds, unless they have reported the costs of the activities to the FPPC as campaign contributions, they have violated separate campaign finance laws as well.

In March 2017, Los Angeles County placed Measure H, a sales tax for homeless programs, on the ballot. Whatever one may think of the need for higher taxes — for homeless programs or any other purpose — the county’s use of nearly a million dollars of public funds for the political campaign unquestionably crossed the line into political advocacy.

The Howard Jarvis Taxpayers Association filed a complaint with the FPPC shortly after Measure H passed — by a slender margin — and this past week the FPPC finally took action.  Specifically, the FPPC found probable cause to charge L.A. County, as well as the individual members of the Board of Supervisors, with 15 counts of campaign finance violations.

Not only is the “probable cause” finding by the FPPC welcomed by taxpayer advocates, the timing is very propitious. California is just weeks away from the midterm elections and, regrettably, local governments up and down California are illegally using taxpayer funds for political advocacy and failing to report the same as political contributions.  Los Angeles County itself is currently running campaign ads, paid for by the taxpayers, for Measure W, a new parcel tax to pay for stormwater projects.

Taxpayers are hopeful that the findings by the FPPC will serve as a huge shot across the bow to all government entities in California not to abuse taxpayers by using public funds for political activity.

In the meantime, using additional FPPC complaints as well as lawsuits can go a long way in stopping this particularly perverse use of taxpayer dollars.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

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Teachers’ unions appalled at idea of paying teachers like rock stars

California Local Government Websites – A 2018 Report Card

The internet has enabled unprecedented transparency in government, but have governments fully adopted the technology? Specifically, how well are government websites providing the most important information to their constituents? Is the information intuitively categorized on these websites? Are the posted reports and notices easy to understand? Is information posted promptly? Are important categories of information omitted? Are the archives of historical reports and other documents easily accessed and searched?

To begin to answer this question for California’s cities and counties, during the summer of 2018 the California Policy Center conducted an in-depth analysis of the websites of California’s 250 largest cities as well as all of California’s counties. The analysis awarded points in ten categories. Within each category were subcategories, as described below, roughly corresponding to the points available per category. These categories were:

EVALUATION CRITERIA

(1) Contact Information (up to 14 points) – For city council and county supervisors, as well as for department heads and senior administrators, is it easy to find their name, email, phone number, biography, and photo?

(2) Public Meetings (up to 16 points) – Are public meeting notices easily accessible from the home page, are they posted at least 72 hours in advance, including agendas and exhibits? Are meeting minutes posted online; are they searchable and downloadable? Are meeting minutes posted within a week or two of the meeting dates? Is it easy to find meeting information? Are meetings streamed live and archived?

(3) Public Records Access (up to 12 points) – Is it easy to find the name and contact of the City Clerk? Is it easy to submit a PRA (public records act) request; are there fees for submitting PRA requests and is the fee policy disclosed? Is the response time to PRAs disclosed? Is there a direct link to a dedicated web page for submitting PRAs?

(4) Budgets (up to 16 points) – Is the current fiscal year budget posted? Are at least five years of prior fiscal year budgets posted? Are they downloadable? Are they searchable?

(5) Financial Reports (up to 16 points) – Is the most recent audited financial report posted? Are at least five years of prior financial reports posted? Are they downloadable? Are they searchable?

(6) Contracts (up to 22 points) – Are all current labor agreements posted? For management, are all individual employment contracts posted? Are all approved vendor contracts over $10,000 posted? Are all current RFPs (request for proposal) over $10,000 posted? Are all of these downloadable and searchable? Are they posted in a timely fashion? Are the interfaces intuitive?

(7) Taxes & Fees (up to 16 points) – Are all taxes and tax rates posted and disclosed; all fees, all revenue sources? Are they easily navigable, searchable, and downloadable?

(8) Expenditures (up to 12 points) – Is employee payroll data easy to find; are expenditures and liabilities easy to find? Are they easily navigable, searchable, and downloadable? Is the information clearly presented?

(9) Facilities and Services (up to 12 points) – Are lists of services provided and terms of access to services all posted in easy to find, intuitive interfaces? Are announcements relating to services available on the homepage? Is service department information easy to find: Contact info, hours, specific instructions, FAQs?

(10) Overall Ease of Navigation (up to 10 points) – Is the city or county website generally easy to navigate and use?

SCORING METHODOLOGY

The scoring for each city and county was based on totaling the points awarded to each category. A perfect score would have been 146, indicating a city or county’s website met every evaluation criteria. Even taking into account seven available bonus points, no website garnered a perfect score. The websites were assigned letter grades ranging from A to F, using the traditional academic scoring method wherein achieving 90% or more of the available points earns an A, scoring more than 80% and less than 90% earns a B, between 70% and 80% equals a C, between 60% and 70% equals a D, and any score lower than 60% gets an F grade.

RESULTS AND OBSERVATIONS

City Websites

Among the 250 cities analyzed, ranging from Suisun City with just over 29,000 residents, to big Los Angeles, with over 4.0 million residents, only two got the top grade of A, Rancho Palos Verdes, located in Los Angeles County, and Poway, located in San Diego County. Grades of F, on the other hand, were handed to 19 cities. In all, only 26 percent of the cities analyzed got either A or B grades, whereas 38 percent got D or F grades.

There is inevitably an element of subjectivity that influences all these scores, despite the elaborate structure of this analysis. Human observers waded through over 300 city and county websites, for each of them checking off over 120 individual criterion. Maybe Rancho Palos Verdes would not be the top scorer, and maybe fewer cities would have ended up with F grades. But what distinguishes the best websites?

Highlights of the Highest Scoring City Website – Rancho Palos Verdes

Rancho Palos Verdes has a home page with a simple navigation bar, offering only six categories: “Government,” “City Services,” “Community,” “City Departments,” “Transparency,” and “How Do I…“. Scrolling over each of these primary categories triggers a comprehensive drop down menu of clickable links. These links are organized in sections, with section titles that make it easy for the viewer to find the particular link they’re looking for.

A good example is the “Government” category on the Rancho Palos Verdes home page. The first section is the link to the “City Council,” which clicks to a page showing a group photo as well as portrait photos of all council members. For each council member, the page provides their title, direct email, biography, and term limits. The page provides a phone number and group council email address and the dates of all city council meetings. It provides means to sign up for council agenda notifications by email, as well as means to submit via email comments or suggestions regarding agenda items.

To the side of the City Council page are additional links that are easy to navigate, including “City Council Meetings,” where dates of upcoming meetings are displayed, as well as links to the agenda, minutes, and video recordings of past council meetings going back by year all the way to 2000.

Another virtue of the Rancho Palos Verdes website is their easily found financial reports and budgets – you can make your way to viewing them by clicking on the Finance link that is found in the dropdown menu of both City Departments and Transparency on the main navigation bar.

Something that ought to be universally adopted is to post searchable PDF documents. Rancho Palos Verdes publishes all of their budgets and consolidated annual financial reports using searchable PDF files, where the user can (using a PC) enter cntl-F and look for all uses of any given search term, ex. “Pensions,” then quickly click to every spot in the document where that term is used.

Assisting anyone trying to get a quick look at the financial status of Rancho Palos Verdes is their use of a parallel 3rd party financial report writer, OpenGov, which offers useful summaries of city revenues, expenses, and personnel costs.

Rancho Palos Verdes was one of the few cities that had all of their outside contracts accessible from a single page, accessed via their Transparency page, then selecting “Contracts and Agreements.” The Transparency page also clearly lays out compensation schedules for city employees, as well as all taxes and fees charged by the city.

The Top Ten City Websites

Rancho Palos Verdes – 142
Poway – 132
Santa Maria – 131
San Luis Obispo – 131
Morgan Hill – 131
Sacramento – 130
Covina – 130
Palm Springs – 130
San Carlos – 128
La Mesa – 127

County Websites

Among the 58 counties analyzed, ranging from tiny Alpine County with barely 1,000 residents to Los Angeles County with over 10.0 million residents, none earned an A grade. Overall, just 13 percent of the counties earned B grades, whereas 53 percent scored grades of either D or F. The top scorer was Alameda County.

Highlights of the Highest Scoring County Website – Alameda

With nearly 1.7 million residents, Alameda is California’s 7th largest county by population. Only the counties of San Diego, Orange, and, of course, Los Angeles have significantly larger populations. Counties also offer far more services than cities, not only public safety and municipal services, but also including, for example, hospitals, jails, employment development, and welfare administration.

To help users navigate this much larger array of services in this very large county, Alameda’s home page has a simplified navigation bar, with categories “Services,” “Careers,” “Connect,” and “Participate.” Above these categories is a huge search box entitled “What can we help you find today.”

This search box works well. Entering “Budgets” takes the user to a results screen where the first result is “Budget Website.” This webpage offers reports generated by a 3rd party application similar to OpenGov called Socrata. It allows quick visualization of budgets by department, depicted (by user choice) as either bar graphs, pie charts, or trends over time. If the user clicks on any specific department slice, a new graphic is generated showing that department’s detail by sub department.

If “Financial Statements” is entered into the search box, the first result that appears is a link to Alameda County’s most recent Comprehensive Annual Financial Report. If “Building Permit” is entered, the first result is “Permit Portal – your one-stop-shop for County permits.”

Alameda County’s homepage relies on its search box, but the other navigation links are comprehensive. The “Services” button is the most inclusive, showing links to every department, service, and information portal in the county, arranged alphabetically. The “Careers” button provides information for anyone wishing to work for the county. The “Connect” button offers a host of links for citizen’s wishing to receive information about various county programs, and the “Participate” button displays information about Board of Supervisor meetings and offers a portal for members of the public to provide input.

The Top Ten County Websites

Alameda – 127
Ventura – 122
Yolo – 121
Mendocino – 120
Humboldt – 119
Sacramento – 118
Kern – 118
San Benito – 117
San Francisco – 115
Orange – 115

CONCLUSION

The top scorers earned points for easy-to-navigate websites that have most of the information a taxpayer would need to make informed opinions about their city or county’s financial performance and information making it possible to know who their local officials are and how to contact them. The top scorers, Rancho Palos Verdes, and Alameda County, offered contrasting approaches that both facilitated these goals of transparency. Rancho Palos Verdes, by having a thoughtfully designed navigation bar where each category generated a clearly sorted array of links on drop down menus, Alameda, by relying on an even more simplified set of buttons that connected to comprehensive directories, combined with a prominently featured search box.

The combination of easily navigated, intuitive interfaces, along with a complete directory of information as noted in our twelve evaluation criteria, are what distinguishes an excellent local government website. Local governments of all sizes may wish to consider the criteria described in this report, and assess to what extent they may be able to enhance their own websites to better provide a more complete range of information. In most cases, the costs to improve these online resources are minimal. California’s citizens deserve to know how their local governments are performing, and nothing offers them better access than an excellent online portal.

The California Policy Center thanks researchers Rowan Macwan, Kelly McGee, and Kyle Drees for the data gathering and contributions to this report.

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This November, Will California Voters Approve $3.6 Billion Per Year in New Taxes?

With the 2018 general election a few weeks away, it’s time to review just how many tax increases are on state and local ballots in California. And while media attention focuses on the statewide tax measures, even bigger money is represented by the sum of hundreds of proposed local tax increases.

Every election cycle, the California Taxpayers Association (CalTax) produces a list of local tax and bond proposals. After every election, they provide information as to how many were approved by voters and how many failed. Using CalTax data, it can be seen that in November 2016, California’s local voters approved 181 bonds, mostly for school construction, totalling an incredible $32.3 billion. Annual payments on these bonds will cost California’s taxpayers an estimated $2.1 billion per year. At the same time, local voters approved 159 new tax measures, mostly increases to local sales taxes and parcel taxes, adding another $2.9 billion in annual payments.

If you add up all the voter approved new taxes in November 2016, state and local, you have to include not only $5.0 billion in new local taxes and payments on local bonds per year, you also have to add the voter approved statewide measures. That would include Prop. 51, adding yet another $9.0 billion in school bonds (estimated payments $585 million per year), and Prop 55, the extension of the “temporary” increase to state income taxes on personal incomes over $250,000 per year (estimated collections, between $4.0 billion and $9.0 per year), and Prop. 56, the $2.00 tax increase per pack of cigarettes (estimated collections just over $1.0 billion per year).

Before turning to 2018, it’s important to also note that in 2016 the Democrats recovered their two-thirds majority in the state legislature, meaning they could pass new taxes without voter approval. And in 2017, that’s exactly what they did, adding twelve cents per gallon to the already high state taxes on gasoline and increasing vehicle registration fees. Voila, another $5.4 billion per year in taxes on Californians.

When considering how California’s proposed new taxes will fare with voters in November, history is a good indicator. In November 2016, ninety-four percent of local bond measures were passed by voters, and seventy-one percent of new local taxes were approved. Similarly, this past spring, in the primary elections of 2018, California’s voters approved eighty-three percent of local bond measures ($200 million per year in annual payments), and sixty-five percent of new local taxes ($228 million in new taxes per year). Statewide, Californians approved a $4.0 billion “water” bond (Prop. 68), which equates to another $260 million per year in annual payments.

Which brings us to November 2018. The table below shows 125 new local bonds are proposed. If they are all approved by voters, that will add another $1.2 billion in annual payments. In addition, 259 new local taxes are proposed, which if approved will total another $1.6 billion in annual payments. This time, along with the perennial hikes to sales taxes and parcel taxes, the other popular new mode of taxation is marijuana, with 73 of California’s cities and counties proposing to cash in on sales of recreational cannabis.

California’s Local Tax and Bond Proposals – November 2018

If historical trends apply this time, California’s voters will likely approve four-fifths (or more) of the local bond measures, and two-thirds (or more) of the local tax increases. This will equate to roughly $2.0 billion in new taxes and payments on bonds per year. And then there are the statewide initiatives.

On California’s November ballot there are four bond proposals, totaling $16.4 billion in additional borrowing. Prop. 1 issues $4.0 billion in bonds for housing programs and veterans’ home loans. Prop. 2 sells future revenue from the millionaire’s tax for $2 to guarantee $2.0 billion in bonds for homelessness prevention housing – that’s tax revenue that has to be made up somewhere else, so yes, it counts. Prop. 3 issues a whopping $8.9 billion in bonds for water-related infrastructure and environmental projects. And Prop. 4 issues $1.5 billion in bonds for children’s hospitals. Total payments on these bonds? Another $1.1 billion per year.

To summarize, in 2016, voters approved new taxes and payments on bonds (not including the $4.0 to $9.0 billion per year in “millionaire” taxes that were not new, but were continued by the passage of Prop. 56) totaling $6.5 billion per year. In the 2018 June primary, California’s voters approved another nearly $700 billion in new taxes and payments on bonds. And this November, voters have the opportunity to approve (or reject), $3.6 billion per year in new taxes and bond payments.

For the children. For education. For safety. For safe drinking water. The list goes on, and the stories are compelling. But here’s the problem: Even if all of the 2018 tax and bond payments are approved, and those payments are added to the payments on new taxes and bonds already approved in Nov. 2016 and June 2018, the total is “only” $10.0 billion. Why “only”? Because the estimated payments on public employee pensions in California are estimated to increase from $31 billion in 2018 to $59 billion in 2024, and that is the “normal” scenario, not one reflecting the impact of a major correction in the value of stocks, bonds, and real estate.

Money is fungible. When more tax revenues go to pension funds, vital publicly funded programs are either defunded or new taxes are imposed to keep them alive. Similarly, when more tax revenues go to pension funds, maintenance projects that might have been funded using operating budgets, suddenly become capital projects requiring debt financing.

Californians may expect a deluge of new tax and bond proposals for many years to come.

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California’s Socialist Oligarchy, Part Two: Who They Are and How to Defeat Them

California’s policymakers have condemned Californians to endure contrived scarcity, unaffordability, and inconvenience in all of the basic necessities of life.

This is a crime, but it’s not a conspiracy. Rather, it is caused by a collection of powerful special interests whose political agendas align.

At the top of the pyramid are left-wing oligarchs, crony capitalists who want to protect their business interests. Whether it’s renewable energy, “connected” appliances, or homes built on those rare parcels of land that are entitled for development, California’s left-wing oligarchs benefit from artificial scarcity. But these direct beneficiaries are only a segment of California’s left-wing oligarchy.

The indirect financial benefits of artificial scarcity are even greater. As the prices of real estate assets ascend once again into bubble territory, as the earnings per share of public utilities swell on the strength of selling overpriced kilowatts, and as Silicon Valley firms see their stock values ascend into the stratosphere, wealthy individuals and investment funds, most assuredly including California’s public employee pension funds which manage over $800 billion in assets, see their portfolio values soar.

Which brings us to the final subcategory of left-wing oligarchs in California, the high-tech moguls of social media. These left-wing billionaires of Silicon Valley, along with their only slightly less well-heeled entertainment industry counterparts in Los Angeles, are the most influential opinion makers on earth. They shape values and behavior using tools that make the overwhelming mass propaganda breakthroughs achieved by radio in the 1930s appear as primitive as smoke signals by comparison. What is their agenda?

The communications kingpins of California have no allegiance to ordinary Californians—or ordinary Americans, for that matter. To them, ordinary people are Pavlovian proles, expendable parasites that pollute the environment. To the extent these kingpins have compassion, it is to profitably create for the expendable multitudes a benign zoo; smart cities of high rises, contained in areas as geographically minute as possible, so that only wild nature, corporate farms, and private estates of the super-rich exist outside the urban containment boundaries.

In these algorithmically managed metropolises, human values, including their voting behavior, will literally be programmed, using the most sophisticated and individualized techniques of manipulation ever devised. Borgcubes, aesthetically optimized by AI psychometricians, with soothing soft edges of gingerbread. Metaphorically speaking, Matrix-like cocoons. A Brave New World, complete with Sexophones and Soma. Get ready. Another innovation from California.

The Environmentalist Lobby

California’s socialist oligarchy probably can continue to consolidate their power without any help, but help is abundant. Most importantly, they have the help of the environmentalist movement.

Collecting legal fees and settlements thanks to a sympathetic judiciary, California’s environmentalist organizations have amassed immense financial power and political influence. And when all else fails, they now have the boogeyman of “climate change” to stop literally anything, anything that so much as scratches the earth, dead in its tracks.

Public Sector Unions
Enforcing the edicts of California’s socialist oligarchy are public sector unions; their full-time paid armies of lobbyists, operatives, political consultants, PR firms, and litigators. Their membership is both cowed and co-opted. California’s unionized public servants, while not entirely immune to the higher costs imposed on them by the oligarchy, are nonetheless exempted from its worst effects, because they are the most lavishly compensated public employees in America, if not the entire world.

The average total compensation (pay and benefits) for a full-time city, county or state worker in California in 2015 was $121,843. In that same year, the average full-time private sector worker in California made $62,475 (with benefits), which is 51 percent of what the public sector worker earned. That’s not all. This pampered class of public servants also enjoys, typically, 72 paid days off per year (no, that doesn’t include weekends).

How that breaks down is as follows: A veteran employee typically gets 20 vacation days, 12 designated holidays, two floating holidays, 12 “personal days,” and if they are on salary and they work eight hours a day for nine weekdays, through the very common “9/80” program, they get every 10th weekday off with pay. When they retire, if they work 30 years (most private sector workers put in 45 years), their average pension is nearly $70,000 per year, not including health benefits.

Public sector unions, which ought to be illegal, are squarely to blame for “negotiating” pay and benefit packages that threaten to force California’s cities and counties into bankruptcy despite sky-high taxes. California’s public sector unions are the most powerful in America, collecting and spending more than $800 million per year in dues and fees. These unions are, in most cases, avowedly socialistic, and in virtually all cases these unions have a political agenda in lockstep with the California’s left-wing oligarchy. As the most powerful permanent political organizations in the state, they are the brokers and enablers of corporate power.

In stunning irony, these unions also play a vital role in convincing ordinary Californians to vote contrary to their own best interests. There are two big reasons for this.

First, these unions proclaim themselves in solidarity with the working class, despite the fact that they represent workers who are much more likely to have financially transcended the challenges facing ordinary private sector workers. They conflate themselves with private sector unions, despite the fact that unlike private sector unions, they elect their own bosses, they are funded through compulsory taxes instead of through profits earned in a competitive market, and they operate the machinery of government allowing them to use that to intimidate their opponents.

Second, and equally insidious, these unions have taken over public education from kindergarten through graduate school, and they have now infected two generations of Californians with their left-wing ideology.

Thoroughly Indoctrinated Voters
While the elites represented in the above categories do represent millions of Californians, it is the influence they have on tens of millions of California’s voters that give them their political power. This starts with college educated liberals, often living in homes they’ve owned for so long that they aren’t adversely affected by property taxes (Proposition 13), and often living on the coast where they don’t have to spend thousands of dollars per year to heat and cool those homes.

These people live and work in educational, corporate, and media environments that are saturated with left-wing propaganda, and they don’t feel the harmful impacts of these policies enough to question them. Many of these liberals work in entertainment or high-tech, where their business model is primarily virtual, which prevents their exposure to the intrusive, stifling laws and regulations that affect businesses in the real world.

The other voting bloc that determines California’s political destiny, perhaps more than any other, are ethnic voters, or, to use a ridiculous, pretentious, obligatory phrase that makes normal people cringe every time they say it, “people of color.” The POC vote in California overwhelmingly favors Democratic candidates for public office. According to the Public Policy Institute of California, among California’s “likely voters,” more whites are registered as Republicans (39 percent), than Democrats (38 percent). But among Latinos, registered Democrats (62 percent) far outnumber Republicans (17 percent). Among blacks, the disparity is even greater: 82 percent Democrat versus a paltry 6 percent Republican. Among Asians, where the disparity is less, the Democrats still have a nearly two-to-one advantage, 45 percent to 24 percent. But can the Democratic grip on ethnic voters endure?

An Alternative Future for California
If you poke at the supposed unbreakable hold by Democrats on ethnic and racial minorities, you find cracks. Many Latino citizens actually favor immigration reform. Many Asian citizens fear affirmative action will rob their children of opportunities. Black voters in recent polls are supporting President Trump in percentages greater than any Republican in recent history. All “POC” are becoming increasingly incensed at the way the teachers unions have destroyed public education.

It wouldn’t take much to persuade California’s racial and ethnic minority voters that the Golden State’s artificial scarcity and high cost-of-living is something completely engineered by Democrats. California’s current Republican candidate for governor, John Cox, is doing a good job of educating voters on that subject.

And for that matter, what does “people of color” even mean, as greater and greater intermarriage occurs? Who is to say that a Mexican-American, with Christian European roots and a shared heritage of settling the American West, would not, does not, embrace American pride and American patriotism just as much as any other proud member of the American melting pot? Maybe all that California’s kaleidoscopic electorate needs is a coherent and unwavering pro-growth, pro-freedom vision, from a new coalition of patriots.

Something’s Got to Give
The biggest mistake that California’s socialist oligarchs can make is to assume they are unassailable. Their certainty could become their downfall.

It’s true that someday we will need to move beyond fossil fuel. It’s true that someday we will live in a world where borders slowly wither away and we are one global people. It’s true that eventually we will let machines do most of our work for us, and we will need to invent economic models that account for this new reality.

It’s even true that someday we may genetically engineer ourselves into transhuman beings. But those future days are not these present days, and for California’s socialist oligarchy to proclaim they have all the answers to trends this transformative displays stupefying arrogance.

While ordinary Californians are deciding between buying gasoline or paying rent, these elites are inventing new ways to make everything cost more. While immigrants from abroad and indigent Americans from east of the Sierras come to California to collect taxpayer funded benefits, these elites are prohibiting the types of economic and infrastructure development that might create the wealth to sustain them, along with those already here.

While commuters curse their way to work and back in clogged lanes on neglected freeways, these elites continue with their $100 billion bullet train project. While Californians pay more taxes than anyone else in America, California’s Democratic candidate for governor reaffirms his commitment to universal, single payer health care for everyone, free healthcare for non-citizen immigrantsfree public pre-schools, and free community college education.

Something’s going to give. Preventing broader private sector participation in competitive development of housing, energy, water and transportation guarantees eventual failure of California’s existing socialist schemes, much less the new ones they’re promising. But so far, California’s elites benefit from and promote these financially unsustainable policies. It cannot stand. Rebellion is brewing. Resistance is not futile. New alignments and alliances are forming. One economic hiccup could be all it takes.

California’s extraordinary potential is diminished by this ruling class of socialist oligarchs, and their coercive utopian supporters. They think they have all the answers when in reality they are flirting with economic and cultural disaster. Republicans, or some new movement, need to offer Californians a vision of abundance instead of scarcity, through competitive development of natural resources, market-driven urban and suburban growth, realistic immigration policies, and a proud, assimilative message to its residents to join together as a united and prosperous people. Concurrent with an agenda of growth that is as pragmatic as it is optimistic, California’s socialist oligarchs need to be exposed for their hypocrisy, their hubris, their venality.

Be warned, America. The agenda of the oligarchic socialists is not incoherent, nor is it mere fantasy. They’ve been building it for years in California.

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California’s Socialist Oligarchy, Part One: Making the State Unaffordable

Touted as the “fifth-largest economy on Earth,” and recently heralded as delivering the “greatest increase in average income,” these statistics obscure an alarming reality. California has become a feudal state, where the benefits of prosperity are unequally distributed, rewarding corrupt plutocrats and punishing ordinary working families. Joel Kotkin, a fellow in urban studies at Chapman University in Orange, California, characterized California’s current political economy as “Oligarchical Socialism.” This is a perfect description of a system that destroys the middle class at the same time it protects the ultra rich.

California’s leftist oligarchy benefits financially from precisely the depredations they accuse conservatives of committing. They have enacted policies that are designed to make California unaffordable to all but the wealthiest residents, and hostile to emerging small businesses, at the same time as their preexisting wealth and politically connected corporations reap enhanced returns and profits.

Plenty of Land, Impossible to Build

Nowhere are the consequences of California’s oligarchical socialism more evident than in the cost of housing. State legislation has made it nearly impossible for developers to construct new housing outside the so-called “urban growth boundary.” Instead, development is redirected into the footprint of existing urban areas.

While there is a natural tendency as population increases to see higher density redevelopment in urban cores, by restricting outward expansion of urban areas, the value of the limited remaining eligible land becomes artificially inflated. But established landowners and large development firms benefit from these restrictions. They are able to withstand years, if not decades, of expensive permitting delays and endless litigation. They are able to afford millions in permit fees because these costs are offset by their ability to sell residence units—from high-rise condos to detached single family dwellings—at prices far beyond what they would cost in a normal market.

These billionaire business interests get richer, while ordinary Californians who want to own or develop land cannot afford to go through the permit process. Meanwhile, the median cost of a home in California is $539,400—nearly 2.5 times the national average of $216,700. And that’s not even in the tougher markets.

With all land development, environmentalist laws such as California’s Environmental Quality Act (CEQA) create additional barriers. California’s legislature has now made it necessary for new home construction to be 100 percent “energy neutral” by 2020. Not only does this require installation of photovoltaic roof panels, but also more expensive insulation, as well as more expensive appliances that use less energy (and also happen to be less durable and don’t work as well). These mandates make homes less livable, for example, requiring smaller windows in order to make the homes easier to heat and cool.

The amazing fact that California’s legislators willfully ignore is the incredibly abundance of expanses of land that remain virtually empty in this vast state. California is only 5 percent urbanized. According to the American Farmland Trust, of California’s 163,000 square miles, there are 25,000 square miles of grazing land and 42,000 square miles of agricultural land; of that, 14,000 square miles are prime agricultural land. In other words, you could put 10 million new residents into homes, four per household, on half-acre lots, and you would only consume 1,953 square miles. If you built those homes on the best prime agricultural land California’s got, you would only use up 14 percent of it. If you scattered those homes among all of California’s farmland and grazing land—which is far more likely—you would only use up 3 percent of it. Three percent loss of agricultural land, to allow 10 million people to live on half-acre lots!

Instead of allowing land owners to build millions of inexpensive homes on, say, just a small fraction of California’s 25,000 square miles of grazing land, California’s lawmakers want to have “smart growth.” And as prices rise, the solution? On the ballot this November, propositions to enforce statewide rent control, borrow $4 billion to build “affordable housing,” and use state tax revenues to build more government-run homeless shelters. After all, expanding the private sector threatens the oligarchy. Best to expand the public sector.

Plenty of Energy Resources, Unaffordable Energy

While the cost of housing is an obvious example of how California has been turned into an enclave for the super rich and an expensive ordeal for ordinary Americans trying to live there, it is not the only example. California’s legislature has curtailed, if not completely shut down, development of oil, natural gashydroelectric and nuclear power.

In the summer of 2000, during California’s energy crisis, as brown-outs were rolling up and down the state, total disaster was averted because two nuclear reactor complexes, San Onofre and Diablo Canyon, were continuously pumping 4.2 gigawatts of electricity—more than 10 percent of California’s peak demand at the time—into the power grid. But instead of retrofitting, San Onofre was shuttered in 2013 and Diablo Canyon is set to shut down by 2025.

And what’s replacing these power plants? Wind and solar farms, with their intermittent output backed up by natural gas power stations.

If the massive amounts of surplus electricity produced when the sun is shining and the wind is blowing could be stored, it might make sense to decommission clean nuclear power plants and ban development of fossil fuel. But despite decades of research, and dozens of promising but failed attempts, grid-scale electricity storage remains prohibitively expensive. But that’s OK. According to the state legislature, Californians can just pay more. And of course, when consumers pay more, utilities—whose percentage profit is limited by regulation—make far more in absolute profits, since they get to charge so much more per kilowatt-hour. The average cost for electricity is 19.7 cents per kilowatt-hour in California, compared to 13.1 cents per kilowatt-hour nationally.

And there’s no end in sight. True to form, California’s state legislature just passed a law that calls for 60 percent renewable energy by 2030 and 100 percent carbon-free energy by 2045. With hydroelectric and nuclear power off the table, that’s going to be a neat trick.

With oil, it gets worse. We’re not talking about California’s aggressive formulation requirements that make tailpipe emissions cleaner. Perhaps California’s geography justifies this, as offshore winds blow the entirety of coastal city smog into the inland valleys where it is trapped and accumulates. But the reason gas is so expensive in California has little to do with that. It is nearly impossible to maintain refinery output in California, and California’s state gas taxes are among the highest in the nation. Gasoline in California costs around $3.87 per gallon, compared to $2.87 nationally.

While ordinary Californians suffer, left-wing oligarchs prosper.

Green technology entrepreneurs flourish, selling products that consumers are required by law to purchase. Not just solar panels and the related “balance of plant” systems. There are also “negawatts,” a good concept that is being taken to extremes. Sensors and chips designed to make appliances more “energy efficient” are designed by Silicon Valley companies whose prosperity depends on legislative mandates that compel Californians to purchase their products. Promoting the “internet of things” is purportedly justified on environmentalist grounds, while in reality it is a lucrative source of income for high-tech manufacturers, as well as a lucrative means of surveillance and data mining. These new appliances save some electricity. But are they durable? Easy to operate? Do they work as well as conventional appliances? Are they easy to use? Are they inexpensive? No to all.

Plenty of Water, Yet Water Is Rationed

Water is another area where ordinary Californians needlessly suffer inconveniences and pay more.

California receives between 150 and 300 million acre feet of rainfall per year, depending on whether it’s a drought year or a wet year. Regardless of the year, most of that water either evaporates, percolates, or runs off into the Pacific Ocean. And of the roughly 65 million acre feet that are diverted, fully half of it is saved for re-release into the environment, to maintain river flow and to prevent saltwater intrusion into the Sacramento Delta. Of what remains, almost all of it is used for agriculture. Less than 4 million acre feet of water each year are used by California’s households, and less than half that much is for indoor use.

You wouldn’t think that were the case if you reviewed California’s new laws regarding water, and the ways they’re going to be implemented. This year California’s state legislature passed a law requiring average daily indoor water use by California residents to not exceed 55 gallons per day, an amount that lowers to 50 gallons per day by 2030. Maybe you’ve encountered the “solutions” that will effect this reduction: Water faucets that spray eight tiny concentrated, 1.0 mm thick jets of water onto your hands, making it difficult to get them wet and nearly impossible to rinse off soap. Or “low-flow” shower heads with the same problem, magnified for anyone who wants to rinse shampoo out of long hair. What about “smart” laundry machinesthat start and stop randomly, ostensibly to save energy and water, that do a poor job of cleaning your clothes. Or supplemental “tankless” water heaters positioned close to your kitchen sink, that cost thousands of dollars and don’t work all that well, in order for residents to avoid running unnecessary gallons down the drain as they wait for the hot water to flow through their pipes.

All this expense and bother, to save what, at a statewide level, amounts to a trivial amount of water. California’s total residential indoor water use represents less than three percent of California’s total water diversions.

And California’s bureaucrats still aren’t done. In a hearing postponed till just after November 6—no coincidence there—California’s State Water Resources Board is expected to mandate increased “natural flows” in California’s rivers, which will create additional water scarcity, especially for farmers.

It doesn’t have to be this way.

Californians could easily escape water scarcity by investing in additional reservoirs, desalination plants, and wastewater recycling. But environmentalists torpedo all of these projects, successfully lobbying for laws that tie every project up in permitting delays that cost millions, if not tens of millions, and take years, if not decades, to overcome. When permits are finally granted, along come the lawsuits.

A good example of a project that makes compelling economic sense, but is bitterly opposed by environmentalists, is raising the height of the Shasta Dam. In exchange for construction costs under $2 billion, an annual yield of a half-million acre feet would be added to California’s water resources. Not only does this amount of water exceed how much water could be saved by additional household rationing, there’s even an environmental benefit, because summer releases of this water from Shasta’s deep, cool reservoir would improve fish habitat on the Sacramento River.

Roads Are Congested, And the State Builds a Bullet Train

There is nothing more versatile than the common road. On a road, anything on wheels, from bicycles to 80-ton trucks, can get from their point of origin to their destination. The simple flat surface delivers transportation options that nothing requiring rails or runways can hope to match. Moreover, cars and trucks are becoming cleaner and greener every year. One may argue vehemently over how exactly clean energy abundance will be achieved, but only the most pessimistic Luddite might cling to the notion that it will never happen.

Meanwhile, Californians urgently need new roads, wider roads, and upgraded roads. Californians may supplement these new roads with hyperloop technologies, or flying cars and other next generation vehicles, but what California does not need is the much criticized but seemingly unstoppable “bullet train,” a project that fails any rational cost-benefit analysis.

Using the California High Speed Rail Authority’s own projections, the system will not be profitable for 10 years. And what projections! The CHSRA assumes an average ticket price of $60, and average daily ridership of 120,000 people. Will 120,000 individuals actually be willing to spend $600 per month (and that’s only $30 per round trip, half what the High Speed Rail Commission is projecting) to commute from California’s less expensive Central Valley, into their jobs in coastal Silicon Valley and Los Angeles? And so what if they did? California has a workforce of more than 19 million people. How does spending around $100 billion on high speed rail help these other 18.9 million commuters?

To build a road in California takes years of permitting and litigating, then costs far more than it would in other parts of America. Environmentalist restrictionsproject labor agreements, and a bloated, inefficient State Department of Transportation are all contributing factors. Meanwhile, in comparison to other states, California consistently ranks at or near the bottom in terms of pavement conditions and traffic congestion. There is no end in sight.

Housing. Energy. Water. Transportation. These are the basic necessities of civilized life. And for power and profit, California’s socialist oligarchs have made them all prohibitively expensive. The social agenda of California’s Left is well understood. But the punishing economic agenda, engineered by California’s socialist oligarchy, is equally disturbing. It represents a devastating threat to the American way of life.

The second part of this report will identify the special interests that constitute this coalition of scarcity profiteers, and how they might be stopped.

Public Servant Who Made $327,491 in 2017 Asks Us to Support Higher Taxes

Every two years, around this time, political mailers inundate the mailboxes of California’s registered voters. This week, many Sacramento residents received “Vote No on Prop 6″ mailer. Prop 6 is that pesky, subversive citizens ballot initiative that, if approved by voters, will roll back the gas tax.

But Prop. 6 isn’t the topic here. Rather, the topic is all taxes in California. Why is there relentless pressure to increase them? And what special interests are paying for these campaigns to increase (or preserve) taxes across California?

In that context, this No on Prop. 6 mailer is instructive. Because blazoned across the cover of this four page, 8.5″ x 11” glossy full color flyer, is Darrell Roberts, representing the California Professional Firefighters. Roberts is the president of IAFF Local 2180, the Chula Vista Firefighters Union. In addition to his duties as president of Local IAFF Local 2180, Roberts is a Fire Battalion Chief for the Chula Vista Fire Department. In that capacity, he earned $327,491 in 2017, including $99,887 of overtime.

Now let’s back up for just a moment and make something perfectly clear. This isn’t about disrespecting firefighters in general, or Mr. Roberts in particular. Quite the contrary. Firefighters perform dangerous, challenging jobs that require years of intense training. Every year in California, a few of them die in the line of duty. In some years, more than a few. Furthermore, firefighters constantly witness trauma, often horrific, every time they respond not only to fires, but medical emergencies and automobile accidents. Their jobs are tough.

For these reasons, critics of public sector compensation trends should always temper their observations with respect. It is far too easy to observe, accurately, that many other jobs carry higher risk of injury or death, while forgetting that first responders stand between citizens and mayhem not just in normal times, but also in extraordinary times. In a truly cataclysmic event, and 911 is a perfect example, firefighters are obligated to occupy the front lines. They are the ones who must stop whatever destructive storms afflict our society. They are the ones who must go in before safety is restored, and rescue the stranded victims.

With that necessary preamble, and without diminishing it in any way, a difficult conversation remains necessary regarding public sector compensation, and the political power of the public sector unions who push for continuous increases in compensation.

A California Policy Center analysis published nearly two years ago, using 2015 data, calculated the average pay and benefits for a California firefighter at $196,370 for those employed by cites, $198,959 for those working for counties, and $145,938 for those working for the state. Those averages have not fallen in the past three years, and they do not include the additional cost per firefighter, if and when their retirement pensions are adequately funded.

Mr. Robert’s own City of Chula Vista provides an example of these rising pension costs. In 2017 the average pay for a Chula Vista firefighter was $189,715. That included, on average, $41,112 for overtime and $31,381 for employer contributions to their defined benefit pensions. But as they say, you ain’t seen nothin’ yet.

Using CalPERS own projections for the City of Chula Vista, the average normal contribution by the city to fund police and firefighter pensions is expected to grow from 20 percent of payroll in FYE 6/30/2017 to 22 percent of payroll by FYE 6/30/2025. Nothing terribly dramatic there. But, get this, the so-called unfunded contribution – that additional amount necessary to pay down the city’s unfunded liability for police and firefighter pensions – is expected to grow from 13 percent of payroll in FYE 6/30/2017 to 32 percent of payroll in 6/30/2025.

Put another way, the City of Chula Vista’s employer payments for public safety pensions are going to go from 33 percent of payroll to 53 percent of payroll by 2025. And if the stock market decides to end its already record breaking bull run, harming the CalPERS investment portfolio, these payments will go much higher.

It’s also important to recognize the relationship between excess overtime expenses and the cost of pension and health benefits (including retirement health benefits). When public employers pay more than 50 percent above regular salary to fund pensions and benefits, and in the case of public safety, they do, then it makes financial sense to pay time-and-a-half to existing staff, since that will cost less. Lost in that equation is the stress this excessive overtime inflicts on overworked personnel, as well as the lost opportunity to bring benefit overhead back below fifty percent.

Collectively California’s state and local employers, based on projections already released from CalPERS, are going to have to increase their total contributions to public employee pension funds from approximately $31 billion in 2017 to an estimated $59 billion by 2025.

Maybe veteran firefighters truly believe they are entitled to annual pay and benefits packages in excess of $200,000 per year, or in Mr. Roberts case, in excess of $300,000 per year. But with all the political power these unions wield, they ought to be thinking of ways to help lower the cost-of-living in California. That would help everyone.

And perhaps it may disturb even the most respectful and appreciative among us, when a public servant who made $327,491 last year, asks us to support higher taxes.

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Sources:

2017 Salaries for Chula Vista – Transparent California

California’s Public Sector Compensation Trends – California Policy Center, January 2017

Comprehensive Annual Financial Report, FYE 6/30/2017 – City of Chula Vista

Safety Plan of the City of Chula Vista, Annual Valuation Report as of 6/30/2017 – CalPERS

Miscellaneous Plan of the City of Chula Vista, Annual Valuation Report as of 6/30/2017 – CalPERS

2017 City Data, Government Compensation in California – California State Controller

California Government Pension Contributions Required to Double by 2024 – California Policy Center, January 2018

 

California’s boondoggles threaten property owners and taxpayers

One would hope that with the profound foolishness associated with California’s infamous High Speed Rail (HSR) project that our elected leadership would have learned a thing or two.

But this is California. Because we do things bigger and better than anyone else, it’s apparent that one massive boondoggle isn’t enough — we need two.

Let’s recap what we’ll call Boondoggle, Senior.

The complete dysfunction of HSR is no longer in dispute. Missed deadlines for the business plans, lack of transparency, massive cost overruns, engineering hurdles that make the project virtually impossible to complete and a lack of funding are tops on the list. Not only is HSR no longer viable, but the biggest irony is the project was justified on grounds that it would reduce greenhouse gas emissions. Even there it fails, as the independent Legislative Analyst has concluded that the project will be a net GHG producer for the foreseeable future.

HSR is now an international joke. Many who originally supported the High Speed Rail project have changed their opinions, including a former Chairman of the HSR Authority.

Boondoggle, Junior, is the planned construction of the Twin Tunnels project through the Sacramento River Delta, also known as WaterFix. While there is no doubt that California needs additional water infrastructure — and the dams and canals we have now are in need of serious maintenance – Governor Brown’s Twin Tunnel project suffers from the same major flaw as High Speed Rail — an abject lack of planning and no vision for how the project will be funded.

Like the High Speed Rail project, the financing for the Twin Tunnels is illusory. Many of the potential major wholesale customers of water from the Twin Tunnels are highly skeptical of its viability and balk at paying for it. The one exception is the Metropolitan Water District in the greater L.A. area, which has now said it will pay for the full project. Of course, that means its customers will pay.

Lack of transparency is another quality the Twin Tunnels project shares with HSR. Earlier this week, the Joint Legislative Budget Committee held a hearing that opened the way for an extension of the long-term contracts for the State Water Project for another 50 years. (The hearing was supposed to be conducted in the waning days of the Legislative session, but because the topic is so controversial, it was delayed until after everyone left town.)

Amendments to the water contracts that have raised eyebrows are the elimination of a restriction that says bonds cannot be used for any project built after 1987 and a provision that removes the requirement for consensus among the water contractors. This could allow a majority of agencies to run roughshod over those who object.

Finally, the real threat from the manner in which water issues are being jammed through a backroom process is the potential for unvoted property tax increases to pay for the Twin Tunnels project.

Taxpayer advocates will continue to monitor this unfolding controversy and do what is necessary to ensure the much needed transparency that is currently lacking. And, of course, if the ultimate outcome envisions property tax hikes that are not approved by the voters who will have to pay them, the next step will be a trip to the courthouse that will be much faster than any High Speed Rail project.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

Just How Much Money Might CalPERS Have to Collect in an Economic Downturn?

When evaluating the financial challenges facing California’s state and local public employee pension funds, a compelling question to consider is when, exactly when, will these funds financially collapse? That is, of course, an impossible question to answer. CalPERS, for example, manages hundreds of billions in assets, which means that long before it literally runs out of cash to pay benefits, tough adjustments will be made that will restore it to financial health.

What is alarming in the case of CalPERS and other public sector pension funds, however, is the relentless and steep rate increases they’re demanding from their participating employers. Equally alarming is the legal and political power CalPERS wields to force payment of these rate increases even after municipal bankruptcies where other long-term debt obligations are diminished if not completely washed away. Until California’s local governments have the legal means to reform pension benefits, rising pension contributions represent an immutable, potentially unmanageable financial burden on them.

SOUTH PASADENA’S PAYMENTS TO CALPERS ARE SET TO DOUBLE BY 2025

The City of South Pasadena offers a typical case study on the impact growing pension costs have on public services and local taxes. Using CalPERS own records and official projections, the City of South Pasadena paid $2.8 million to CalPERS in their fiscal year ended 6/30/2017. That was equal to 25% of the base salary payments made in that year. By 2020, the City of Pasadena is projected to pay $4.3 million to CalPERS, equal to 35% of base pay. And by 2025, the City of Pasadena is projected to pay $5.9 million to CalPERS, equal to 41% of base pay.

Can the City of South Pasadena afford to pay an additional three $3.0 million per year to CalPERS, on top of the nearly $3.0 million per year they’re already paying? They probably can, but at the expense of either higher local taxes or reduced public services, or a combination of both. But the story doesn’t end there. The primary reason required payments to CalPERS are doubling over the next few years is because CalPERS was wrong in their estimates of how much their pension fund could earn. They could still be wrong.

Annual pension contributions are calculated based on two factors: (1) How much future pension benefits were earned in the current year, and how much money must be set aside in this same year to earn interest and eventually be used to pay those benefits in the future? This is called the “normal contribution.” (2) What is the present value of ALL outstanding future pension payments, earned in all prior years by all participants in the plan, active and retired, and by how much does that value, that liability, exceed the amount of money currently invested in the pension fund? That amount is the unfunded pension liability, and the amount set aside each year to eventually reduce that unfunded liability to zero is called the “unfunded contribution.”

Both of these annual pension contributions depend on a key assumption: What rate-of-return can the pension fund earn each year, on average, over the next several decades? And it turns out the amount that has to be paid each year to keep a pension fund fully funded is extremely sensitive to this assumption. The reason, for example, that CalPERS is doubling the amount their participating employers have to pay each year is largely because they are gradually lowering their assumed rate of return from 7.5% per year to 7.0% per year. But what if that isn’t enough?

IF THE RATE-OF-RETURN CALPERS EARNS FALLS, PAYMENTS COULD RISE MUCH HIGHER

It isn’t unreasonable to worry that going forward, the average rate of return CalPERS earns on their investments could fall below 7.0% per year. For about a decade, nearly every asset class available to investors has enjoyed rates of appreciation in excess of historical averages. Yet despite being at what may be the late stages of a prolonged bull market in equities, bonds, and real estate, the City of South Pasadena’s pension investments managed by CalPERS were only 73% funded. As of 6/30/2017 (the most recent data CalPERS currently offers by agency), the City of South Pasadena faced an unfunded pension liability of $35 million. Using CalPERS own numbers, if they were to earn 6% per year on their investments in the coming years, instead of their new – and just lowered – annual return of 7%, that unfunded liability would rise to $58 million.

As it is, by 2025 the City of South Pasadena is already going to be making an unfunded contribution that is nearly twice their normal contribution. Another reason for this is because CalPERS is now requiring their participating agencies to pay off their unfunded pension liabilities in 20 years of even payments. Previously, attempting to minimize those payments, agencies had been using 30 year payoff terms with low payments in the early years. Back in 2017, based on a 6% rate-of-return projection, and in order to pay off a $58 million unfunded pension liability on these more aggressive repayment terms, the City of South Pasadena would have to come up with an unfunded pension contribution of $5.0 million per year, along with a normal contribution of around another $2.4 million per year.

But why should it end there? Nobody knows what the future holds. These rate-of-return projections by definition have to be “risk free,” since otherwise – and as has happened – taxpayers have to foot the bill to make these catch up payments. How many of you can rely on a “risk free” rate-of-return,” year after year, for decades, in your 401K accounts of six percent, or even five percent? At a 5% rate-of-return, the City of South Pasadena would have to pay an unfunded contribution of $6.2 million, along with a normal contribution of $2.8 million.

These scenarios are not outlandish. Most everyone hopes America and the world are just entering a wondrous “long boom” of peace and prosperity, ushered in by ongoing global stability and technological innovations. But the momentum of history is not predictable. Imagine if there was an era of deflation. It has happened before and it can happen again. The following chart shows how that might play out in the City of South Pasadena. Notice how at a 4% rate-of-return projection, in 2017 the City of South Pasadena would have had to pay CalPERS $9.8 million; at 3%, $11.4 million.

City of South Pasadena  –  FYE 6/30/2017
Estimated Pension Payments and Pension Debt at Various Rate-of-Return Projections

And what about the rest of California? How would a downturn affect all of California’s public employee pension systems, the agencies they serve, and the taxpayers who fund them? In a CPC analysis published earlier this year, “How to Assess Impact of a Market Correction on Pension Payments,” the following excerpt provides an estimate:

“If there is a 15% drop in pension fund assets, and the new projected earnings percentage is lowered from 7.0% to 6.0%, the normal contribution will increase by $2.6 billion per year, and the unfunded contribution will increase by $19.9 billion. Total annual pension contributions will increase from the currently estimated $31.0 billion to $68.5 billion.”

That’s a lot of billions. And as already noted, a 15% drop in the value of invested assets and a reduction in the estimated average annual rate-of-return from 7.0% to 6.0% is by no means a worst case scenario.

To-date, meaningful pension reform has been thwarted by powerful special interests, most notably pension funds and public sector unions, but also many financial sector firms who profit from the status quo. But a case to be decided next year by the California Supreme Court, Cal Fire Local 2881 v. CalPERS, may provide local agencies with the legal right to make more sweeping changes to pension benefits. The outcome of that ruling, combined with growing public pressure on local elected officials, may offer relief. For this reason, it may well be that raising taxes and cutting services in order to fund pensions may be a false choice.

REFERENCES

CalPERS Annual Valuation Reports – main search page
CalPERS Annual Valuation Report – South Pasadena, Miscellaneous Employees
CalPERS Annual Valuation Report – South Pasadena, Safety Employees
CalPERS Annual Valuation Report – South Pasadena, Miscellaneous Employees (PEPRA)
CalPERS Annual Valuation Report – South Pasadena, Safety Employees, Fire (PEPRA)
CalPERS Annual Valuation Report – South Pasadena, Safety Employees, Police (PEPRA)

Moody’s Cross Sector Rating Methodology – Adjustments to US State and Local Government Reported Pension Data (version in effect 2018)

California Pension Tracker (Stanford Institute for Economic Policy Research – California Pension Tracker

Transparent California – main search page
Transparent California – salaries for South Pasadena
Transparent California – pensions for South Pasadena

The State Controller’s Government Compensation in California – main search page
The State Controller’s Government Compensation in California – South Pasadena payroll
The State Controller’s Government Compensation in California – raw data downloads

California Policy Center – Resources for Pension Reformers (dozens of links)
California Policy Center – Will the California Supreme Court Reform the “California Rule?” (latest update)

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Public needs to keep eye on pensions, but suit says CalPERS withholds core data

In the Last 25 Years, Sonoma County’s Pension Liability Rose ELEVEN TIMES Faster Than Tax Revenues

In August of last year retired attorney George Luke sued the Sonoma County Employees Retirement Association (SCERA) and the Board of Supervisors (BOS) because according to County records they did not follow the law when pensions were increased in 2002 and 2003. According to the law, before increasing pension benefits the supervisors are required to (1) hire an actuary to determine the future annual cost of the increase, (2) enact by majority vote a board resolution adopting the new formulas and (3) present the cost to the citizens at a regular BOS meeting so they would have the ability to know how their tax dollars are being spent. None of these requirements were even minimally met and that is why Luke sued.

Growth of Sonoma County Pension Liability vs Other Indicators

What is really appalling is documents obtained by my organization, New Sonoma, just 2 years ago proved it was not the BOS that enacted these increases at all, but a closed door settlement of a lawsuit between the employee unions and SCERA over what pay items should be considered pensionable. Here is how it happened.

In 1998 to settle another lawsuit brought by the unions (they have sued the county many times) SCERA added 45 additional pay items to pensionable pay, but the unions sued again over 2 items the unions thought should also have also been considered pensionable, the employer pickup of the employees’ pension contribution and their health insurance premiums. As part of the settlement somehow new formulas, which SCERA cannot legally change, became part of the settlement.

There’s more. The agreement struck between the employee unions and the supervisors required the Safety employees to pay half the cost of the increase and the non-safety employees to pay 100% of the cost. But because costs were underestimated by SCERA’s actuary, the additional employee contributions have fallen well short of the amount needed to avoid shifting the cost to taxpayers. This has been admitted by the supervisors and even former assembly member and current SEIU negotiator Michael Allen who said instead of the increased employee contribution being 5% it should have been 20% of salary. His estimate is exactly what mine is and if true, the county would have $70 million more each year to spend on basic services like road and infrastructure maintenance, which has about a $1 billion backlog to go along with the $1.1 billion unfunded pension and retiree healthcare liability.

Unfortunately, George lost the first round of his suit because Sonoma County judge Rene Chouteau ruled that even if the County did not follow the law it did not matter because the 3-year statute of limitations had been exceeded, which some might think is a strange ruling when the violation was failure to notify citizens of the increase and there is no resolution adopting the increase (so it never really happened). The plan now is to appeal the ruling because case law indicates every time a new check is written for an illegal pension amount, the statute of limitations starts all over again.

Why should county employees and retirees be worried? As the chart indicates, these illegal increases caused pension liabilities to grow 772 percent from 1993 to 2017 — a rise that was eleven times more than the 66 percent increase in Government Fund revenues during the same period.

The bottom line is that what can’t continue won’t and the longer the supervisors and unions wait to reform the system, the more drastic cuts to pensions will eventually be.

Ken Churchill is the Director of New Sonoma, and organization of financial experts and citizens concerned with the finances and governance of Sonoma County. More information can be found at www.newsonoma.org.

REFERENCES

Here is a link to the full text of the amended complaint:
George Luke Vs. Sonoma County

Here is a link to the exhibits for the lawsuit:
George Luke Vs. Sonoma County Exhibits for Original Complaint

Here is a link to the exhibits for amended complaint:
George Luke Vs. Sonoma County Exhibits for Amended Complaint

Here is the article that appeared in the Press Democrat:
http://www.pressdemocrat.com/news/7471405-181/lawsuit-targets-enhanced-pension-benefits?artslide=0

California is not creating jobs fast enough to support tax increases for pensions

On a superficial level, things look pretty good in California. Sure, we have big problems with wildfires and other periodic disasters, but the state’s finances have made a strong recovery since the depths of the recession. Indeed, Gov. Brown has repeatedly touted the multi-billion-dollar surplus and the state’s balanced budget.

But objective assessments from government experts and academicians have warned of troubling aspects of the state’s financial condition. These include mega projects we can’t pay for, business flight out of California, unfunded pension obligations in the hundreds of billions of dollars, a state government that is growing much faster than population and inflation combined and a dysfunctional political system.

Close analysis reveals that California is like a home with a fresh coat of paint but a crumbling foundation. It may look pretty, but there are serious problems that are not readily apparent.

One area where there is a gulf between superficial appearance and reality is in California labor statistics. Here again, on the surface, the state’s 4.2 percent unemployment rate looks very good — and it is. During the depths of the recession, the state hit a high of 12.2 percent unemployment and tens of thousands of Californians were suffering. There’s no denying that we’ve seen a vast improvement.

But there are metrics beyond the simple unemployment rate that must be taken into consideration to fully comprehend the health of California’s labor force. A recent report from the California Center for Jobs and the Economy has troubling news: “California’s labor force grew only 16,922 over the 12 months ending July 2018, or 0.1 percent growth. The U.S. as a whole grew 1.8 million — a 1.1 percent expansion.” In other words, California’s labor force has seemingly hit a plateau — an unusual occurrence given the strength of the national economy.

When it was coming out of the recession, California was a job-creation machine. Indeed, for many quarters it was producing more jobs than economic powerhouses like Texas. But some context is necessary here. Because California was harder hit in the recession, we basically had nowhere to go but up. That gave the appearance that California was outperforming other states in job growth when, in truth, we had more ground to make up.

Some other figures from the California Center are equally disturbing, such as the fact that we are not creating jobs as fast as we were when coming out of the recession: “Between July 2017 and July 2018, Bureau of Labor Statistics (BLS) data shows the total number of employed in California increased by 120,600 (seasonally adjusted), or 4.9 percent of the total net employment gains in this period for the U.S. Based on the total numbers, California dropped to 5th place behind Texas (which has a civilian working-age population only 69 percent as large as California’s), Florida (55 percent as large), Massachusetts, and Georgia. Measured by percentage change in employment over the year, California dropped to 36th highest. Adjusted for working-age population, California dropped to 36th as well.”

Moreover, there is significant concern over the types of jobs being created: “Nearly half (48 percent) of net jobs growth since the recession has been in the lower-wage industries. For the 12 months ending July 2018, lower-wage industries accounted for over a quarter (28 percent) of new jobs, while middle-class blue-collar jobs produced over a quarter (30 percent) as construction levels remained higher compared to prior years.”

Diving into employment numbers isn’t that exciting for the average voter, but this is important because California will need a growing –— not stagnant — workforce that will share the burden of paying down the state’s prodigious level of debt — particularly all the pension obligations our politicians have committed us to. As explained by the California Center’s report, “While workers elsewhere continue to return to the workforce, California’s continued low rate has implications for future growth in the state, including the ability to sustain jobs expansion as fewer workers are available and continued effects on state and local budgets for higher social program spending compared to other states.”

Translated, this simply means we need more people working in well-paying jobs if California hopes to avoid insolvency.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

Towards a Grand Bargain on California Water Policy

When it comes to water policy in California, perhaps the people are more savvy than the special interests. Because the people, or more precisely, the voters, by huge majorities, have approved nine water bonds in the past 25 years, totaling $27.1 billion. It is likely they’re going to approve another one this November for another $8.9 billion.

The message from the people is clear. We want a reliable supply of water, and we’re willing to pay for it. But the special interests – or whatever you want to call the collection of politicians, unelected bureaucrats with immense power, and other stakeholders who actually decide how all this money is going to be spent – cannot agree on policy. A recent article in the Sacramento Bee entitled “Why San Francisco is joining Valley farmers in a fight over precious California water,” says it all. “Precious California water.” But what if water were so abundant in California, it would no longer be necessary to fight over it?

As it is, despite what by this time next year is likely to be $36 billion in water bonds approved by voters for water investments since 1996, the state is nowhere close to solving the challenge of water scarcity. As explained in the Sacramento Bee, at the same time as California’s legislature has just passed long overdue restrictions on unsustainable groundwater withdrawals, the political appointees on the State Water Resources Control Board are about to enact sweeping new restrictions on how much water agricultural and municipal consumers can withdraw from the Sacramento and San Joaquin rivers.

This is a perfect storm, and every conservation, recycling and storage project currently funded or proposed will not make up the shortfall. In 2002, well before these new restrictions were being contemplated, the California Dept. of Water Resources issued an authoritative study, “Averting a California Water Crisis,” that estimated the difference between demand and supply at between two and six million acre feet per year by 2020. An impressive response from the public during the most recent drought, combined with some investment in water infrastructure has narrowed that gap. But the squeeze is ongoing, with tougher challenges and tradeoffs ahead.

Abundance vs Scarcity

When thinking about solutions to California’s water challenges, there is a philosophical question that has to be addressed. Is it necessary to persistently emphasize conservation over more supplies of water? Is it necessary to always perceive investments in more supplies of water as environmentally unacceptable, or is it possible to decouple, or mostly decouple, environmental harm from investment in more water supplies? Is it possible that the most urgent environmental priorities can be addressed by increasing the supply of water, even if investing in more water supplies also creates new, but lessor, environmental problems?

This philosophical question takes on urgent relevance when considering not only the new restrictions on water withdrawals that face Californians, but also in the context of another great philosophical choice that California’s policy makers have made, which is to welcome millions of new immigrants from across the world. What sort of state are we inviting these new residents to live in? How will we ensure that California’s residents, eventually to number not 40 million, but 50 million, will have enough water?

It is this reality – a growing population, a burgeoning agricultural economy, and compelling demands to release more water to threatened ecosystems – that makes a grand political water bargain necessary for California. A bargain that offers a great deal for everyone – more water for ecosystems, more water for farmers, more water for urban consumers – because new infrastructure will be constructed that provides not incremental increases, but millions and millions of acre feet of new water supplies.

The good news? Voters are willing to pay for it.

How to Have it All – A Water Infrastructure Wish List

When considering what it would take to actually have water abundance again in California, the first step is to try to determine the investment costs, imagining a best case scenario where every good idea got funded. Here’s a stab at that list, not differentiating between local, state and federal projects. These are very approximate numbers, rounded upwards to the nearest billion:

Projects to Increase Supplies of Water

(1) Build the Sites Reservoir (annual yield 0.5 MAF) – $5.0 billion.

(2) Build the Temperance Flat Reservoir (annual yield 0.25 MAF) – $3.0 billion.

(3) Raise the height of the Shasta Dam (increased annual yield 0.5 MAF) – $2.0 billion.

(4) So Cal water recycling plants to potable standards with 1.0 MAF capacity – $7.5 billion.

(5) So Cal desalination plants with 1.0 MAF capacity – $15.0 billion.

(6) Desalination plants on Central and North coasts with 0.5 MAF capacity – 7.5 billion

(7) Central and Northern California water recycling plants to potable standards with 1.0 MAF capacity – $7.5 billion.

(8) Facilities to capture runoff for aquifer recharge (annual yield 0.75 MAF) – $5.0 billion.

Total – $52.5 billion. Increased supply – 5.5 MAF.

Projects to Increase Resiliency of Water Distribution Infrastructure

(9) Retrofit every dam in California to modern standards, including Oroville and San Luis – $5.0 billion.

(10) Aquifer mitigation to eliminate toxins with focus on Los Angeles Basin – $7.5 billion.

(11) Retrofit of existing aqueducts – $5 billion.

(12) Seismic retrofits to levees statewide, with a focus on the Delta – $7 billion.

Total – $24.5 billion.

The total of all these projects, $77 billion, is not accidental. That happens to be the latest best case, low-ball estimate for California’s completed high speed rail project. Without belaboring the case against high speed rail, two comparisons are noteworthy.

First, an ambitious program to create water abundance in California and water infrastructure resiliency in California based on this hypothetical budget is achievable. These numbers are deliberately rounded up, and the final costs might actually be lower, whereas it is extremely unlikely that California’s high speed rail project can be completed for $77 billion.

Second, because people will actually consume these new quantities of water that are being supplied and delivered, private financing will be attracted to significantly reduce the taxpayer’s share.

The Impact of a $77 billion Investment on Water Supply, Resiliency, and Ecosystems

As itemized above, at a capital cost of $52.5 billion, the total amount of water that might be added to the California’s statewide annual water budget is 5.5 million acre feet.

This amount of water would have a staggering impact on the demand vs. supply equilibrium for water. It is nearly equal to the total water consumed per year by all of California’s urban centers. Implementing this plan would mean that nearly all of the water that is currently diverted to urban areas could be instead used to ensure a cool, swift flow in California’s rivers, while preserving current allocations for agriculture. The options for environmentalists would be almost unbelievable. Restore wetlands. Revive the Delta. Refill the shrinking Salton Sea.

The environmentalist arguments against the three dams are weak. Shasta Dam is already built. The impact of expanding the Shasta Dam is purportedly the worst on McCloud creek, where it will affect “nearly a mile” of what was “once a prolific Chinook salmon stream,” (italics added). That negative impact, which seems fairly trivial, has to be balanced against the profound benefit of having another 500,000 acre feet of water available every summer to generate pulses of swift, cool water in the Sacramento River. The proposed Temperance Flat Reservoir is proposed on a stretch of the San Joaquin River that already has a smaller dam. The Sites Reservoir is an offstream reservoir that will not interfere with the Sacramento River.

The environmental benefits of these dams are not limited to their ability to ensure supplies of fresh water for California’s aquatic ecosystems. They can also be used to store renewable electricity, by pumping water from a forebay at the foot of the dam into the reservoir during the day, when solar energy already brings the spot price of electricity down to just a few cents per kilowatt-hour, then generating hydro-electric power later in the evening when peak electrical demand hits the grid. This well established technology has already been implemented on dams throughout California, and remains one of the most cost-effective ways to store clean, but intermittent, renewable energy. It will also be a profit center for these dams.

The environmentalist arguments against desalination are also weak. The energy required to desalinate seawater is comparable to the energy necessary to pump it from Northern California to the Los Angeles Basin. The outfall can be discharged under pressure a few miles from shore, where it is instantly disbursed in the California current. The impact from the intakes is grossly overstated by environmentalists, when considering that even if all of these contemplated desalination plants were built, the water they would intake is only a fraction of the amount of water taken in for decades by California’s power plants that are sited on the coast and use seawater for cooling.

As for the Delta, the primary environmental threat to that ecosystem is the chance that an earthquake destroys the hundreds of miles of levees, causing the agricultural areas behind those levees to be flooded. Not only would agricultural contaminants enter the water of the Delta, but the rush of water flooding into the areas behind the levees would cause salt water from the San Francisco Bay to rush in right behind, creating conditions of salinity that would take years to remove, if ever.

This is why investing in levee upgrades and a Delta Smelt hatchery is a preferable solution to the Delta tunnels. The tunnels would ensure a resilient supply of water from north to south, but the Delta would still be vulnerable to levee collapse. Levee upgrades and a Delta Smelt hatchery would accomplish both goals – resiliency of the water supply and of the Delta ecosystem. Moreover, the presence of massive water recycling and desalination facilities in Southern California would take a great deal of pressure off how much water would need to be transported through the Delta from north to south.

How to Finance $77 Billion for Water Infrastructure

Funding capital projects depends on three possible sources: operating budgets, general obligation bonds, or revenue bonds. Operating budgets, which used to help pay for capital projects, and which ought to help pay for capital projects, will never be balanced until real pension reform occurs. So for the most part, operating budgets are not a source of funds.

A useful way to differentiate between general obligation bonds and revenue bonds are that the general obligation bonds impose a progressive tax on Californians, since wealthy individuals pay about 60% of all tax revenues in California. Revenue bonds, on the other hand, because they are serviced through sales of, for example, water produced by a desalination plant, are regressive. This is because all consumers see these costs included in their utility rates, and utility bills constitute a far greater proportion of the budget for a low income household.

The Grand Bargain – Creating Water Abundance in California
(MAF = million acre feet)

By financing water infrastructure through a combination of revenue bonds and general obligation bonds, instead of solely through revenue bonds, water can remain affordable for ordinary Californians. The $24.5 billion portion of the $77.0 billion wish list, the funds for dam, aqueduct, and levee retrofits, along with aquifer mitigation, are not easily serviced through revenue bonds. A 30 year general obligation bond for $24.5 billion with an interest rate of 5% would cost California’s taxpayers $1.6 billion per year. Some of these projects, to the extent they are improving water delivery to specific urban and agricultural consumers, might be funded by bond issuances that would be serviced by the agencies most directly benefiting.

To claim that 100% of the revenue producing water projects can be financed through revenue bonds is more than theoretical. The Carlsbad Desalination Plant financing costs, principle and interest payments a nearly $1.0 billion for the plant’s construction, are paid by the contractor that built and operates the plant, with those payments in-turn funded through the rates charged to the consumers of the water. The contractor also retains an equity stake in the project, meaning that additional capital costs incurred privately are also funded via a portion of the rates charged to consumers.

Some of the revenue producing assets on the grand bargain wish list may also have a portion of them paid for by general obligation bonds. Determining that mix depends on the consumer. For example, a revenue bond for the reservoir projects may be applied to agricultural consumers who are willing to pay well above historical rates to have a guaranteed source of water for their orchards, which have to survive through dry years.

For urban consumers in particular, making the more expensive projects financially palatable may require general obligation bonds to cover part of the costs, so the remaining costs are affordable for ratepayers. For example, desalination is a relatively expensive way to produce water, making it harder to finance 100% with revenue bonds. But without desalination, wastewater recycling and runoff capture are not sufficient local sources of water in places like Los Angeles. The overall benefit to Californians of adding another 1.5 million acre feet per year to the state’s water supply, using desalination which is impervious to droughts, may be worth having some of its cost financed with general obligation bonds.

To fund roughly 50% of the revenue producing water supply infrastructure ($26.2 billion) and 100% of the water resiliency and distribution infrastructure ($24.5 billion) on this list would cost taxpayers about $3.0 billion per year. While this might strike some as an unthinkable amount to even consider, these projects meet all the criteria for so-called “good debt.” Constructing them all would solve California’s challenge of water scarcity, possibly forever. All of the projects are assets yielding ongoing and long-term benefits that will outlast the term of the financing. At the same time, water would become so abundant in California that prioritizing water allocations to revive ecosystems would no longer provoke bitter opposition. And California’s residents would live again in a state where taking a long shower, planting a lawn, and doing other water-intensive activities that are considered normal in a developed nation, would once again become affordable and normal.

Other Ways to Help Pay for Water Abundance in California

Enable and Expand Water Markets

Even if a grand bargain is struck between environmentalists, farmers, and water districts, and massive investments are made to increase the supply of water, enabling and expanding water markets will help optimize the distribution of available water resources. Similarly, reforming California’s labyrinthine system of water rights might also help, by making it easier for owners of water rights to sell their allocations. Fostering water markets while protecting water rights have interrelated impacts, and ideally can result in more equitable, appropriate water pricing across the state. It might also help make it unnecessary to impose punitive tiered rates or rationing on household consumers.

Reform Environmentalist Barriers to Development

CEQA, or the California Environmental Quality Act, is a “statute that requires state and local agencies to identify the significant environmental impacts of their actions and to avoid or mitigate those impacts, if feasible.” While the intent behind CEQA is entirely justifiable, in practice it has added time and expense to infrastructure projects in California, often with little if any actual environmental benefit. An excellent summary of how to reform CEQA appeared in the Los Angeles Times in Sept. 2017, written by Byron De Arakal, vice chairman of the Costa Mesa Planning Commission. It mirrors other summaries offered by other informed advocates for reform and can be summarized as follows:

  • End duplicative lawsuits: Put an end to the interminable, costly legal process by disallowing serial, duplicative lawsuits challenging projects that have completed the CEQA process, have been previously litigated and have fulfilled any mitigation orders.
  • Full disclosure of identity of litigants: Require all entities that file CEQA lawsuits to fully disclose their identities and their environmental or, increasingly, non-environmental interest.
  • Outlaw legal delaying tactics: California law already sets goals of wrapping up CEQA lawsuits — including appeals — in nine months, but other court rules still leave room for procedural gamesmanship that push CEQA proceedings past a year and beyond. Without harming the ability of all sides to prepare their cases, those delaying tactics could be outlawed.
  • Prohibit rulings that stop entire project on single issue: Judges can currently toss out an entire project based on a few deficiencies in environmental impact report. Restraints can be added to the law to make “fix-it ticket” remedies the norm, not the exception.
  • Loser pays legal fees: Currently, the losing party in most California civil actions pays the tab for court costs and attorney’s fees, but that’s not always the case with CEQA lawsuits. Those who bring CEQA actions shouldn’t be allowed to skip out of court if they lose without having to pick up the tab of the prevailing party.

Find Other Ways to Reduce Construction Costs

The Sorek desalination plant, commissioned in Israel in 2015, cost $500 million to build and desalinates 185,000 acre feet of water per year. Compared to Carlsbad, which also began operations in 2015, Sorek came online for an astonishing one-sixth the capital cost per unit of capacity. Imagine if the prices Israelis pay to construct desalination plants could be achieved in California. Instead of spending $15 billion to build 1.0 million acre feet of desalination capacity, we would spend less than $3.0 billion. How did they do this?

The bidding process itself adds unnecessary costs to public infrastructure projects. Moving to a design-build process could significantly reduce duplicative work during the plant’s engineering phase. Project labor agreements are another practice that at the very least deserve serious reconsideration. Would it be possible objectively evaluate the impact of project labor agreements, and determine to what extent those mandates increase costs?

What about economies of scale? If ten desalination plants were commissioned all at once, wouldn’t there be an opportunity for tremendous unit savings? What about creativity? Elon Musk, who has disrupted the aerospace industry by building rockets at a fraction of historical prices, said “the construction industry is one of the only sectors in our economy that has not improved its productivity in the last 50 years.” Is he even partly correct? Is that worth looking into?

Shift Government Spending Priorities

Cancel High Speed Rail: The most obvious case of how to redirect funds away from something of marginal value into water infrastructure, which is something with huge public benefit, is to cancel the bullet train. The project is doomed anyway, because it will never attract private capital. But what if Californians were offered the opportunity to preserve the planned bond issuances for high speed rail, tens of billions of capital, but with a new twist? If voters were asked to redirect these funds away from high speed rail and instead towards creating water abundance through massive investment in water infrastructure, there’s a good chance they’d vote yes.

Cancel the Delta Tunnels: By investing in levee hardening, the Delta’s ecosystems can be fortified against a severe earthquake. Reducing the possibility of levee failure protects the Delta ecosystems from their worst environmental threat at the same time as it protects the ability to transfer water from north to south. Investing in hatcheries to increase the population of the threatened Smelt is a far more cost-effective way of safeguarding the survival of that species. And investing in infrastructure on the Southern California coast to make that region water independent greatly reduces the downside of a disruption to water deliveries through the Delta. Canceling the Delta Tunnels would save $20 billion, money that would go a long way towards paying for other vital water infrastructure.

Reform Pensions: The biggest out of control budget item, by far among California’s state and local agencies, is the cost of public sector pensions. A California Policy Center analysis released earlier this year, based on public announcements from CalPERS, estimated that the total employer payments for pensions for California’s state and local government employees is set to nearly double, from $31 billion in 2018 to $59 billion by 2024. And that is a best case baseline. If there is a severe market correction, those required contributions will go up further. No discussion of how to find money for other government operations can take place without understanding the role of pension costs in creating budget constraints.

Reduce State Spending: Other ways to shift spending priorities in California, while worth a discussion, are mostly controversial. Returning the administrator to faculty ratio in California’s UC and CalState systems to its historical level of 1:2 instead of the current 1:1 would also save $2.0 billion per year. Outsourcing CalTrans work and eliminating redundant positions could save $2.5 billion per year. Reducing just state agency headcount and pay/benefits by 20% would save $6.5 billion per year. Just enacting part of that, incremental pension reform for state workers, could stop the runaway cost increases that are otherwise inevitable.

California’s state budget this year has broken $200 billion for the first time. Of that, general fund spending is at $139 billion, also a record. Revenues, however, have set records as well. The rainy day fund is full, and an extra deposit of $2.6 billion has it overflowing. Why not spend that $2.6 billion on water infrastructure? For that matter, why not spend all of the $1.4 billion of cap and trade revenue on water infrastructure?

Financing more water infrastructure will more likely come via public and private debt financing. But redirecting intended future borrowings, in particular for high speed rail and for the Delta Tunnels, could cover most if not all of the infrastructure investments necessary to deliver water abundance to Californians. And at the least, redirecting funds from government operating budgets can defray some of the operating costs, if not some of the capital costs.

Work to Build a Consensus

How many more times will California’s voters approve multi-billion dollar water bonds? The two passed in the last four years, plus the current one set for the November ballot, raise $20 billion, but only $2.5 billion of that goes to reservoir storage. Only another $3.3 billion more goes to any type of supply enhancements – mostly to develop aquifer storage or fund water recycling. Meanwhile, consumers are being required to submit to permanent water rationing, and dubious projects are being funded to save water. Artificial turf is a good example. There isn’t a coach in California who wants their athletes to compete on these dangerous surfaces. On a hot day in Sacramento, the temperature on these “fields” can reach 150 degrees. They are actually keeping sprinkler systems operating on these horrendous boondoggles, just to reduce the deadly heat buildup.

Credibility with voters remains intact to-date, but cannot be taken for granted. If a grand bargain on California’s water future is struck, it will need to promise, then deliver, water abundance to California’s residents.

Change the Conventional Wisdom

California’s current policies have stifled innovation and created artificial scarcity of literally every primary necessity – not just water, but housing, energy and transportation. Each year, to comply with legislative mandates, California’s taxpayers are turning over billions of dollars to attorneys, consultants and bureaucrats, instead of paying engineers and heavy equipment operators to actually build things. The innovation that persists despite California’s unwelcoming policy environment is inspiring.

California’s policymakers have adhered increasingly to a philosophy of limits. Less water consumption. Less energy use. Urban containment. Densification. Fewer cars and more mass transit. But it isn’t working. It isn’t working because California has the highest cost of living in the nation. Using less water and energy never rewards consumers, because the water and energy never were the primary cost within their utility bills – the cost of the infrastructure and overhead was the primary cost.

Changing the conventional wisdom applies to much more than water. It is a vision of abundance instead of scarcity that encompasses every vital area of resource consumption. A completely different approach that could cost less than what it might cost to fully implement scarcity mandates. An approach that would improve the quality of life for all Californians. Without abandoning but merely scaling back the ambition of new conservation and efficiency mandates, embrace supply oriented solutions as well. Build wastewater recycling and desalination plants on the Pacific coast, enough of them to supply California’s massive coastal cities with fresh water. Instead of mandating water rationing for households, put the money that would have been necessary to retrofit all those homes into new ways to reuse water and capture storm runoff.

Paying for all of this wouldn’t have to rely exclusively on public funds. Private sector investment could fund a large percentage of the costs for new water infrastructure. Water supplies could be even more easily balanced by permitting water markets where farmers could sell their water allotments without losing their grandfathered water rights. If the bidding process and litigation burdens were reduced, massive water supply infrastructure could be constructed at far more affordable prices.

The Grand Bargain

Water abundance in California is achievable. The people of California would welcome and support a determined effort to make it a reality. But compromise on a grand scale is necessary to negotiate a grand bargain. Environmentalists would have to accept a few more reservoirs and desalination plants in exchange for plentiful water allocations to threatened ecosystems. Farmers would have to pay more for water in exchange for undiminished quantities. While private financing and revenue bonds could cover much of the expense, taxpayers would bear the burden of some new debt – but in exchange for permanent access to affordable, secure, and most abundant water.

 *  *  *

This is the third and final part of an investigation into California’s water future. Part one is “How Much California Water Bond Money is for Storage?,” and part two is “How to Make California’s Southland Water Independent for $30 Billion.” Edward Ring is a co-founder of the California Policy Center and served as its first president.

 

Don’t believe the hysteria: There are other ways for public workers to get benefits

How to Make California’s Southland Water Independent for $30 Billion

The megapolis on California’s southern coast stretches from Ventura County on the northern end, through Los Angeles County, Orange County, down to San Diego County on the border with Mexico. It also includes the western portions of Riverside and San Bernardino counties. Altogether these six counties have a population of 20.5 million residents. According to the California Department of Water Resources, urban users consume 3.7 million acre feet of water per year, and the remaining agricultural users in this region consume an additional 700,000 acre feet.

Much of this water is imported. In an average year, 2.6 million acre feet of water is imported by the water districts serving the residents and businesses in these Southland counties. The 701 mile long California Aqueduct, mainly conveying water from the Sacramento River, contributes 1.4 million acre feet. The 242 mile long Colorado River Aqueduct adds another 1.0 million acre feet. Finally, the Owens River on the east side of the Sierras contributes 250,000 acre feet via the 419 mile long Los Angeles Aqueduct.

California’s Plumbing System
The major interbasin systems of water conveyance, commonly known as aqueducts

California’s Overall Water Supplies Must Increase

Californians have already made tremendous strides conserving water, and the potential savings from more stringent conservation mandates may not yield significant additional savings. Population growth is likely to offset whatever remaining savings that may be achievable via additional conservation.

Meanwhile, the state mandated water requirements for California’s ecosystems continue to increase. The California State Water Board is finalizing “frameworks” that will increase the minimum amount of flow required to be maintained in the Sacramento and San Joaquin rivers order to better protect fish habitat and reduce salinity in the Delta. And, of course, these rivers, along with the Owens and Colorado rivers, are susceptible to droughts which periodically put severe strain on water users in California.

At about the same time, in 2015, California’s legislature began regulating groundwater withdrawals. This measure, while long overdue, puts additional pressure on urban and agricultural users.

California’s water requirements for healthy ecosystems, a robust and growing farm economy, as well as a growing urban population, are set to exceed available supply. Conservation cannot return enough water to the system to fix the problem.

How Can Water Supplies Increase?

In Southern California, runoff capture is an option that appears to have great potential. Despite its arid climate and perennial low rainfall, nearly every year a few storm systems bring torrential rains to the South Coast, inundating the landscape. Until the Los Angeles River was turned into a gigantic culvert starting in 1938, it would routinely flood, with the overflow filling huge aquifers beneath the city. Those aquifers remain, although many are contaminated and require mitigation. Runoff harvesting for aquifer storage represents one tremendous opportunity for Southern Californians to increase their supply of water.

The other possibilities are sewage recycling and desalination. In both cases, Southern California already boasts some of the most advanced plants in the world. The potential for these two technologies to deliver massive quantities of potable water, over a million acre feet per year each, is now predicated more on political and financial considerations than technological challenges.

Recycling Waste Water

Orange County leads the United States in recycling waste water. The Orange County Sanitation District treats 145,000 acre feet per year (130 million gallons per day – “MGD”), sending all of it to the Orange County Water District’s “Ground Water Replenishment System” plant for advanced treatment. The GWRS plant is the biggest of its kind in the world. After being treated to potable standards, 124,000 acre feet per year (110 million GPD), or 85 percent of the waste water, is then injected into aquifers to be stored and pumped back up and reused by residents as potable water. The remainder, containing no toxins and with fewer total dissolved solids than seawater, is discharged harmlessly into the ocean.

Currently the combined water districts in California’s Southland discharge about 1.5 million acre feet (1.3 billion GPD) of treated wastewater each year into the Pacific Ocean. Only a small percentage of this discharge is the treated brine from recycled water. But by using the advanced treatment methods as are employed in Orange County, 85% of wastewater can be recycled to potable standards. This means that merely through water reuse, there is the potential to recycle up to another 1.2 million acre feet per year.

Needless to say, implementing a solution at this scale would require major challenges to be overcome. Currently California’s water districts are only permitted to engage in “indirect potable reuse,” which means the recycled water must be stored in an aquifer or a reservoir prior to being processed as drinking water and entering the water supply. By 2023, it is expected the California Water Board will have completed regulations governing “direct potable reuse,” which would allow recycled water to be immediately returned to the water supply without the intermediate step of being stored in an aquifer or reservoir. In the meantime, it is unlikely that there are enough uncontaminated aquifers or available reservoirs to store the amount of recycled water that could be produced.

Desalinating Seawater

The other source of new water for Southern California, desalination, is already realized in an operating plant, the Carlsbad Desalination Plant in San Diego County. This plant produces 56,000 acre feet per year (50 MGD) of fresh water by processing twice that amount of seawater. It is the largest and most technologically advanced desalination plant in the Western Hemisphere. It is co-located with the Encina Power Station, a facility that uses far more seawater per year, roughly ten times as much, for its cooling systems. The Carlsbad facility diverts a portion of that water for desalination treatment, then returns the saltier “brine” to the much larger outflow of cooling water at the power plant.

Objections to desalination are many, but none of them are insurmountable. The desalination plant proposed for Huntington Beach, for example, will not have the benefit of being co-located with a power plant that consumes far more seawater for its cooling system. Instead, this proposed plant – which will have the same capacity as the Carlsbad plant – will use a large array of “wet filters” situated about 1,500 feet offshore, on the seabed about 40 feet below the surface, to gently intake seawater that can be pumped back to the plant without disrupting marine life. The outgoing brine containing 6 percent salt (compared to 3% in seawater) will be discharged under pressure from an underwater pipe extending about 1,800 feet offshore. By discharging the brine under pressure, it will be instantly disbursed and immediately dissipated in the powerful California current.

While desalination is considered to be energy intensive, a careful comparison of the energy cost to desalinate seawater reveals an interesting fact. It takes a roughly equivalent amount of electricity to power the pumps on the California aqueduct, where six pumping stations lift the water repeatedly as it flows from north to south. To guarantee the water flows south, the California aqueduct is sloped downward by roughly one foot per mile of length, meaning pump stations are essential. The big lift, of course, is over the Tehachapi Mountains, which is the only way to import water into the Los Angeles basin.

Barriers to Implementation – Permitting & Lawsuits

The technological barriers to large scale implementation of water recycling and desalination, while significant, are not the primary impediments. Permitting and financing are far bigger challenges. Moreover, financing costs for these mega projects become more prohibitive because of the difficulties in permitting.

The process necessary to construct the proposed Huntington Beach Desalination Plant is illustrative of just how difficult, if not impossible, it is to get construction permits. The contractor has been involved in the permitting process for 16 years already, and despite significant progress to-date, still expects approval, if it comes, to take another 2-3 years.

One of the problems with permitting most infrastructure in California is that several agencies are involved. These agencies can actually have conflicting requirements. Applicants also end up having to answer the same questions over and over, because the agencies don’t share information. And over the course of decades or more, the regulations change, meaning the applicant has to start the process over again. Compounding the difficulties for applicants are endless rounds of litigation, primarily from well-funded environmentalist organizations. The failure to-date of California’s lawmakers to reform CEQA make these lawsuits potentially endless.

Barriers to Implementation – Financing

Even if permitting were streamlined, and all technical challenges were overcome, it would be a mistake to be glib about financing costs. Based on the actual total cost for the Carlsbad desalination plant, just under $1.0 billion for a capacity of 56,000 acre feet per year, the capital costs to desalinate a million acre feet of seawater would be a daunting $18.0 billion. On the other hand, with permitting reforms, such as creating a one-stop ombudsman agency to adjudicate conflicting regulations and exercise real clout among the dozens of agencies with a stake in the permitting process, billions could be shaved off that total. Similarly, CEQA reforms could shave additional billions off the total. How much could be saved?

The Sorek desalination plant, commissioned in Israel in 2015, cost $500 million to build and desalinates 185,000 acre feet of water per year. Compared to Carlsbad, Sorek came online for an astonishing one-sixth the capital cost per unit of capacity. While there’s undoubtedly more to this story, it is also undeniable that other developed nations are able to deploy large scale desalination plants at far lower costs than here in California.

Financing costs for water recycling, while still staggering, are (at least in California) not comparable to those for desalination. The GWRS water recycling plant in Orange County was built at a capital cost of $905 million – $481 million was the initial cost, the first expansion cost $142 million, and the final expansion cost $282 million. This equates to a capital cost of $7,300 per acre foot of annual yield. If that price were to apply for new facilities to be constructed elsewhere in the southland, one million acre feet of recycling capacity could be built for $7.3 billion. Until there is direct potable reuse, however, it would be necessary to add to that cost the expense of either constructing storage reservoirs, or decontaminating aquifers for underground storage.

It’s anybody’s guess, but with reasonable reforms to contain costs, and taking into account additional investments in aquifer mitigation, a budget to make California’s Southland water independent might look like this:

  • 1.0 million acre feet from water recycling – $7.5 billion
  • 1.0 million acre feet from desalination – $15.0 billion
  • 0.5 million acre feet from runoff capture and aquifer mitigation – $7.5 billion

Total – $30 billion.
How much again is that bullet train? Water abundance in California vs. high speed rail

While runoff capture, water recycling, and desalination have the potential to make Southern California’s coastal megapolis water independent, it will take extraordinary political will and innovative financing to make it happen. The first step is for California’s voters and policymakers alike to recognize that conservation is not enough, that water supplies must be increased. Once the political will is established, it will be necessary to streamline the regulatory process, so cities, water agencies, and private contractors can pursue supply oriented solutions, at realistic prices, with a reasonable certainty that their applications will be approved.

 *   *   *

This is part two of an investigation into California’s water future. Part one is “How Much California Water Bond Money is for Storage?,” and the third and final part is “Towards a Grand Bargain on California Water Policy.” Edward Ring is a co-founder of the California Policy Center and served as its first president.

When is a political campaign neither political nor a campaign?

California law prohibits government officials from using taxpayer dollars “for the purpose of urging the support or defeat of any ballot measure.” But on February 13, in the meeting room of the Santa Ana Unified School District, school officials revealed a political campaign that began with shaping public opinion and will end in November with a district-wide vote on a bond measure that will cost residents hundreds of millions of dollars.

In rebuking San Diego’s pension initiative, state high court slams our basic voting rights

How Much California Water Bond Money is for Storage?

Californians have approved two water bonds in recent years, with another facing voters this November. In 2014 voters approved Prop. 1, allocating $7.1 billion for water projects. This June, voters approved Prop. 68, allocating another $4.0 billion for water projects. And this November, voters are being asked to approve Prop. 3, allocating another $8.9 billion for water projects. This totals $20.0 billion in just four years. But how much of that $20.0 billion is to be invested in water infrastructure and water storage?

Summaries of how these funds are spent, or will be spent, can be found on Ballotpedia for Prop. 1, 2014, Prop. 68, 2018 (June), and the upcoming Prop. 3, 2018 (November). Reviewing the line items for each of these bonds and compiling them into five categories is necessarily subjective. There are several line items that don’t fit into a single category. But overall, the following chart offers a useful view of where the money has gone, or where it is proposed to go. To review the assumptions made, the Excel worksheet used to compile this data can be downloaded here. The five categories are (1) Habitat Restoration, (2) Water Infrastructure, (3) Park Maintenance, (4) Reservoir Storage, and (5) Other Supply/Storage.

California Water Bonds, 2014-2018  –  Use of Funds
($=millions)

The Case for More Water Storage

It isn’t hard to endorse the projects funded by these water bonds. If you review the line items, there is a case for all of them. This November, voters will have a chance to approve $200 million to restore Salton Sea habitat, a sum that joins the $200 million of Salton Sea habitat restoration approved by voters in June 2018 in Prop. 68. This November, voters will have a chance to approve $150 million to turn the Los Angeles River back into a river, instead of the concrete culvert that was completely paved over between 1938 and 1960.

Who would be against projects like this? But Californians are heavy water consumers in a relatively arid state. Habitat restoration and park maintenance spending must be balanced against spending for water infrastructure. And conservation mandates must be balanced with investments in infrastructure that increase the overall supply of water. Here’s how Californians are currently managing their water:

Total Water Supply and Usage in California

As can be seen on the above table, residential water consumption represents less than 6% of California’s total water diversions. Indoor water consumption, only about half of that. Yet conservation measures imposed on California’s households are somehow expected to enable more water to be returned to the environment. Even with farmers, where conservation measures have the potential to yield far more savings, putting more irrigated land into agricultural production easily offsets those savings.

Not only does conservation fail to return sufficient water to the environment for habitat maintenance, but there is a downside in terms of system resiliency. During the last drought, when households were asked to reduce water consumption by 20%, it wasn’t an impossible request to fulfill. But as these reductions in consumption become permanent, far less flexibility remains.

California’s climate has always endured periods of drought, sometimes lasting several years. Meanwhile, the population continues to increase, farming production continues to rise, and we have higher expectations than ever in terms of maintaining and restoring healthy ecosystems throughout the state. We cannot merely conserve water. We need to also increase supplies of water. Ideally, by several million acre feet per year.

How Much California Water Bond Money is for Surface Storage?

Prop. 1, approved by voters in 2014, was called the “Water Quality, Supply, and Infrastructure Improvement Act of 2014.” It was marketed as necessary to increase water storage in order to protect Californians against droughts, and was overwhelmingly approved by over 67% of voters. But only about one-third of the money actually went to water storage, and it took nearly four years before any of those funds were allocated to specific storage projects. It was only this month, July 2018, that the California Water Commission awarded grants under their “Water Storage Investment Program.”

A review of these grants indicates that only two of them allocate funds to construct large new reservoirs. The proposed Temperance Flat Reservoir will add 1.2 million acre feet of storage. Situated south of the delta, it will be constructed on the San Joaquin River above a much smaller existing dam. It is estimated to cost $2.7 billion, and the California Water Commission awarded $171 million, only about 6% of the total required funds.

The proposed Sites Reservoir is situated north of the delta, west of the Sacramento river. It is an offstream reservoir, meaning that it will be filled using excess storm runoff pumped out of the Sacramento river during the rainy season. It is designed to store up to 1.8 million acre feet of water and is estimated to cost $5.2 billion to construct. The California Water Commission awarded $816 million, a large sum, but only about 16% of the total required funds.

Two other surface storage projects were approved, expansion of the existing Los Vaqueros and Pacheco reservoirs. Both of these reservoirs serve water consumers in the San Francisco Bay Area, both are supplied water via the California Aqueduct, and both expansion projects are estimated to cost not quite a billion dollars – $795 million for Los Vaqueros and $969 million for Pacheco. The California water commission awarded Los Vaqueros $459 million, and they awarded Pacheco $484 million.

When you consider surface storage, the total capacity of a reservoir is a critical variable, but in many ways more significant is the annual “yield.” This is the amount of water that on average, over decades, the reservoir is planned to deliver to water consumers in normal years. While the Los Vaqueros and Pacheco reservoir expansions combined will add roughly 250,000 acre feet of storage capacity, most of this added capacity is to save for drought years. Los Vaqueros may actually yield up to 35,000 acre feet per year in normal years; Pacheco may yield around 20,000 acre feet per year in normal years.

With respect to annual yields, the case for the much larger Sites and Temperance Flat reservoirs becomes more compelling. The Temperance Flat Reservoir is projected to yield 250,000 acre feet of water in normal years, the Sites Reservoir, a massive 500,000 acre feet. To put this in perspective, 750,000 acre feet represents 20% of ALL residential water consumption in California, or, put another way, each year these reservoirs will yield a quantity of water equivalent to 100% of the reductions achieved via conservation measures imposed on California’s residents during the drought. But will they ever get built?

According to spokespersons for the Sites and Temperance Flats projects, some federal funding is expected, but most of the funding will be from agricultural and urban water districts who will purchase the water (as well as the right to store surplus water in the new reservoir) as soon as its available. The projects still require congressional approval, and then will face a multi-year gauntlet of permit processes and the inevitable litigation. If all goes well, however, both of them could be built and delivering water by 2030.

How Else is Water Bond Money Being Used to Increase Water Supply?

All three of the recent water bonds had some money allocated to invest in water supply. Prop. 1 in 2014, in addition to investing $1.9 billion in surface water storage, allocated $1.4 billion to other projects intended to increase water supply. The projects they approved are either intended to store water in underground aquifers, or fund advanced water treatment and recycling technologies which have the practical effect of increasing water supply. While it isn’t clear from these groundwater storage proposals how much water they would then release in normal years, it appears that cumulatively the projects intend to eventually store as much as 1.0 million acre feet in underground aquifers.

At a combined cost total cost of under one billion, the aquifer storage projects just approved appear to be more cost effective than surface storage. It is also a critical priority to recharge California’s aquifers which have been drawn down significantly over the past several years, especially during the recent drought.

Prop. 68, the “Parks, Environment, and Water Bond” passed earlier this year, while mostly allocating its $4.0 billion to other projects, did allocate $290 million to “groundwater investments, including groundwater recharge with surface water, stormwater, and recycled water and projects to prevent contamination of groundwater sources of drinking water.”

The upcoming Prop. 3, the $8.9 billion “Water Infrastructure and Watershed Conservation Bond Initiative” that will appear on the November 2018 ballot, invests another $350 million to maintain existing, mostly small urban reservoirs, along with $200 million to complete repairs on the Oroville Dam. Prop. 3 also includes $1.6 billion to otherwise increase water storage and supply, including $400 million for wastewater recycling and $400 million for desalination of brackish groundwater.

It is important to emphasize again that all of the funds allocated in these three water bonds are paying for what are arguably worthwhile, if not critical projects. $6.3 billion for habitat restoration, $6.2 billion for water infrastructure, $1.6 billion to maintain our parks. But despite the worth of these other projects, Californians urgently need to increase their annual supply of water to ensure ecosystem health, irrigate crops, and supply urban consumers. And to address that need, out of $20 billion in water bonds passed or proposed between 2014 and this November, only $5.8 billion, less than one-third, is being used to increase water supplies.

What Other Ways Could Water Bond Money Be Used to Increase Water Supply?

Clearly the most important region to increase water supply is Southern California. Two thirds of all Californians live south of the Sacramento River Delta, while most of the rain falls on in Northern California. One way to increase California’s supply of fresh water is to build desalination plants. This technology is already in widespread use throughout the world, deployed at massive scale in Singapore, Israel, Saudi Arabia, Australia, and elsewhere. One of the newest plants worldwide, the Sorek plant in Israel, cost $500 million to build and desalinates 120,000 acre feet of water per year.

Theoretically – because capital costs in California are far higher than in most of the rest of the developed world – desalination offers a cost-effective solution to water scarcity. Uniquely, desalination creates new water, not dependent on rainfall, not requiring storage for drought years, not requiring redirecting of water from other uses. Imagine if Californians invested in desalination plants along the entire Southern California Coast. Eight desalination plants the same size as the Sorek plant would cost $4.0 billion to build if constructed for the same cost as the one in Israel cost. They could desalinate 1.0 million acre feet per year.

The energy costs for desalination have come down in recent years. Modern plants, using 16″ diameter reverse osmosis filtration tubes, only require 5 kWh per cubic meter of desalinated water. This means it would only require a 700 megawatt power plant to provide sufficient energy to desalinate 1.0 million acre feet per year. Currently it takes about 300 megawatts for the Edmonston Pumping Plant to lift one million acre feet of water from the California aqueduct 1,926 ft (587 m) over the Tehachapi Mountains into the Los Angeles basin. And that’s just the biggest lift, the California aqueduct uses several pumping stations to transport water from north to south. So the net energy costs to desalinate water on location vs transporting it hundreds of miles are not that far apart.

The entire net urban water consumption on California’s “South Coast” (this includes all of Los Angeles and Orange County – over 13 million people) is 3.5 million acre feet. It is conceivable that desalination plants producing 1.0 million acre feet of new water each year, combined with comprehensive sewage reuse and natural runoff harvesting could render the most populous region in California water independent.

Why is Infrastructure so Expensive in California?

The Carlsbad desalination plant in San Diego cost $925 million to build, and it has a capacity of 56,000 acre feet per year. That is a capital cost per acre foot of annual yield of $16,500. How is it that the Sorek desalination plant in Israel cost $500 million to build and has a capacity of 120,000 acre feet per year – a capital cost per acre foot of annual yield of only $4,100? Why did it cost four times as much to build the Carlsbad desalination plant?

This is the prevailing question when evaluating infrastructure investment in California. Why does everything cost so much more? The Sites reservoir is projected to cost $5.2 billion. An off-stream reservoir of equal size, the San Luis Reservoir, was constructed in California in the 1960s at a total cost, in 2018 dollars, of $2.3 billion. That all-in cost includes not just the dam, but also includes pumping stations, the forebay, the intertie to the California Aqueduct, and conveyances to get some of the water over the Diablo Range into the Santa Clara Valley. All of these costs (in today’s dollars) for the San Luis Reservoir, compared to the proposed Sites Reservoir, cost less than half as much. Why?

It’s easy to become enthusiastic about virtually any project that will increase our resiliency to disasters and droughts, improve our quality of life, steward our ecosystems, and hopefully create abundance of vital resources such as water. But when considering the need for these various projects, it is equally important to ask why they cost so much more here in California, and to explore ways to bring costs back down to national and international norms. We could do so much more with what we have to spend.

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This is part one of an investigation into California’s water future. Part two is “How to Make California’s Southland Water Independent for $30 Billion,” and the third and final part is “Towards a Grand Bargain on California Water Policy.” Edward Ring is a co-founder of the California Policy Center and served as its first president.

 

 

 

 

School officials want you thinking how to spend millions, but not how they’ll get it

Survey says? Whatever they want it to say.

Under the guise of measuring public opinion, Santa Ana school officials are trying to shape it – and they’re using taxpayer dollars to pay for it.

In April and May, Santa Ana Unified School District officials papered the city with mail that looks like a poll. The direct-mail campaign included questions about how residents would spend $479 million to “support high quality instruction, repair deteriorating facilities, provide modern science labs, replace failing heating and ventilation systems, and replace portable classrooms.”

Officials asked the questions in anticipation of a district-wide vote on a multi-million-dollar bond. On a 4-1 vote last month, the district’s board of trustees placed the bond on the November ballot.

State law allows government officials to communicate nonpartisan information, but not to engage in politicking.

“This mailing was neither a scientific survey or a poll or mere educational outreach,” said Will Swaim of the California Policy Center. “It was a push poll, an attempt by Santa Ana Unified officials to persuade voters, and that would be illegal under state law.”

A push poll is meant to promote a political message under the pretense of collecting public feedback.

The Santa Ana survey is part of a broader trend in California politics. “It’s now common for local officials seeking tax increases or bond issues from voters to hire campaign consultants on the fiction that they will provide unbiased information to the voting public,” said veteran political commentator Dan Walters.“These consultants conduct polling to determine which angles of proposals are most attractive to voters, write the measures to stress those popular features and then produce literature and ads to trumpet those selling points.”

On first glance, the Santa Ana mailing looks like an actual survey. The front page states, “Santa Ana Unified School District wants to hear from you.” On the second page, respondents are told that “developing a plan for the future of our schools should be a community-driven process.”

But the “survey” strongly implies that the bond is essential – and that it’s so likely to succeed at the polls in November that voters should start thinking about how they’d like to spend hundreds of millions of dollars.

These millions will come from Santa Ana residents and businesses – a fact the district downplays.

A bond is a loan that will be repaid by local taxpayers over a period of years. Public officials have priced the November bond all over the map – from $479 million when they first launched it, they soon raised the price tag to $518 million. More recently, without explanation, the district announced the bond was $232 million. None of those numbers include interest payments that will double the cost to taxpayers. The district is still paying off two previous bonds.

“Santa Ana’s campaign strategy is a little like sending your kids a bill in January for all the toys you gave them in December,” said Swaim. “Everybody’s excited to think about spending. It’d be great if district officials told their residents about the costs to individuals and businesses.”

One of the first things respondents saw on the April-May survey was a message in capital letters: “Improving the Quality of Local Schools.” The accompanying note from the district superintendent emphasizes the district’s pressing need for more cash.

Further, the survey asks respondents to rank their priorities on bond spending. The menu of options ranges from upgrading classrooms and repairing deteriorating roofs and electrical systems, to replacing failing heating and ventilation systems.

Critics say the district’s approval of every proposed teacher pay raise and rising pension debt is consuming so much money that almost nothing is left for facility maintenance or hiring new teachers. Hence, the November bond.

“Santa Ana can ill afford another tax increase,” says Art Pedroza, a Santa Ana resident and publisher of the website New Santa Ana. “Our residents include many seniors on fixed incomes and young families struggling to survive. This latest bond measure will raise their cost of living.

“Ultimately this bond measure is a gift to the unions at taxpayer expense.”

Kelly McGee is a Rhodes College (Memphis) graduate and CPC journalism intern.