Donna Frye: The Connections Between Water, City Loans, and Prop A

by on May 21, 2012 · 0 comments

in California, Economy, Election, Environment, San Diego

By Donna Frye / Voice of San Diego / May 21, 2012

If you don’t know about the relationship between state low interest loans for city wastewater and water projects, city bond offering documents and Proposition A’s proposed ban on Project Labor Agreements, you will probably want to read this to the end.

Fact is, they have a lot in common and it’s an interesting relationship.

On Tuesday May 22, the City Council will vote on two agenda items, 51 and 52, that allow the city to borrow money from the State Revolving Fund (SRF) program at a “low 2.0933% for a 20-year term”. Both items are for public infrastructure projects; one is for wastewater and the other is for replacing old water mains. Combined, the city is seeking to borrow approximately $30 million at this low rate of interest.

Some background in the agenda:

[Since 1999] The City has received approximately $160,000,000 in low interest loans under the SRF Program. Utilizing the SRF 20-year loan program, approved loans of $29 million and $80 million, since July 1, 2007, will result in savings of approximately $78 million when compared to traditional 30-year bond financing.

It’s a great deal for San Diego ratepayers and taxpayers, and saves money because lower interest rates allow more projects to be constructed at a lower cost. But if Proposition A passes, these low interest loans are just one of many state funds that could be a thing of the past for San Diego because state legislation precludes cities in California that have bans on Project Labor Agreements (PLAs) for public works projects from receiving any state construction funding. This creates a significant financial risk for the public and the city.

But don’t take my word for it, simply because I oppose Proposition A and signed the ballot statement urging people to vote no.

Take a look for yourself and read what the city says about Proposition A in their bond offering documents, items 332 and 334, which also happen to be on the city council agenda this Tuesday. The bond offering documents, which include information that must be disclosed to the bond markets regarding material financial risks to the city, state:

Subsequent to Proposition A’s qualification for the ballot, the State Legislature passed, and the Governor signed, a law that would prohibit the use of State funds on local construction projects where the local agency, including a charter city, prohibits the use of PLAs. If approved, Proposition A could cause the City to lose State funding for City construction projects.

So the city is taking this seriously and think it is a material fact that must be disclosed, otherwise they wouldn’t disclose it. But it’s not just SRF loan money at risk; it’s all state grants and loans, which last year totaled $158 million according to the mayor’s office and city’s Independent Budget Analyst.

State Controller John Chiang has tried to educate people on this financial risk too. On May 3, 2012, he said, “If Prop A passes, San Diego would no longer be eligible to receive state grants for local construction projects.”

And even though the Proposition A proponents argue that the legislation denying state funding to cities with PLA bans is unconstitutional, the state’s legislative counsel reviewed it, and on May 3, provided a legal opinion letter to the governor stating that it was constitutional.

We can see where this is headed if it passes, and it’s this stuff that the Proposition A proponents really don’t focus on much in their voter education and outreach. But I think people have a right to know this and more.

For example, did you know that the city of San Diego has never been a party to a Project Labor Agreement? Or that the mayor’s office and IBA estimate that implementing Prop A will require $450,000 in yearly costs and a one-time startup cost of $500,000 to post some redacted construction contracts online in a searchable database? Did you know that those costs are not included in the FY 2013 budget?

And finally, because the Proposition A proponents did not include a funding source for these costs in the ballot measure, what do you think should be cut from the budget to pay for it? Pothole repairs? Library hours? Restrooms in public parks? Fire rings?

It’s your call, but at least you can’t say you didn’t know.

Donna Frye is a former San Diego City Councilwoman.

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