CG/LA Infrastructure's InfraBlog
JULY 03, 2013 BY JUSTIN EWERS
WALNUT CREEK, CA – Before success, there is often failure. That was certainly the case in the Bay Area’s Contra Costa County, where voters frustrated in the 1980s with one of the state’s perennial challenges–traffic jams caused by its fast-growing population–still decisively voted down a proposed solution: A local tax measure in 1986 that would have raised the nearly $1 billion needed to take on the problem.
By sending their leaders back to the drawing board, though, Contra Costa set the stage for one of California’s great infrastructure success stories. Two years later, in 1988, the same $1 billion proposal went back to the ballot, also promising to use a half-cent increase in sales taxes to pay for 20 years of needed infrastructure projects.
This time, the measure not only passed–it put the newly-created Contra Costa Transportation Authority on the road to becoming a national model for managing growth through sensible infrastructure investment. It laid the foundation for California Forward’s own Smart Infrastructure Strategy for California, an effort to expand Contra Costa’s time-tested approach across the state’s infrastructure system. And after several decades of success, it also underscores what the state can do to help regions like Contra Costa, which still faces a looming $6 billion shortfall in meeting its long-term infrastructure needs.
In Contra Costa’s dramatic shift, in other words, lies an important lesson for the state. On their second try in 1988–and ever since then–the region’s leaders have given voters what they want: a comprehensive, easy-to-understand infrastructure plan for the region. The 1988 measure included a detailed list of the transportation projects it would support–from extending BART to improving the area’s highways. It also included a unique, and important, provision: It linked these hundreds of millions of dollars in spending to an innovative plan for growth, one that included performance measures, not only for traffic, but also for a range of public services from fire and police to parks and flood control.
Keeping voters at yes
“In the old days, there were no criteria for programs, and there was no obvious rhyme or reason to how it was divvied up,” says Randy Iwasaki, who became CCTA’s executive director in 2010 after nearly three decades at CalTrans, where he served most recently as the agency’s director. “That changed starting here in the 1980s. The sub-regions got together, they elevated the highest-performing projects to the top, and the voters said yes.”
Sixteen years later, in 2004, when CCTA asked voters to extend the $1 billion tax measure for another 25 years, they said yes again. This time CCTA’s winning combination was based on an offering of marquee projects, from a traffic-easing fourth bore of the Caldecott Tunnel to another extension of BART. Again, the plan kept pace with the region’s evolving needs, addressing the growing problem of urban sprawl by creating a new “urban limit line.”
And again, the measure passed, this time with an unheard-of 71 percent of the vote–easily surpassing the state’s 2/3rds vote requirement.
These nearly three decades of success, though, have left Contra Costa leaders with an interesting conundrum–one many other regions face, as well: After years of local efforts to raise the money needed for infrastructure projects, how can they convince voters to approve the funding needed to continue the work?
Thanks to a combination of state investments and federal stimulus, Contra Costa is already close to completing the marquee projects it asked voters to support in 2004. The Caldecott Tunnel will open later this year, and efforts to extend BART and expand Highway 4, considered one of the worst commutes in the country, will be complete by 2015.
“We delivered 86 percent of the program in seven years,” says Ross Chittenden, deputy executive director of projects at CCTA. “Our big challenge now is, ‘What’s the hook for the next round of projects that people can understand?’ The last time around, it was easy: People could see we wanted to bore another hole in the mountain to make their commute a little easier. This time we don’t have those kinds of projects.”
Doing it right, but coming up $6 billion short
What Contra Costa does have, though is a list of infrastructure needs that add up to $10 billion over the next 20 years, from highway maintenance to expanding rail access for goods movement to the Central Valley. Combining state and federal sources with existing local revenues, the county has access to about $4 billion in cash.
“We have a shortfall of $6 billion,” says Martin Engelmann, deputy executive director of planning. “It’s a problem we’re doing everything we can to address.”
Why does one county’s infrastructure shortfall matter? Because of Contra Costa’s sheer scope, for one thing: If the county’s more than a million people were a state, it would be the nation’s 33rd most populous, just ahead of Rhode Island. Contra Costa also has fourth largest household income of any county in California: If tony cities like Orinda and Walnut Creek can’t find the funds they need for public projects, who can?
Most importantly, though, Contra Costa matters because the state’s regional shortfalls add up: All told, experts estimate California will need to spend about $500 billion on its transportation infrastructure over the next 10 years to meet the needs of a growing population–from replacing bridges and maintaining roads to expanding public transit systems. State and local governments only have enough money to pay for about $240 billion of that.
“Infrastructure is critical to the economic vitality of California,” says Iwasaki. “If you spend the money on it and it works, you get people and goods moving through areas like Contra Costa. Every $1 billion invested in infrastructure means 18,000 jobs. If it doesn’t work, those goods move somewhere else, because the Panama Canal is getting widened.”
Regions like Contra Costa are doing what they can to avoid this by leveraging the resources they have at their disposal. “With public projects, you can fund or you can finance,” says Iwasaki. “We finance.”
The county has been creative in arranging deals to sell bonds against its tax revenue stream. “We’ve calculated that for every dollar we want to invest, if we can raise 25 cents from [a tax measure], then we can raise the rest from other fund sources,” says Chittenden.
On a yearly basis, this allows the county to turn a tax measure aimed at raising $1 billion for projects over 25 years into an annual cash-flow of $74 million a year. The measure requires 60 percent of that money to be invested on programs residents already use every day like bus and rail services. The rest can be invested on long-term capital improvements like the Caldecott Tunnel. “We’re getting great bids, and we’re saving a lot of money for 2.1 percent interest,” says Iwasaki about one recent bond sale.
What the state can do to help
While CCTA is doing what it can to build out the roads and transit systems the county depends on, Contra Costa leaders say there are two things the state government could do today to help the county close its infrastructure shortfall:
– Tax-exempt status: The CCTA is particularly concerned at the prospect of losing its tax-exempt status, a financing perk the federal government grants non-profit organizations–and occasionally threatens to take away. “These are the tools we can use, and we need to protect them,” says Randy Carlton, the organization’s chief financial officer, who estimates that the low interest rates the Authority pays for its bonds–which saves taxpayers tens of millions of dollars–would be impossible to get without its tax status. “Right now we have an advantage [in the market], and we need to hold onto it.”
– “Design-build” authority: Contra Costa is also eager to get access to a range of tools other states give local governments to put together–and privately finance–projects, including the authority to adopt a so-called “design-build” infrastructure procurement system. Instead of the current project delivery system, a clunky process that divides projects into multiple contracts for design, bidding, and construction, the design-build approach would allow groups like CCTA to streamline their operations: A single contract could be drawn up with the project owner to move the project from design to construction–allowing for faster delivery and a focus on performance instead of meeting minimum design requirements.
“There are reforms we could make at the state level that would allow us to change the way we do procurement,” says Carlton. “We’d like to take better advantage of private investments and collaboration from contractors and construction managers working with owners to find efficiencies and make more out of the investments.”
Carlton points to the $1 billion Presidio Parkway project in San Francisco, the largest public-private partnerships in the state, as an example of how such an authority can work. “I think it’s a creative way to get the financing done–and to get more projects done as a result,” he says.
Through the California Economic Summit, Contra Costa is working with other regions to encourage state leaders to consider these options–and to ensure the state does all it can to help regions pay for their infrastructure needs.
In the meantime, if history is any guide, Contra Costa will find a way to keep investing in everything from roads to rail–and building it the right way.
Taken from the California Economic Summit: http://www.caeconomy.org/reporting/entry/what-gets-voters-past-no-on-infrastructure-spending-in-bay-area-county