Federal transportation money: What does it mean for California?

The waiting game has begun. President Obama announced a plan over Labor Day weekend to pump $50 billion into nation-wide transportation projects.

But with multi-billion dollar infrastructure projects in gridlock throughout California, government officials, agencies, and labor unions are waiting skeptically to see if the President’s plan can survive Congress, let alone make it into California.

“Gov. Schwarzenegger supports investment infrastructure, but we’re waiting to see what is put forward,” said Matt Hirsch from Governor Schwarzenegger’s Recovery Task Force Office. Hirsch and his colleagues are in charge of monitoring Federal stimulus money from the Recovery Act.

Obama’s transportation stimulus plan would span the course of six years and create an infrastructure bank that would funnel federal money out to various transportation projects. The plan will jump-start with an initial $50 billion investment to spur the transportation industry and create jobs.

“Over the next six years…we are going to rebuild 150,000 miles of our roads- that’s enough to circle the world six times…We’re going to lay and maintain 4,000 miles of railways…We’re going to restore 150 miles of runway. And we’re going to advance a next generation air-traffic control system to reduce travel time,” said the president.
That is, if Congress passes the bill.

Assembly Transportation Committee Chair Bonnie Lowenthal, D-Long Beach, remains optimistic.

“I’m an optimist, so I do believe all Congress members want to move the economy forward and every state has a need for transportation projects.”

But her enthusiasm is curbed by concerns about how the federal government would distribute the stimulus.

“The most critical point is how an economic stimulus program would be administered and economic stimulus for transportation should avoid major policy changes, waive or reduce dollar matching requirements, and have a reasonable delivery time.”

In the past, Lowenthal explained, federal stimulus programs have kept construction projects under tight time constraints that have crippled contractors and even caused them to have their contracts revoked. The process of applying for the money is time consuming by itself.

“Streamlining the federal paperwork and program requirements would be helpful,” added Lowenthal.  

Jim Earp, president of the business-labor coalition California Alliance for Jobs, said he supports the president’s proposal for infrastructure investment but is skeptical that it won’t make it past political wrangling in Washington.

“There’s a legitimate concern that this may not make it through Congress because a) there seems to be a lot of Republican opposition to it or b) it may be morphed into something different than what the president is talking about… We’ll see what it’s going to look like if it makes it through that process.”

President Obama voiced similar concerns in his speech.

“When it comes to just about everything we’ve done to strengthen our middle class, to rebuild our economy, almost every Republican in Congress says no…Their slogan is ‘No we can’t.'”

In addition to the doubt surrounding the bill’s ability to make it past its opposition, Earp said past infrastructure investments by the federal government did not deliver what was originally promised.

“In the last stimulus there was a relatively small amount that went to infrastructure investment.”

Making sure the proposed $50 billion goes solely to strong infrastructure projects is crucial, said Earp.

“There is some real value investing in some legacy projects that the first stimulus didn’t address…I mean projects that increase capacity and vitality and really improve the state’s infrastructure.”

Earp said one of those legacy projects includes the California High-Speed Rail project, which would stretch over 800 miles of California valley to transport passengers from Sacramento to San Diego, and virtually everywhere in between, at up to 220 mph. Voters approved its construction in the 2008 general election but little progress has been made so far in the way.

“Any additional funding for high-speed rail would be welcome but one of the criteria the Administration is looking for is to invest this money where jobs can be created quickly and the high-speed rail still has a lot of work to do before you see much in the way of actual construction.”

The project would make California the first in the U.S. to introduce a high-speed rail train, bringing it just up to speed with Europe, Japan, and China, who reap economic benefits from state-of-the-art “bullet trains.”  

The train is estimated to create over 600,000 jobs in the construction industry alone. Earp said over 25 percent of the construction workforce in California is currently unemployed. In some sections of California, that number reaches 65 percent.  

“Private sector construction has dried up and blown away. There just isn’t anything happening there besides what we’re putting in to public infrastructure projects.”

But the High-Speed Rail Authority, or HSRA, an appointed board of members in charge of organizing and planning for the construction of the train, has been under the scrutiny of the State Auditor’s office. The Auditor’s 2009-10 report highlighted a multitude of misgivings about the HSRA.

“The Authority’s 2009 business plan estimates it needs $17 billion to $19 billion in federal funds. However, the Authority has no federal commitments beyond $2.25 billion.”

The report also noted, “other potential federal programs are small,” and questioned the Authority’s financial accountability.

“Authority staff paid at least $4 million of invoices from regional contractors received after December 2008, without having documented written notification that the Program Manager had reviewed and approved the invoices for payment. The Authority paid contractors more than $268,000 for services performed outside of the contractors’ work plans and purchased $46,000 in furniture for one of its contractor’s use, based on an oral agreement contradicted by a later written contract.”

Since the report was conducted in April, staff from the auditor’s office staff said the Rail Authority has about one more month before another audit will track any improvements made by the group.

Irregardless, HSRA spokesman Jeffrey Barker released an optimistic statement in response to President Obama’s plan.

“The Administration’s announcement to commit $50 billion to transportation infrastructure provides one more strong signal that the federal government is serious about making high-speed rail a reality, in California and across the country. That means we’ll continue to have a strong partner as we look to Washington for the sustained support California’s high-speed train project needs (to) connect the state’s major metropolitan cities, create good, new jobs, and provide a faster, more convenient way to travel.”

Rod Diridon, a member of the Authority, said high-speed rail is a necessary national investment necessary to make the U.S. internationally competitive, employed, and eco-friendly.

“The most controllable element of our international competitiveness is our transportation system yet we’re not choosing to control it…We’ve got to refocus on international competitiveness or are destined to become a
second-class country. We’ve got to do things like high-speed rail that reduce our carbon footprint or we will become the world’s pariah; the huge polluter that jeopardizes our lives on earth… All the way back to the Eisenhower period is the last time we’ve invested adequately in our nation’s transportation infrastructure…but we put a substantial amount of funds into nonproductive activities like wars and other things.

“Now the President is trying again to have another infrastructure package and he must be applauded and supported for this…Right thinking people will support this (bill). We’ll see who the right thinking people are and I hope that’s revealed to the public before the November elections.”

Rachel Wall, an HSRA spokeswoman, said it is too early to tell exactly how President Obama’s proposal could affect the construction of the train but affirmed, “We’re going to continue pursuing a continuous stream of money from the Federal government.”

To supplement the funds, Obama’s plan includes a national infrastructure bank. And the Administration may be modeling that bank after California’s own infrastructure bank.  
Stanton Hazelroth is the executive director of California’s “I-bank,” which is run under the Business, Transportation and Housing Agency and distributes low interest loans to infrastructure projects throughout California.

Hazelroth has testified before Congress to explain the ins and outs of infrastructure banking and to promote the financial success of California’s infrastructure bank.
“I think that they’ll be using our success kind of as a model for some of the things they want to do,” said Hazelroth.

“We started with about $161 million of seed money but through leveraging we’ve made over $400 million in loans to local governments all over the State.”

The Governor’s office, CalTrans, and staff from both the Senate and Assembly Transportation Committees all said it was too early to comment on how the federal money should be spent.

CalTrans’ Public Affairs noted, “The parameters of the legislation are unknown. It hasn’t even gone through Congress yet.”

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