Proposition 1B - State Transportation and Infrastructure Bonds

What it does

Proposition 1B, the Highway Safety, Traffic Reduction, Air Quality and Port Security Act of 2006, is $19.9 billion in general obligation bonds designated for highway and street repair and reconstruction, traffic congestion improvements, port goods movement and security, mass-transit projects, traffic safety, and air-quality programs. With the exception of a $1 billion earmark for Highway 99 in the Central Valley, the bond funds will be distributed according to existing state transportation funding formulas, a competitive process for certain elements of the bond, and legislative or California Transportation Commission actions.

The bond measure requires a majority vote to pass. Repayment of the bond's principal and interest is from existing state General Fund revenues. No additional revenues are raised by passage of the bond. In effect, passage of state bonds is a "set aside" of state funds for a specific purpose.

Why it is on the ballot

Nationally, California ranks third in having the most deteriorated streets and highways. For example, 3 out of 10 of the state's overpasses and bridges are structurally deficient or functionally obsolete. Two of 5 of the most congested urban areas in the country, the San Francisco Bay Area and Los Angeles, are in California. Approximately half, 49 percent, of California's urban freeways are considered congested.

Similar observations could be made about the condition of public transit. Transit agencies require significant capital infusions to replace old buses and rail cars, improve train and bus controls, separate trains from vehicles, improve safety, and implement other projects to improve or expand service.

Together, these conditions pose a long-term threat to the state's economy, environment and quality of life. Bay Area residents seem to agree. In 9 out of 10 years, the Bay Area Council's annual poll found transportation was the No. 1 stated concern.

Pros

Those who support the measure claim:

• Prop. 1B is a small, yet necessary, down payment on the funds required to repair, maintain, reconstruct and enhance California's state and local transportation systems. Without this investment infrastructure will continue to deteriorate, leading to more costly projects in the future.
• A strong infrastructure is essential to accommodate California's growing population and sustain a vibrant economy.
• The proposition provides for accountability to ensure that funds are spent responsibly, including requirements for audits and annual reports.
• With the exception of the Highway 99 earmark, the bond expenditures are largely governed by existing state funding regulations. In contrast to the federal transportation bill, this measure will almost entirely rely on competitive grants, hopefully leading to the more cost-effective projects being funded.
• San Francisco and the Bay Area will be net winners under the bond, as we generally are well positioned to receive significant proceeds, particularly for transit. This is due to the way existing funding formulas are written.

Cons

Those who oppose the measure claim:

• This measure will not make any serious impact on transportation problems because it devotes most of the money to highways rather than future-oriented, more efficient investments such as public transit. It is impossible to accommodate the population growth California will experience over the next 25 years in the old way. While San Francisco and the Bay Area will receive funding for some important projects, the rest of the state is largely going to see highway expansions. In this sense, Prop. 1B may be good for San Francisco, but bad for the state.
• Bond funds should be linked to smart-growth zoning and transit-oriented development. Instead, the bond funds will reward poor planning and land-use policies of the past by subsidizing highways and roads in sprawling suburban areas. This will only exacerbate the problem and lead to more sprawl by extending feasible driving distances through subsidized highway projects.
• Prop. 1B needlessly subsidizes ports and shippers for goods movement improvements. A better alternative would be to charge shippers directly to improve congestion in and around ports through a surcharge on containers moving through the ports.
• By subsidizing the ports and shipping companies, we are inadvertently making it cheaper for imported goods and thus further undermining the competitiveness of U.S. and California manufacturing. In essence, this measure asks us to subsidize the continued off-shoring of the U.S. manufacturing base when a simple user fee on containers would more accurately reflect the true costs of shipping goods across those long distances.
• Other transportation and public transit financing methods (for example, index gas sales-tax) should have been considered instead. Bond-financed programs may squeeze out other program priorities because general obligation bonds are repaid from General Fund revenues.

SPUR's analysis

Many analysts argue California is not investing adequate funds to maintain its transportation infrastructure at its current level, let alone expand it to keep pace with population growth. Highways and streets require maintenance, traffic is increasingly congested, and public transit for most residents is inadequate. According to some analysts, California requires hundreds of billions of dollars in infrastructure investments for transportation and public facilities for both catch-up and positioning the state for the future. Accordingly, this bond represents a modest down payment on the maintenance and improvement needs of California's transportation infrastructure.

Prop. 1B's bond funding for all programs would be provided over 10 years, and subject to annual appropriation by the Legislature. Annual funding for three new programs ? Corridor Mobility, Trade Corridors and State Route 99 funding ? is tied to the annual state budget bill and therefore would require approval by two-thirds of lawmakers, while annual funding for the other remaining categories would require a simple majority approval by legislators.

One of the noteworthy policy changes proposed in this measure is the reinvigoration of the California Transportation Commission. Subsequent to passage of Senate Bill 45 (Kopp) in 1997, the CTC's role lessened considerably, with project selection responsibilities shifted to regional agencies such as Bay Area Metropolitan Transportation Commission, and CalTrans. However, under the bond measure, the CTC would be granted sole discretion over the selection of corridor mobility projects, trade corridor projects, and a new state-local partnership program, among others.

The $4.5 billion Corridor Mobility Program provides that CalTrans, regional transportation planning agencies (such as MTC) or county transportation commissions could nominate projects to the CTC. The CTC's project selection criteria includes: (1) is it a high priority project; (2) can begin construction by 2013; (3) will it improve mobility in highly congested, (4) improve connectivity between rural, suburban and urban areas, or will it improve safety; and (5) improve access to jobs, housing, and commerce. The projects would also be subject to the north/south split; up to 40 percent of funds to northern counties, and the remaining 60 percent for southern counties.

The CTC has sole discretion to fund $2 billion for projects in federally designated trade corridors or other corridors within the state that have a high volume of goods movement traffic (e.g., port, airport, truck and rail freight corridors). Projects funded by this program must match state funds on a dollar-to-dollar basis. Los Angeles advocated for this section of the bond, initially seeking $10 billion. It is working diligently to capture a significant share of this funding.

The bond provides $3.6 billion for transit improvements statewide, as well as $400 million for intercity rail. These funds are distributed according to the State Transit Assistance formula ? 50 percent on population and 50 percent on transit revenue. This funding is for capital improvements only. An additional $100 million is available for transit security and disaster preparedness. Lastly, the bond provides $250 million for railroad-highway grade-separation projects, including up to $100 million for grade-separation work related to high-speed rail, at the discretion of the CTC. Transit operating costs are ineligible for bond funds.

Two billion dollars is designated for improvements to local streets and roads, with funds split 50/50 between cities and counties. Similar to existing state gasoline tax subventions, county funds are distributed based on the number of registered vehicles (75 percent) and the number of county-maintained roads (25 percent). For cities, the funds are distributed according to population. The funding provided by the bond would be available for "reducing local traffic congestion" and "improving traffic flows," as well as rehabilitation and maintenance. In addition, the bond provides $250 million for CalTrans to develop a program to fund "traffic light synchronization projects or other technology-based safety, operations and capacity improvements.

While recognizing the need to improve the state's transportation infrastructure, some environmental and social-justice advocates do not think that Prop. 1B has sufficient land-use management linkage in funding projects. They support stronger linkage to smart growth, transit-oriented development and incentives to cities and counties for sound land use. Many advocates are neutral. Others may oppose the measure because they think its defeat would mean that another, more progressive proposition could be written and submitted to the voters in two years.

The state bonds (1B through E) require legislative enabling and implementing legislation. Efforts are under way to draft legislation that would strengthen the linkage between these bond programs and smart growth, Transit-Oriented Development and incentives for sound land-use management. There is no guarantee that this legislation will be adopted.

One of the last-minute changes to the transportation bond measure was the shifting of provisions related to regional planning and Transit-Oriented Development into a separate $2.8 billion Proposition 1C, the Housing and Emergency Shelter Trust Fund Act of 2006. This bond includes $850 million for "regional planning, housing and infill incentives" to be distributed by the Department of Housing and Community Development (HCD). The bill provides up to $200 million for park creation, development or rehabilitation to encourage infill development. In addition, it includes $850 million for "transportation improvements related to infill development" and "traffic mitigation," and $300 million for a Transit-Oriented Development implementation program. It does not provide details on how the funds are to be distributed, leaving that up to subsequent state legislation. Some environmental and social justice advocates think that Prop. 1C should have remained within Prop. 1B so that their concerns would more likely be addressed.

The Alliance for Jobs, an infrastructure lobby composed of highway contractors, labor unions and businesses, garnered sufficient initiative signatures to place a bond measure on the ballot that largely focused on highway and street construction. As a result of legislative action, Prop. 1B contains a wider mix of highway, street, public transit, and other environmental measures than found in the Alliance for Jobs' original initiative. Supporters of Prop. 1B argue that if it is defeated, the Alliance for Jobs could return with another highway-construction initiative that would not contain many of the meritorious aspects of Prop. 1B. Supporters also argue that if Prop. 1B is defeated, it is possible no new transportation system bond would be introduced for several years, leaving critical infrastructure to further deteriorate.

San Francisco stands to gain significantly from the proceeds of Prop. 1B. However, due to the operation of state transportation funding formulas, a competitive project process, and legislative appropriation actions, the bond allocations are only estimates for San Francisco or the Bay Area. Prop. 1B's bond funds of $19.9 billion are allocated to a variety of purposes:

• High-priority corridors, $4.5 billion: To be awarded competitively for improvements to highly congested state highways. In the Bay Area, Doyle Drive, Interstate 80, 580 and 880, and the proposed fourth Caldecott Tunnel are likely projects.
• Rail and bus capital improvements, $4 billion: To be awarded based upon state formulas for buses, commuter rail and light rail. San Francisco could receive $336 million, BART $280 million and MTC $337 million for transit connectivity, in addition to allocations for CalTrain, AC Transit and other regional agencies. The region's total is around $1.3 billion.
• State Transportation Improvement Program, $2 billion: Using the STIP formula, San Francisco is likely to receive $40 million and the region $264 million.
• Trade corridor infrastructure, $2 billion: Awarded competitively to improve goods movement in heavily congested routes. The ports of Oakland and San Francisco should be eligible for funds, although Southern California ports are striving to be very competitive.
• State Route 99 corridor improvement, $1 billion: Amazingly, this is the only earmarked project. Funds are for safety, rehabilitation and capacity expansion.
• Highway rehabilitation, $0.75 billion: Funds operational and preservation projects.
• City/county transportation improvements, $2 billion: Funds local transportation priorities using state formulas.
• State-local partnership, $1 billion: Provides state matching funds for "self-help" counties that generate local funds for transportation (e.g., San Francisco's transportation sales-tax). Only 20 of California's 58 counties are self-help counties.
• Transit security and disaster preparedness, $1 billion: Subject to appropriation by the Legislature, monies are to fund security and safety for public transit and to expand transit's ability to respond to a major disaster. BART, Muni and Bay Area ferries should be eligible.
• Port security, $0.1 billion: Funds grants to improve port security, including equipment to screen cargo. The Ports of Oakland and San Francisco should qualify
• Local bridge seismic retrofit, $0.125 billion: Provides local match to leverage federal funding. Every dollar spent leverages 6 federal dollars.
• Grade separation, $0.250 billion: Funds safety projects where local streets and highways cross railroad tracks. CalTrain is a high-priority grade separation candidate.
• Port air quality, $1 billion: Reduce diesel emissions and other pollutants in trade corridors. The ports of Los Angeles and Long Beach are the equivalent of an air pollution Superfund site for their air basin. San Francisco's cruise ship emission-control plan should be eligible, as well as the Port of Oakland projects to improve port related air pollution.
• School bus retrofit/replacement, $0.2 billion: Replace or retrofit older, polluting school buses.

Although the bonds will dedicate far too much money to highways as opposed to transit and unnecessarily subsidizes imports (which further undermines domestic manufacturing), it is a step in the right direction toward dedicating additional funding for our transportation infrastructure.

SPUR recommends a "Yes" vote on Proposition 1B.