Wednesday Dec 17 2008
Infrastructure project loans halted by state
By: Gus Thomson and Associated Press
A state panel that oversees loans for public works voted Wednesday to stop financing nearly all infrastructure projects in California, halting nearly $4 billion in loans for everything from freeway interchanges and carpool lanes to classrooms. The three-member Pooled Money Investment Board voted 3-0 Wednesday not to lend money for an estimated 2,000 infrastructure projects statewide through June, saying the state's finances are so grim that California can no longer afford to fund them. The value of those projects totals $16.2 billion. They include work on highways, parks, schools, levees, hospitals and more. Two of the more prominent projects the stoppage will have an impact on are the Highway 65 bypass and the Interstate 80 car-pool-lane addition through Roseville. Celia McAdam, Placer County Transportation Planning Agency general manager, described the funding cut-off as frustrating in terms of potential lost jobs during a time when construction projects are being seen as a way to help move the economy forward during a recession. It’s also frustrating to see the Legislature fail at resolving budget issues, she said. Tempering the blow of the halt in loans is the timing. “There’s less construction going on now because we’re in winter mode,” McAdam said. “Work pretty much shuts down in mid-October and the majority of the work is done once the weather clears in the spring.” State Treasurer Bill Lockyer had warned the state Legislature last week that the unprecedented halt in funding would be necessary if lawmakers did not immediately address a $14 billion deficit in the fiscal year that ends in June. The hole is forecast to grow to $42 billion over the next 18 months. Board members said Wednesday that lawmakers now need to find a way to close the entire $42 billion shortfall, not just the $14 billion gap in the current fiscal year. California is expected to run out of operating cash in February. That means any money currently in the pooled fund could be needed to shore up the state's finances, board members said. Lockyer estimated previously that the frozen projects could cost California 200,000 jobs and eliminate $12.5 billion in private sector revenue in every part of the state. Officials were still calculating the effect of Wednesday's decision. Ken Grehm, Placer County Public Works Department director, said the move is being viewed as the state trying to up the ante in a high-stakes game of chicken. Grehm said the work on the two large road projects in Placer County were under the purview of Caltrans and appeared to be eligible for a stoppage. A Caltrans spokesman wasn’t available Wednesday afternoon. State Controller John Chiang, a member of the board, noted that the decision came as state officials were hoping to spur the economy through more infrastructure investment, not less. ``This is only going to tear into the heart of California's recovery efforts,'' he said. Republican and Democratic lawmakers have been locked in a stalemate over how to deal with the deficit for 42 days. The Assembly and Senate were scheduled to meet again Wednesday afternoon, one day after Republicans rejected a Democratic proposal for a combination of spending cuts and tax increases for the second time since the governor first called lawmakers to work on the problem Nov. 5. Senate Minority Leader Dave Cogdill, R-Modesto, said GOP members were unmoved by the board's vote and preferred to solve the state's problems by cutting deep into education and social service programs. ``Today's decision by the Pooled Money Investment Board doesn't make the case for raising taxes,'' Cogdill said in a statement. Schwarzenegger said it was sad to see the state freeze projects when he and other leaders have been championing infrastructure investment as a way to improve California. Officials estimate that every $1 billion spent on public works generates 18,000 jobs. ``It's terrible the kind of pain that the Legislature is causing to the people of California,'' Schwarzenegger said at a news conference. ``They were sent to Sacramento to solve problems, not create them.'' Representatives of contractors and builders who attended the board meeting said the freeze would further devastate an industry that's already lost work on residential homes and business construction because of the recession. ``Public work is the only game in town,'' said Dave Ackerman, who spoke on behalf of the Associated General Contractors. ``Private work has virtually dried up. And we now have hundreds of contractors that are moving to the public arena because there is no private work for them to do. There's no lines of credit available.''