Darrell Steinberg Supports Using Cap-and-Trade Funds for HSR
State Senate President Pro Tem Darrell Steinberg today announced a new proposal to guide the use of California’s cap-and-trade revenues. It includes earmarking 20% of those revenues for the high speed rail project:
In addition to permanent funding sources for affordable housing and mass transit, the strategy (available here) also provides a permanent source of funding for highway and road rehabilitation to improve traffic flows and repair, to retrofit streets for cycle-lanes, and for the Governor’s High Speed Rail project, which is projected to reduce heavy emissions generated by air and road travel. Senator Steinberg’s proposed strategy identifies funding for green infrastructure projects and clean-vehicle programs, seed funds to assist clean projects, and rebates for consumers.
From the Cap-and-Trade Investment Strategy:
III. A permanent source of funding for High-Speed Rail. (20%)
a. Purpose: Ongoing source for construction of HSR.
b. Allocation method: Continuous appropriation. Could be securitized.
What that means is HSR would would be explicitly authorized as a recipient of 20% of the cap-and-trade revenues. And the California High Speed Rail Authority could borrow against those revenues, which is what the “securitized” reference means.
Securitization of cap-and-trade revenues for HSR would be a game-changer for funding. That means the state could borrow against expected future revenues and have a lot more money available now – maybe, just maybe, enough to build the Initial Operating Segment to Los Angeles.
What might those numbers look like? Cap-and-trade auctions brought in $1.4 billion in revenue in 2013. 20% of that is $280 million a year. If those revenues don’t grow, then that comes out to $4.76 billion by 2030. That’s a big help to the project’s finances but not enough to get the tracks through the mountains and into LA. If those revenues do grow, then so does the HSR share. If cap-and-trade brought in $3 billion a year, HSR’s share is $600 million annually and $6 billion over ten years (say, 2020 to 2030).
30 years is a standard length for a revenue-backed bond. So what if the state were willing to “securitize” 30 years of HSR revenue? That could mean $8.4 billion in revenue at current cap-and-trade revenues and $18 billion at the speculative $3 billion a year in cap-and-trade revenues, though perhaps less depending on how interest costs are paid. That latter amount just might get the tracks into the LA basin.
UPDATE: In fact, Sen. Steinberg’s plan actually includes a projection of $5 billion a year in cap-and-trade revenues. They peg HSR’s share at $878 million each year. Over ten years that’s $8.78 billion. Over 30 years, that’s $26.34 billion – enough to get the IOS built.
There’s a lot of ifs to those numbers and so I don’t want to overstate this. The cap-and-trade money alone, even securitized, may not be enough to build the IOS if revenues don’t grow to projections. But it’s a huge shot in the arm for the project and goes a long way toward resolving the financial and legal problems triggered by Congressional Republican hostility to HSR funding.
Sen. Steinberg’s plan appears to have broad support:
Attending the press conference in support of the strategy:
Robbie Hunter, President, State Building and Construction Trades Council of California
Jim Earp, Executive Director, California Alliance for Jobs
Ann Notthoff, California Director, Natural Resources Defense Council
Tom Adams, environmental activist and retired environmental lawyer
Shamus Roller, Executive Director, Housing California
Marina Wiant, Policy Director, California Housing Consortium
Joshua Shaw, Executive Director of the California Transit Association
Steve Heminger, Executive Director of the Metropolitan Transportation Commission
Bill Higgins, Executive Director, California Association of Councils of Governments
Chris McKenzie, Executive Director, League of California Cities
Mike McKeever, Executive Director of Sacramento Area Council of Governments (SACOG)
Joel Keller, Board President, Bay Area Rapid Transit (BART)
Jeanie Ward-Waller, California Policy Advocate, Safe Routes to School National Partnership
I’m especially pleased to see the NRDC listed here, filling in for the utter lack of leadership we’ve seen from Sierra Club California on this issue.
What’s not immediately clear is how much support this has in the State Senate. But my guess is that Sen. Steinberg would not have proposed this unless he had strong confidence that it had a majority. And since this plan merely allocates existing revenues, rather than creating new ones, it requires a simple majority for passage rather than a 2/3 vote. That gives me confidence that this can become law, especially since one would imagine Governor Jerry Brown would be pleased with this plan.
I gotta say, today was a good day.