Legislature Debates HSR Cap-and-Trade Options
Last week an Assembly budget subcommittee debated options for how to use the revenues generated by the AB 32 cap-and-trade program. And as it turned out, they had a different approach than that suggested by Governor Jerry Brown:
The conflict was aired Thursday as an Assembly budget subcommittee voted to replace Brown’s cap-and-trade plan with a much different, $1 billion version limited to just one year.
While it would allow the fees to be used for the bullet train, it would have to compete with other state projects before an obscure state agency called the Strategic Growth Council.
However, the Assembly plan also would give Brown the power to seek a $20 billion federal loan and float a $20 billion revenue bond issue to finance the train, tapping cap-and-trade funds to repay the loans.
As if that isn’t complicated enough, the Assembly plan would give local governments and private groups a greater access to the funds for their carbon-reduction programs, such as mass transit, solid-waste treatment and “carbon farming.”
“This is worse than the governor’s plan,” Fresno Republican Jim Patterson, a member of the subcommittee and a bullet-train critic, said, but the chairman, Malibu Democrat Richard Bloom, said it has “some superior attributes.”
The Assembly plan drew a negative reaction from Brown’s Department of Finance, particularly its one-year limit.
Thursday’s hearing indicated that the cap-and-trade issue will be a thorny one for Brown and legislative leaders to resolve. It is, in political terms, free money that everyone wants to tap but, as Bloom observed, “there’s never enough money to pay for every project.”
So as a concept, using cap-and-trade revenues to back $40 billion in loans to build HSR is, for lack of a better phrase, completely fucking awesome. Limiting this plan to just one year is indeed moronic, as is the ridiculous idea of making HSR compete for funds before some obscure bureaucracy. The Golden Gate Bridge and the California Aqueduct didn’t have to beg for funds like that.
Some observers are quite pleased with the plan, including Urban Insights:
RRIF, an underutilized low-cost federal loan program administered by the Federal Railroad Administration (FRA), has been struggling to attract qualified applicants, and the agency has been reprimanded by Congress for sitting atop $35 billion in largely unallocated lending capacity.
The ability to tap RRIF for high-speed rail in California would be a coup both for the Authority and FRA, as it would accelerate funds for construction on multiple key segments of the system and represent a relatively low-risk deal for FRA, since the repayment source is essentially backed by the State of California.
Contrast this deal with the $5.5 billion loan being sought by Xpress West, the proposed high-speed rail line between Las Vegas and Southern California, that would be secured by passenger revenues that may never materialize. With the Solyndra boogeyman still uppermost in federal underwriters’ minds, Xpress West has a high hurdle to jump with FRA.
A $20 billion RRIF loan for the Authority would, in one fell swoop, significantly chip away at that $35 billion lending cap, also solving FRA’s “do-nothing” image with Congress in the process.
Details will be messy, but this is a promising development for high-speed rail and FRA, if legislators can stay the course in the face of opposition.
Congressional Republicans would lose their shit if this happened, meaning time is of the essence. Whatever the ultimate method by which cap-and-trade funds are used to back a federal RRIF loan, 2014 is the year to get that done.
And that requires Sacramento Democrats to stop worrying about what a fringe political party (that’d be the Republicans) think about HSR. Democrats have large majorities in Sacramento that are not threatened by the GOP. They have the opportunity, and I would argue they also have the obligation, to use those majorities to solve California’s most pressing problems. Global warming, oil dependence, and job creation certainly rank among those.
Sacramento Democrats have absolutely nothing to fear, nothing to risk, by supporting the use of cap-and-trade funds for HSR. Neel Kashkari’s ads smashing the crazy train are airing regularly on Southern California TV stations, but it’s a desperate ploy from a candidate sure to lose big to the very governor who is backing HSR so strongly. Any Democrat in Sacramento who lets GOP fear-mongering drive their strategy or their decision-making is a Democrat who needs to think long and hard about whether they belong in the Legislature.
Still, I fully expect that once the budget is done in a few weeks, it will indeed include enough cap-and-trade funds for HSR that the state can go out and get an RRIF loan, and maybe even float a revenue bond too. The Legislature wants leverage over Governor Brown to force him to restore more funding to services slashed in 2007-09, and HSR is good leverage for them. My guess is a deal gets cut that HSR supporters will still be happy with, even if it isn’t exactly the same as what Governor Brown proposed.