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Friday, Aug 19, 2022
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Pushing Public-Private Funding Solutions

By GREGORY N. LIPPE Guest Columnist Although actual and projected California revenues are significantly higher (approximately 15 percent to 20 percent) than just two years ago when we were facing a double digit (in billions) structural deficit, it is clear that we will never be able to afford the many demands that are being placed on our state coffers without changing our funding methods. Historically, when our state needed more funds, the ultimate solution was to raise taxes or implement new fees (a synonym for additional taxes). This solution is no longer feasible. Since California is considered to be one of the most expensive states in which to do business, we are having a very difficult time attracting new businesses to our state and retaining the ones we have. Adding or increasing taxes will merely exacerbate this condition with the result being less revenues overall. So, what can we do? It seems that the most logical solution would be for the state to work with businesses by forming public-private partnerships. This could create a win-win situation. To illustrate, we already know that something must be done to alleviate the traffic congestion through downtown Los Angeles resulting from deliveries of goods from our ports to their local destinations. One proposed solution is to build more rail systems. If we look to the state to do this alone it won’t happen because the funds are just not there. However, if we engage in partnerships with private companies to build the systems whereby the state could provide a portion of the funds and the private companies could absorb the balance, we just may be able to get what we need. The private companies would get their costs reimbursed and receive profits through user fees and the state would benefit in numerous ways including the reduction of traffic congestion, the addition of many new jobs, increased tax revenue, the ability to move more goods and therefore attract more business, etc. Basis of plan The utilization of public-private partnerships was the cornerstone of Gov. Schwarzenegger’s proposed $222 billion Strategic Growth Plan designed to repair and rebuild the state’s badly decaying infrastructure. The infrastructure bond bill, AB 134 (initially intended by the governor to be $68 billion and reduced to approximately $40 billion by the legislature prior to its failure) represented the publicly funded portion of the project. It was intended that the majority of the additional costs would be absorbed by private companies. In order for the plan to work, there would need to be legislation providing for the use of public-private partnerships. In order to attract the private investment in transportation projects, there would need to be legislation providing for the utilization of the “design-build” method of construction which is significantly more efficient than the method utilized currently and is the method recently approved for the addition of a car pool lane on the 405 freeway. Unfortunately, AB 134 didn’t authorize either the use of “design build” or public-private partnerships, thus the governor’s plan was effectively D.O.A. even before the bill failed. The governor is hopeful that his plan will come back to life in time for the November ballot. Additionally, Senate President Pro Tem Don Perata (D-Oakland) said that he believes a comprehensive deal can be negotiated for the November ballot, but did not say whether he thought the deal would include “design-build” and public-private partnerships. Airbus talks An example of private industry’s belief in public-private partnerships is found in the current discussions between European aircraft manufacturer, Airbus and the City of Los Angeles. According to an article in the Los Angeles Daily News on April 1, 2006, Airbus is considering expanding its supplier base in the San Fernando Valley, potentially generating several thousand jobs. The article also said that Mayor Villaraigosa told Airbus “we can develop a work force training program around the jobs that are to be created so we can fill any jobs they have.” Additionally, Councilman Dennis Zine said “they (Airbus) definitely want to invest in the city and “they are interested in a partnership.” I sincerely hope that our legislature will recognize the benefits of public-private partnerships and move forward on a well-reasoned infrastructure plan for the November ballot. I have selected the following “Job Killer” bill to profile this month: >SB 174: This bill would authorize an employee who was paid less than twice the state minimum wage to recover unpaid minimum wages or overtime compensation in a civil action on behalf of himself or herself and other current and former employees who were also paid less than twice the state minimum wage. It would create a new kind of class action lawsuit with no protections contained in the Code of Civil Procedure which governs traditional class action lawsuits and would undoubtedly lead to increased litigation. This bill could result in the same kind of shakedown lawsuits that were prohibited with the passage of Proposition 64 in 2004 and would be a disincentive for the creation and retention of jobs. Status: Passed Senate and Assembly, vetoed by governor on 9/29/05 Valley Legislators voting for bill: Senate, Alarcon, Kuehl; Assembly, Frommer, Koretz, Levine, Montanez, Pavley. Valley Legislators voting against bill: Senate, Margett, McClintock; Assembly, Richman, Strickland, Sharon Runner. Valley Legislators absent, abstaining or not voting: Senate, Runner, Scott.

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