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Monday, Dec 4, 2023

State Creates Bank to Help Fund Infrastructure Projects

After five years of hemming and hawing, the state finally has rolled out a plan for financing badly needed infrastructure projects, many of them likely to be in L.A. The Infrastructure and Economic Development Bank would make low-interest loans to municipalities, helping them to close gaps in financing new roads, sewers, transit centers and other public works projects. But the bank will only have $475 million to start with. And although state officials expect to leverage that into $1.4 billion in financing, it’s still just a drop in the bucket. Earlier this year, the California Business Roundtable estimated that $90 billion to $100 billion would be needed over the next 10 years to bring the state’s roads and public works up to par. “This is long overdue, and we intend to take advantage of this bank for every project we can,” said Gay Williams, assistant deputy L.A. mayor for intergovernmental relations. “But what we really need are direct cash payments of much larger magnitude.” A 1996 report by L.A. City Administrative Officer Keith Comrie said the city faces a $44 billion “infrastructure shortfall” by 2010. Almost $20 billion of that would go toward maintaining city streets and improving transportation, including $5 billion for maintaining hillside roads, $3 billion for street widening, and another $5 billion for transit projects. The report also calls for another $9 billion to expand the city’s park system and $8 billion to maintain its wastewater system over the next 10 years. Limited use in L.A. Regionally, the Southern California Association of Governments estimates that $80 billion must be spent over the next 20 years on upgrading airports, freeways, bus systems and building commuter rail projects in Los Angeles, Orange, Riverside, San Bernardino and Ventura counties. L.A. County officials say they will likely use the infrastructure bank, but the county already has access to low-interest loans, so the bank’s usefulness might be limited, according to John Edmisten, assistant division chief for capital projects and public finance. State officials acknowledge the huge funding needs for infrastructure and say the bank is only designed to address a small portion of those needs. “This program is a start,” said state Secretary of Trade and Commerce Lon Hatamiya, who heads the agency that will administer the loan program. “We need to go on from here and reinvest in our communities. We haven’t done this in the past.” Legislation setting up the infrastructure bank was crafted in 1994 by then-state Assemblyman Steve Peace, D-San Diego, (now a state senator), and then-state Sen. Marian Bergeson (an Orange County Republican who this year was appointed by Gov. Gray Davis to the state Board of Education). The bill was signed into law later that year, but the bank languished with no funding for the next three years. “There was the realization that we had to do something, but other priorities always came up,” said Dave Kilby, vice president with the California Chamber of Commerce, which strongly supports the infrastructure bank concept. “Remember, back then the state was in recession and running multibillion-dollar budget deficits. Then, when the economy improved, voters made clear their spending priorities were reducing crime and improving education. Given this situation, neither the Wilson administration nor the Legislature pushed hard for the funding.” Davis proposed funding In fact, it wasn’t until the last year of the Wilson administration that the bank received its first funds a paltry $50 million. That was only enough to guarantee lower interest rates on bond financings undertaken by several local governments for small projects, like road repairs and child-care centers. Then came the Business Roundtable report, which focused on the need for billions of dollars in infrastructure funding. In his first budget, Davis proposed adding $425 million to the bank; the Legislature approved it in July. Under its guidelines, the bank would make loans on projects that have the potential for permanent job creation. “Since there are so many projects out there that need funding, we’re going to pick and choose the ones that will produce jobs,” Hatamiya said. He added that the Trade & Commerce Agency will closely track the projects to ensure that the job targets are met. “It remains to be seen how many cities would use the program,” said Dan Carrigg, a lobbyist with the California League of Cities. “The key determinant is how easy it will be to use the program, how many hoops and hurdles you have to go through. Each community will have to make a determination whether this program is the best option for them.”

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