CA Democrats want higher fees and taxes for state infrastructure

by James Poulos | December 14, 2016 7:52 am


Sharing in a new emerging consensus in favor of substantial infrastructure spending, California Democrats have teed up the policy for early action in 2017, triggering renewed debate over the wisdom of funding the effort through significant new transportation-related fees and taxes.

Gov. Jerry Brown and other leading Democrats had signaled earlier in the month that infrastructure would be a priority in the new year. “It’s also expected to be one of [Donald] Trump’s first policy proposals,” Capital Public Radio noted[1] — a rare area of overlap between Sacramento’s agenda and what soon will likely be Washington’s. While Trump has floated the outsized prospect of spending at the trillion-dollar level, some lobbyists pushing California Democrats for a robust package of their own are claiming “the state has tens of billions of dollars worth of backlogged projects, from congested bottlenecks to crumbling bridges,” according to the station. 

“Senate Bill 1 by state Sen. Jim Beall, D-San Jose, calls for a phased-in 12-cent tax increase on gasoline, increased vehicle-registration fees as well as an annual $100 road maintenance fee for zero-emission cars,” Courthouse News reported[2]. “The proposal would raise California’s gas tax for the first time since 1994, and reallocate $500 million in heavy-vehicle fees to road maintenance instead of paying down existing transportation bond debt.” 

“Democrats say raising the gas tax is the best way to make up tax revenues lost by Californians buying electric vehicles. The state’s fuel levy is currently 27 cents per gallon. With California facing an estimated $59 billion highway-maintenance shortfall over the next decade, Beall says the tax and vehicle registration fee hikes will fix the state’s roads and come with the added benefit of new jobs.”

From old to new

State Senate Democrats rolled out a total of five bills, some of which took advantage of the vogue for infrastructure spending to recast more traditional parts of their longstanding policy agenda. One bill, for instance, would offer “$1.2 billion to state programs that incentivize freight and trucking companies for reducing emissions,” Courthouse News added. 

Another bill with an environmental cast focused on water and recreation. The legislation “would fund state and local parks and water infrastructure through a $3 billion general obligation bond,” according[3] to Reuters. “Despite recent rains, California is in the fifth year of drought. In 2014, state voters passed a $7.5 billion bond to fund water infrastructure projects throughout California.” Another bill would issue another $3 billion bond for increased housing. One affordable housing bill imposes a $75 real estate documentation fee. State Senate leader Kevin de León, D-Los Angeles, cited “a high unmet demand for new water and natural resource investment,” the wire noted.

Bond battles

Advocates for private infrastructure financing have warned against tackling the state’s infrastructure challenges through recourse to big-ticket bond measures. “Governments and taxpayers could get far more value from private investors willing and able to finance total costs than they do from simple bonds with little accountability,” California Policy Center vice president of policy research Ed Ring observed[4] in a recent Sacramento Bee op-ed. “The recent auction of the Indiana Toll Road to a consortium of pension funds (including CalPERS) for $5.7 billion demonstrates the value of high-quality infrastructure to institutional investors.”

“The American Society of Civil Engineers gives the state a dismal C- grade,” Ring noted. “The state’s water infrastructure has not been expanded since the 1970s and is designed for about half the current population. California’s transportation network is crumbling and congested, and its electrical grid is increasingly focused on renewable energy without a clear plan for storage and distribution.”

In the lead up to November’s elections, Gov. Brown pushed to defeat Prop. 53, an initiative designed to block bond measures that didn’t pass popular muster. “Proposition 53 would have required state revenue bonds, borrowing that’s generally paid back by users of a large public works project, of $2 billion or larger to be approved by voters statewide,” the Los Angeles Times recalled[5]. “Revenue bonds could be an integral part of the future $17-billion effort to build twin underground water tunnels through the Sacramento-San Joaquin River Delta region. They could also be required to complete the controversial high-speed rail project from San Francisco to Los Angeles.”

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