Tag Archives: caeconomy

Brown, Newsom clash over merits of obstruction

by Steve Blum • , , , ,

Zorro drew his sword. Paladin went for his gun. TJ Hooker whipped out his stick. When in peril, Californian heroes find salvation in a sure and deadly weapon. In our finest tradition, lieutenant governor Gavin Newsom faced the looming threat of Donald Trump’s wall, shouted not in my backyard and brandished the ultimate equaliser: the California Environmental Quality Act. According to the Los Angeles Times

“There’s something called CEQA in California — NEPA at the federal level,” Newsom said. “There’s indigenous lands and autonomies relating to governance on those lands. There are all kinds of obstructions as it relates to just getting zoning approval and getting building permits. All those things could be made very, very challenging for the administration.”

I’m not saying the wall is a good idea. Nor am I suggesting opposition to it is a bad thing. If you’re against it, you should oppose it by any legitimate means possible.

The point I’m making has nothing to do with the wall and everything to do with the seductive power of laws and processes that were intended to promote thoughtful stewardship of land and resources, but have instead become tools that allow anyone with a grievance – real or imagined – to block infrastructure development.

Around the same time that Newsom was making his stand, governor Jerry Brown called out for regulatory reform, to solve California’s housing shortage…

What we can do is cut the red tape, cut the delays, cut whatever expenses we can afford to do without to make housing more affordable and therefore increase the stock and therefore hopefully bring down the costs.

You want affordable housing, efficient transportation and fast broadband? Then someone has to grab a shovel and dig. But if the cost of a project is doubled or tripled, or if it is hopelessly tangled in endless challenges, then ground will never be broken.

Newsom’s defiance is no threat to Trump’s wall. Federal preemption is a simple fix that can be baked into any authorising bill. But Newsom’s example legitimises self centered nimbys and rent seekers, and impedes reform of well meaning laws that they have warped into weapons of woe.

California needs fast, investor friendly projects to win federal infrastructure money

by Steve Blum • ,

A new business model?

Money could start flowing into California infrastructure, if president-elect Donald Trump’s plan to spend a trillion dollars on construction projects continues on the course that it seems to be on. That was the cautious optimism expressed at the California Economic Summit yesterday during a briefing on infrastructure programs and progress.

The optimism was about the way Trump’s infrastructure priorities – at least as far as those have been articulated – broadly matches California’s make-up: big projects in major metropolitan areas that have a national impact and rural areas that are close to major economic drivers – like Silicon Valley – and to logistics hubs like major seaports, rail lines and highways.

The caution was the result of doubts about California’s ability to compete with other states for federal subsidies and its willingness to embrace private capital and participation – otherwise known as public-private partnerships.

There are states that don’t have California’s regulatory overhead – environmental clearances, work rules, set asides for particular purposes such as low income housing and the list goes on – and they might be able to put (I hate to say it, but it’s back in vogue) shovel ready projects on the table faster. Governor Brown’s plan to bore tunnels around the Sacramento-San Joaquin Delta and transport more water south was given as an example. It’s a high profile mega-project that will generate lots of jobs, but there’s a seemingly infinite number of only-in-California wrenches that can thrown into the works.

Trump is also said to favor supplementing private sector investment in public projects, rather than simply handing out grants to states. The California high speed rail project would likely have to be converted into some form of public-private partnership, rather than remain a purely public sector endeavor, in order to get federal funding, according to Michael Likosky, the head of the infrastructure practice at 32 Advisors, an east coast consultancy. Texas and Florida have competing, privately financed high speed rail projects that are a better match with Trump’s preferred business model, he said.

On the other hand, Likosky expects straight grants – as opposed to loans or partnership financing packages – will be available for public sector projects in rural areas.

Three ways for California to lead telecoms policy in the right direction

by Steve Blum • , ,

Time to untangle.

California is large enough and our economy is advanced enough to support independent telecommunications policy making, as the California Public Utilities Commission is beginning to do. It’s a start in the right direction, and more can be done…

  1. In recent decisions regarding the California Advanced Services Fund, the CPUC has made useful and workable distinctions between middle and last mile broadband infrastructure, requiring open access on transparent terms to the former and non-discriminatory access to the latter. These principles should be universally extended to publicly owned telecommunications assets, such as conduit and rights of way, and to privately owned assets that were built or obtained with the assistance of public rents. Ownership of publicly subsidised or sanctioned infrastructure should not be a means to protect service providers from competition.

  2. Current Californian policy regarding construction of and access to broadband infrastructure is based on antiquated distinctions between the types of services provided. In the past, technology determined service and vice versa: telephone networks were necessarily continental-scale, narrow-band voice systems run on pairs of copper wire, while wide band television service was delivered via coaxial cable and limited by physics and programming distribution rights to local markets. Public policy evolved – correctly at the time – to accommodate the unique characteristics of each. But those conditions no longer obtain. Regardless of heritage or current business model, all telecommunications companies should be subject to the same rules regarding access to civil infrastructure, including pole routes and conduit, access to telecommunications facilities such as middle mile fiber and last mile copper, and technical standards for building, maintaining and operating networks. Services should be similarly (and, I would argue, lightly) regulated according to the functionality delivered to end users, without regard to underlying technology.

  3. In order to build broadband infrastructure in California, investors must navigate a patchwork of local, regional and statewide policies and largely autonomous regulatory authorities. Incumbents, large and small, use this jurisdictional incoherence to protect themselves from competition, often with the active cooperation of local decision makers. Small, disruptive and self-interested groups can use state laws, such as the California Environmental Quality Act, and byzantine local permit processes, to stall or completely kill broadband infrastructure upgrades. Private investment follows swift and certain decisions. To attract new sources of broadband investment, California must rationalise broadband infrastructure construction policy into a technically-focused, independently administered statewide regime, [much as the FCC regulates spectrum access and use]().

Control of political or policy-making processes, whether gained with lobbyists and cash today or woven with red tape and practice over the years, cannot determine who is allowed to build California’s future, if it is to be built at all.

Wireline broadband regulation should follow the wireless roadmap

by Steve Blum • , ,

The major broadband service providers are cable and telephone companies, which are regulated, or not, under two completely different sets of rules. There are huge differences in technology and business models, but the basic service – Internet access – is a commodity. It’s time to find a common regulatory regime.

A good starting point is to look at the the wireless industry. Regulation is split into two largely independent policy areas: 1. creation and physical management of the infrastructure – technical regulation of the allocation and use of spectrum – and 2. operational regulation – oversight of business practices and services provided to the public.

Except for increasingly limited local land use discretion, technical regulation is the sole province of the federal government and is run according to transparent, evidenced-based engineering principles. Design specifications and capital requirements are predictable and infrastructure plans are long term and quickly implemented on a national scale.

Spectrum is allocated for broadly defined purposes. Technical requirements, such as power levels, antenna design and non-interference measures, are established and enforced. Standards may be set with a particular sort of service in mind, but any service that fits within these parameters is allowed by the technical regulators.

Access to spectrum – which is held in the public trust – is managed openly and competitively. The one major restriction on spectrum auctions, for example, are rules which are intended to prevent any single company from gaining monopoly control of the market.

Otherwise, regulation is based on the type of service, and not on the underlying technology or the ancestry of the company providing it. AT&T and Sprint have to meet the same requirements for voice service, for example, even though one is a legacy landline telephone company and the other is not, and one uses GSM and the other CMDA technology.

Although volumes have been written about the deficiencies of wireless regulation in the U.S., it has produced a national, competitive and highly innovative market that continues to attract billions of dollars in capital investment every year.

Wireline broadband needs and deserves the same advantages.

Governor Brown signs community broadband bond financing bills into law

by Steve Blum • , , , , ,

Cities and other local agencies in California will be able to issue bonds to pay for building broadband infrastructure, thanks to two new laws approved by Governor Brown yesterday. Assembly bill 2292 and senate bill 628 expand the use of infrastructure financing districts (IFDs), on the one hand specifically allowing broadband to be included in old-style IFDs and creating a new kind, called enhanced infrastructure financing districts, on the other. In both cases, the bonds can be repaid by earmarking the incremental tax revenue that the project is expected to produce.

It’s more like a win and a half than two solid victories for community-financed broadband, though. SB 628 creates enhanced IFDs, which only require a single two-thirds majority vote by the electorate and have more flexible structures. It goes a long way toward replacing the old redevelopment agencies that the legislature (and the governor and the courts) killed in 2012. It will be a very useful tool for upgrading California’s ageing and overused water and transportation infrastructure, among other things. But it doesn’t specifically allow enhanced IFDs to issue bonds to build broadband facilities. Nor does it prevent it, particularly. So until someone actually tries to use it for, say, a fiber network, broadband will be in a grey area of the new law.

Not so with traditional IFDs, though. AB 2292, authored by San Leandro assemblyman Rob Bonta, specifically allows the use of bonds to build broadband infrastructure, and defines it as “communications network facilities that enable high-speed Internet access”.

Legally, the two don’t overlap, so Bonta’s bill doesn’t directly affect the new and improved system created by SB 628. But as far as it goes, it gives broadband the same critical infrastructure status as roads, sewers and aqueducts.

Broadband missing on California’s new enhanced infrastructure list

by Steve Blum • , , ,

A deal to give local governments more infrastructure financing options finally came together in the closing hours of the California legislature’s 2014 session. Assuming Governor Brown signs senate bill 628 – likely, considering that his staff was deep in the negotiations that led to it – it’s good news overall for local governments. The measure gives local agencies the ability to create enhanced infrastructure financing districts that can issue bonds to build public facilities and earmark the future tax revenue the project is expected to generate to pay the money back. With the notable exception of tax money designated for schools.

The current version of IFDs – which would also remain an option – require three successive votes by the public, two of which have to pass by a two-thirds majority. This new version – enhanced, as they call it – only requires a single ballot measure with 55% approval. The EIFDs would also have more flexibility in putting financing packages together and cities, counties and other agencies could work together to form one.

A big hurdle in the bill is a requirement that local governments more or less wrap up the leftover business of former redevelopment agencies. Given the messy and litigious way those agencies were shut down by the legislature and the courts, it might be a while before many cities can take advantage of EIFDs.

The biggest disappointment from my point of view is that the list of allowable enhanced projects doesn’t specifically include broadband infrastructure, as was originally intended, at least by the governor’s staff. On the other hand, it isn’t prohibited either. Along with the long list of the types of projects that are specifically allowed, the bill leaves the door open for EIFDs to finance other sorts of “public capital facilities or other specified projects of communitywide significance that provide significant benefits to the EIFD or the surrounding community”.

So broadband projects are at least theoretically possible. It would have much better if the bill removed any doubt, since uncertainty and risk don’t play well with either elected officials or voters. But that’ll be a problem for next year.

No reform this year for California’s environmental road blocks

by Steve Blum • ,

One of the useful, if frustrating, aspects of the California Economic Summit’s state capitol conference earlier this month was listening to some lawmakers defend the California environmental quality act (CEQA). It’s universally considered to be a needlessly complex and economically damaging impediment to any kind of infrastructure project. Except by environmentalists and their allies in the legislature.

The core argument in favor of CEQA in its current form is that even though it’s cumbersome, it has saved California’s signature natural assets – you get the idea it’s the only thing standing between the redwoods and a horde of chainsaw wielding loggers. And it’s true, CEQA has legitimately protected valuable resources. But it’s an indiscriminate weapon – the logic is essentially if you shoot them all, you’re sure to get the guilty.

The problem isn’t so much that the law aspires to high standards, but that it creates a battle ground for anyone to launch a never ending fight against infrastructure projects on the flimsiest basis. Any decision made by elected or appointed officials or agency staff can be taken to court on the basis of CEQA. Because of that, staff will frequently take a CYA approach up front – no one wants to be on the chopping block when challenges come in.

And it’s not always clear who takes the lead. Public agencies frequently arm wrestle over who has jurisdiction, if not for an entire project, at least for particular aspects of it. The Digital 395 project in eastern California is a case study: a $100 million fiber optic project that had to navigate more than 40 agencies and ended up exceeding its permit-processing budget by $25 million.

There won’t be any changes this year – the legislature’s term is all but wrapped up. But expect a renewed push to reform CEQA next year, hopefully, with better results.

California governor, lawmakers consider expanded infrastructure financing power for local government

by Steve Blum • , , ,

A new plan to finance public infrastructure is being hatched in Sacramento and, at this point, broadband is included.

Chris Hill, a senior budget analyst working for California governor Jerry Brown, talked about the negotiations going on with legislative leaders, during an infrastructure breakout session at yesterday’s California Economic Summit conference at the state capitol. The idea is to allow local governments to create what are being called enhanced infrastructure financing districts that could sell bonds to build a wide variety of projects and repay the debt using property tax money.

Depending on your point of view, the plan would either upgrade or create giant loopholes in current law that allows a more restricted version of IFDs. There’s already a proposal on the table to explicitly include broadband infrastructure in the list of projects allowed under the current structure. But the enhanced IFD plan would go further.

Deal points on the table include…

  • Lowering the threshold for voter approval to 55% from the current two-thirds, and only requiring a single vote, instead of the three needed now.
  • Allow the bonds to be bundled with a wide variety of other financial vehicles, including fees and private investment.
  • Expand the list of allowable projects, including broadband, housing and transportatation, and give local governments the discretion to choose which ones to pursue – no requirements for set-asides for specific types of infrastructure.
  • Allow two or more local agencies – cities, counties, special districts – to collaborate on a project and jointly issue bonds.

The enhanced IFDs would be a replacement of sorts for the local redevelopment agencies that the governor and legislature scuppered a few years ago. One major difference is that, contrary what some local officials are urging, voters would be involved in the decision.

“This governor has made it very clear that the voters should have a say”, Hill explained.

The deal isn’t done. Negotiations over the details continue. Hill acknowledged that time is tight – the legislative clock is ticking down for this year, with a key deadline looming next week.

Clearing the way for better infrastructure in California

by Steve Blum • , , , ,

It costs more here.

California’s infrastructure was “designed for 25 million people”, state treasurer Bill Lockyer told an opening breakout session at the California Economic Summit in Los Angeles. The problem, he said, is that California will have 50 millon people before there’s a fix in place.

The focus was on roads and water – publicly funded projects – but it’s equally true for infrastructure that’s supported by private capital, such as telecommunications and energy.

That conversation was mostly about ways to funnel more tax dollars towards road maintenance and construction but as the conference moved on, the cost side of the equation took center stage.

The president of San Diego Gas and Electric, Mike Niggli, told how his company spent $100 million and five uncertain years working through regulatory obstacles, particularly environmental clearances, to get permission to build new transmission lines. The irony was that the lines were needed to connect San Diego’s electric grid to renewable energy sources advocated by environmentalists.

It’s a problem shared by broadband projects. The 500-mile Digital 395 middle mile fiber build down the eastern edge of California saw costs jump by $25 million due to the complexity of satisfying the requirements of four dozen different federal, state, local and tribal agencies.

Many ideas for fixing problems were put on the table, and the legislators and other elected officials, who came and went during the two days of the meeting, politely nodded their heads. The question is whether that’s enough to drive change in Sacramento.

“We have requirements that are overly burdensome, overly difficult and a barrier to investment in our state”, said Kish Rajan, the head of governor Brown’s business and economic development office. “This has to get translated into concrete action”.