Capitol Update 8/14/2023
California Gov. Gavin Newsom has issued an executive order to accelerate repairs and debris removal at levees to prepare for a rainy season. “Removal must expeditiously occur before the next rainy season begins in fall 2023 in order to mitigate the risk of additional flooding and allow for continued recovery efforts,” according to the order. Full Story: The Hill
A 1.9% decrease in the institutional component of the Dodge Momentum Index led the way as the overall index decreased 0.9% in July to 193.4. The commercial component decreased 0.2%. Looking ahead through year-end, “weaker commercial activity, resulting from tighter lending standards and higher interest rates, will counter sturdier institutional activity, bolstered by public funding and less sensitivity to interest rates,” says Sarah Martin, associate director of forecasting for Dodge Construction Network. Full Story: Dodge Data & Analytics
Boot camps, including one offered by the National League of Cities, are assisting smaller cities bewildered by the application process for federal infrastructure grants. More than 600 cities have participated, and 60 have been awarded 71 grants totaling $428 million, with more to come. Full Story: Governing
The Bureau of Reclamation has allocated $195 million for projects to upgrade water infrastructure and to improve water resilience. The funding comes from the bipartisan infrastructure law’s WaterSMART program, the Inflation Reduction Act and annual appropriations. Full Story: The Construction Broadsheet
The construction industry increased jobs by 19,000 in July, according to the Bureau of Labor Statistics. Sectors within the industry saw mixed results, with residential specialty trade contractors adding 13,300 jobs and nonresidential building construction adding 10,500, while nonresidential specialty trade contractors lost 2,100 jobs. Full Story: Engineering News-Record (tiered subscription model)
CPI for all items rises 0.2% in July; shelter up
In July, the Consumer Price Index for All Urban Consumers increased 0.2 percent, seasonally adjusted, and rose 3.2 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.2 percent in July (SA); up 4.7 percent over the year (NSA).
Water infrastructure was not built with climate change in mind and consequently has faced greater stress than the infrastructure was designed for. Experts examine challenges, including risk posed by putting systems near bodies of water they discharge into and the inevitability of water pipes aging and deteriorating to the point that breaks are common. Full Story: The Associated Press
Small and financially challenged communities are the focus as the Environmental Protection Agency allocates $50 million under the Sewer Overflow and Stormwater Reuse Municipal Grant program for stormwater and sewer infrastructure upgrades. The funds help communities address water needs and challenges posed by a changing climate. Full Story: Environmental Protection Agency
Workers are favored in a final rule issued by the Labor Department that revisits rules to determine prevailing wages for federal construction projects. Procedures under the Davis-Bacon Act will return to what they were before the Reagan administration and define prevailing wages as wages equal to those for at least 30% of workers, instead of 50%, in a given locality. Full Story: Engineering News-Record (tiered subscription model)
Conversion of office buildings to multifamily accommodations accounts for the largest share of adaptive reuse projects in the multifamily construction pipeline at 45,000 units, according to a report by RentCafe. The pipeline has increased to a record 122,000 units this year from 77,000 units last year, with Los Angeles, New York City and Chicago leading the way.
Full Story: Multifamily Dive
Sustainability is achievable with profitability in the built world, according to the Venturon 2023 Sustainable Proptech report. Governments are adapting regulations to mandate greater sustainability, the report notes, while investors, lenders, consumers and tenants are getting on board with renewability and sustainability. Full Story: Toronto Sun
PPI for final demand advances 0.3% in July; services rise 0.5%, goods increase 0.1%
The Producer Price Index for final demand increased 0.3 percent in July. Prices for final demand services rose 0.5 percent, and the index for final demand goods edged up 0.1 percent. Prices for final demand advanced 0.8 percent for the 12 months ended in July.
The cost of construction materials has held steady and has fallen in some cases, according to the latest producer price index from the Bureau of Labor Statistics. The stabilization stems from supply chain improvement, although costs remain higher than before the pandemic. Full Story: Engineering News-Record (tiered subscription model)
The San Francisco region added 300 construction jobs in June, leaving the total of 43,000 nearly 8% lower than the total in February 2020, according to the San Francisco Business Times. The picture was different in Alameda and Contra Costa counties, where 800 jobs were added in June, bringing the total to 80,200, up 2.6% compared with August 2019. Full Story: The Real Deal
Frontwave Arena for the San Diego Sockers professional soccer club has topped out in Oceanside, Calif. The goal is to have the arena enclosed by October, with a June finish expected in time for opening to the public in late summer 2024. Full Story: The San Diego Union-Tribune (tiered subscription model)
A World War II aircraft factory would be redeveloped as part of a plan by the Navy for its Old Town Campus in San Diego. Few details have been revealed for the 70.3-acre campus, although the Navy has a shortlist of four developers that have expressed interest in the project. Full Story: San Diego Business Journal
Construction has begun on a $27 million project to add dining and retail space in Little Saigon in Westminster, Calif. R.D. Olson is the contractor on the Bolsa Row Terrace project, which spans 26,211 square feet and is the second phase of a mixed-used development that spans 6 acres. Full Story: Construction Dive
Making borrowing easier: Amendment to state constitution could unlock billions of dollars for California housing
Many local governments have more than half their voters approve a bond measure… but fewer than the two-thirds supermajority required. An effort to change that would drastically alter the ability of local governments to fund housing and infrastructure projects.
For more stories on inequality in California, sign up for Inequality Insights, a weekly must-read on one of California’s most pressing issues.
Last November, 59% of voters in Berkeley wanted to give the city permission to borrow $650 million to fund affordable housing.
Two years earlier, 58% of San Diego voters supported a $900 million housing bond.
Two years before that, in 2018, commanding majorities in San Jose (64%), Santa Rosa (62%) and Santa Cruz County (just over 55%) turned out to back housing bonds worth hundreds of millions of dollars.
All five measures failed.
The California constitution doesn’t make it easy for local governments to issue IOUs. Not only are most types of municipal and county borrowing plans required to go before the electorate, once on the ballot they also have to win support from at least two-thirds of the voters to pass.
Now, as state lawmakers scramble to put a lid on ever-increasing housing costs, a persistent homelessness crisis and growing public ire over both, a coalition of housing developers, unions, local governments and pro-housing groups want to lower that electoral bar for bonds and taxes that fund affordable housing and a wide array of public infrastructure projects.
The new proposed threshold: 55%. Had that standard been in place in 2018, Berkeley, San Diego, San Jose, Santa Rosa and Santa Cruz County would have been granted the power to borrow a total of $2.26 billion.
Spearheading the effort to amend the state constitution is Assemblymember Cecilia Aguiar-Curry — and not for the first time. The Davis Democrat has introduced a version of the bill every session since joining the Legislature in 2017. It’s never made it out of the Assembly.
But proponents think this year could be different. The Assembly’s new speaker, Robert Rivas, has named housing a top priority and has shown an early willingness to push his preferred housing bills, even over the objections of powerful committee chairpersons. Rivas is a co-author of Aguiar-Curry’s bill, along with roughly half the Assembly.
Aguiar-Curry may also have a bit more negotiating weight to throw around this time, too. Rivas named her speaker pro tem, his second in command, upon assuming the leadership role this summer.
Meanwhile, public concern about housing has not gone away.
“If we’re gonna do these big statewide efforts, ensuring the locals also do their piece and have the tools they need to meet us halfway is really important.”
ABRAM DIAZ, POLICY DIRECTOR FOR THE NON-PROFIT HOUSING ASSOCIATION OF NORTHERN CALIFORNIA
If the proposed constitutional amendment makes it through the Legislature, where it would require (what else?) two-thirds of the vote to pass, it would then go before voters statewide on the November 2024 ballot.
It would be in good company. Alongside initiatives and referenda proposed by private citizens and interest groups, the Legislature is considering a handful of other proposed constitutional changes and as many as 10 statewide bonds, including a $10 billion affordable housing measure.
Aguiar-Curry, who used to be the mayor of semi-rural town of Winters, said her measure may help cure some of the defects she sees with those colossal statewide bonds that often most benefit bigger cities.
“When you pass some of these big time bonds, we don’t see the money,” she said in an interview. “Every community has different needs, but for a lot of us in rural communities, it’s hard to get bonds passed.”
Making it easier for local governments to raise funds for affordable housing will also make it easier for those governments to compete for matching state and federal cash, said Abram Diaz, policy director for the Non-Profit Housing Association of Northern California, which supports the amendment.
“If we’re gonna do these big statewide efforts, ensuring the locals also do their piece and have the tools they need to meet us halfway is really important,” he said.
Many of the state’s business groups and the California Association of Realtors oppose the measure, reluctant to take any steps that would make it easier for local governments to hike taxes or run up their debts. Most bonds issued by local governments are paid out of increased property taxes.
For many defenders of California’s long-time restrictions on local taxation — namely, Proposition 13 from 1978 — Aguiar-Curry’s measure represents a fiscal Pandora’s box.
“It’s a slippery slope,” said Newport Beach Assemblymember Diane Dixon, a Republican, at a recent Assembly hearing. “There are always attempts to undo Prop. 13 and the two-thirds vote, and it’s just a pincer attack.”
Learning from schools
The space between 55% and two-thirds of the vote is where many ballot measures go to die.
In 2022, cities, counties, schools and special districts put a total of 59 revenue-raisers requiring two-thirds of the vote to pass on local ballots across California, according to data compiled by local government fiscal analyst Michael Coleman. Only 29 of those measures cleared that threshold. Of the 30 that failed, 16 received more than 55% of the vote.
“Why should one-third of the local voters have the power to overrule fiscal decisions in your community?” Aguiar-Curry said.
That’s been a major source of fiscal frustration for cities and counties. But for the last two decades, school districts have been the exception. Thanks to Proposition 39, a constitutional amendment passed by voters in 2000, local school bond measures only need to hit a 55% cut off to pass, so long as they’re used to fund facility construction and upgrades and don’t exceed a certain amount.
That’s been “a real game changer for schools,” said Coleman.
You can see that in the election results. Over the last two decades, local governments have turned to the voters more than 5,000 times, begging permission to raise taxes or borrow money, according to Coleman’s database.
Since 2001, city and county bond and tax measures that have been required to get two-thirds of the vote have succeeded just more than half the time. School bonds with a 55% threshold have cleared that requirement 80% of the time.
No surprise, then, that affordable housing developers want in on some of that special treatment.
So, too, do organizations representing firefighters, librarians and school employees, public sector workers and construction unions. Alongside affordable housing projects, Aguiar-Curry’s proposal would lower the voter requirement for bonds and taxes that fund all manner of “public infrastructure” projects, including road, highway and transit improvements; water and flood control upgrades; hospital, police station and library construction; and the purchase of firefighting equipment.
And going further than Prop. 39, Aguiar-Curry’s measure sets no limits on the amount of borrowing. Nor is it just restricted to bonds, which are frequently paid back through property tax increases, but would free local governments to propose new parcel tax increases and sales tax hikes.
Opponents of the measure, led by the nonprofit California Taxpayers Association, have seized on that final detail.
“The taxes this measure would make it easier to pass are regressive,” said Peter Blocker, the organization’s lobbyist, at the recent hearing. “And while one of the goals of the measure is to make it easier to raise revenue for housing, the two taxes this measure applies to — sales taxes and parcel taxes — are both taxes that make housing less affordable.”
Tacking on these other areas of infrastructure spending and giving local governments more financial flexibility to use the measure has helped Aguiar-Curry build a coalition. Proponents insist it’s also sensible policy.
“This thought that we can do this for housing and not infrastructure doesn’t work,” said Assemblymember Lori Wilson, a Suisun City Democrat, at the hearing. “You can’t build housing without infrastructure.”
Proponents also insist, over the objections of anti-tax advocates, that the measure would do nothing to directly increase debt or raise taxes. If voters pass the measure in 2024, it would simply provide local governments with new tools to combat the housing crisis.
But voters could put those tools to work immediately in some parts of the state.
As currently written, the Aguiar-Curry amendment would apply to any local revenue-raiser passed “on or after” the amendment itself is passed — meaning, to any other measure also on the November 2024 ballot.
That’s a pertinent detail for voters across the Bay Area, who are likely to be presented with a regional affordable housing bond as large as $20 billion next November. If Aguiar-Curry’s measure makes the ballot, too, that would give millions of Northern California voters the opportunity not only to vote on the largest housing-related IOU in recent California memory, but also on a provision to ease its passage.
“If this passes in November, the lower threshold applicability will apply to other housing bonds that are also on the ballot so that they can really harness this new tool,” said Diaz with the Non-Profit Housing Association. “We don’t have a day to waste as we try to address the homeless crisis.”