What the City of San Diego is Telling Wall Street about Prop A…and other things you may not know
In the spirit of bringing our readers thoughtful and meaningful commentary from alternative viewpoints, we are pleased that former Council Member Donna Frye asked Rostra if we would consider a guest opinion piece.
by Donna Frye
There are serious financial risks to the taxpayers and the City of San Diego if Proposition A, which bans project labor agreements (PLAs), passes. This is due in part to two pieces of state legislation - SB 922 and SB 829 - which would preclude charter cities in California that have bans on PLAs for public works projects from receiving any state construction funding. SB 922 was signed into law in October, 2011, and SB 829 was signed into law in April, 2012.
The City of San Diego is taking the financial risks associated with Proposition A seriously and has stated:
“Subsequent to Proposition A’s qualification for the ballot, the State Legislature passed, and the Governor signed, a law that would prohibit the use of State funds on local construction projects where the local agency, including a charter city, prohibits the use of PLAs. If approved, Proposition A could cause the City to lose State funding for City construction projects.”
This is according to financial disclosures contained in two preliminary official statements for bond offerings prepared by the City of San Diego (Items 332 and 334) that will be heard by the city council on Tuesday, May 22.
Other public agencies are also taking this seriously. Earlier this year Escondido removed its proposed ban on PLAs by revising its draft charter proposal citing SB 922. El Cajon followed, also removing the language banning PLAs from a proposed charter ballot this June, and the Palmdale Water District Board voted unanimously to repeal its ban on PLAs.
State officials are clear about the intent and legality of the state law. On May 1, 2012, State Controller John Chiang specifically warned the city:
“If Prop A passes, San Diego would no longer be eligible to receive state grants for local construction projects.”
On May 3, 2012, the state’s Legislative Counsel Bureau reviewed SB 829 and provided a legal opinion letter to the Governor stating that the bill is constitutional.
Proposition A could impact funds that pay for repairing our streets, cleaning our water and building critical infrastructure. According to the Fiscal Impact Analysis for the ballot measure approved by the mayor’s office and the Independent Budget Analyst, “Major State funding awarded to the City in fiscal years 2010 and 2011 was approximately $36 million and $158 million, respectively.” This major funding includes Prop 42 funds, State CIP grants and State Revolving Fund (SRF) loans, and is the type of funding that is at risk if Prop A passes.
As one example, since 1999, “The City has received approximately $160,000,000 in low interest loans under the SRF Program. Utilizing the SRF 20-year loan program, approved loans of $29 million and $80 million, since July 1, 2007, will result in savings of approximately $78 million when compared to traditional 30-year bond financing.”
Prop A also requires the city to post online the text of some redacted construction contracts in a searchable format. The cost to do this, including redacting certain information and presenting other information, is estimated to be $450,000 per year, plus a $500,000 set-up cost. These estimates are according to the mayor’s office and Independent Budget Analyst.
Neither the ballot language nor the Prop A proponents have identified a funding source to pay for this requirement and it is not included in the FY 2013 budget. Additionally, Prop A does not require any city contracts that are not construction-related to be posted online.
Frye is a former city council member in the City of San Diego. She signed the ballot argument against Proposition A.