California Chamber of Commerce President Allan Zaremberg

(February 24, 2006) Governor Arnold Schwarzenegger’s emphasis on investing in California infrastructure is good news for business and the economy. It is clear from recent floods, crowded freeways, crumbling schools and other problems throughout our state that California’s infrastructure needs a significant investment. It has been ignored for far too long, and the plan outlined by Governor Schwarzenegger in his State of the State remarks and budget proposal is essential to keep California’s economy growing.

Individuals who are concerned about incurring the amount of debt the Governor has proposed should be reassured that the level is no more than California has historically experienced - between 5 percent and 6 percent.

For critics who ask whether the state can afford the bonds, the answer is: we can’t afford not to issue the bonds. Not only will the state’s bond capacity be filled if we allow a vacuum to exist, but the General Fund revenues also will get spent on programs and projects less essential to getting California’s infrastructure back in shape.

Projects that Help Economy
In contrast to the past piecemeal adoption of bond measures, the Governor proposes dealing with the infrastructure crisis in a strategic, comprehensive way. The guiding principle of the Governor’s budget and bond proposals is to focus on projects that help generate the economic activity so critical to California.

• For example, the Governor’s $107 billion transportation investment package is intended to reduce the amount of time Californians spend stuck in traffic, with an additional emphasis ($2 billion) on decreasing congestion caused by goods movement near California’s ports.

The answer is not to reduce port activity, because the ports provide good quality jobs, but to improve the transportation network. Reducing congestion and giving truckers enough mobility to make a profit moving goods in and out of the ports means those truckers will be able to afford new technology, such as clean diesel vehicles. Cleaner-burning engines, in turn, will reduce pollution and improve air quality - a benefit for everyone in the region.

Traffic issues around the ports are just one example of the gridlock that threatens to stifle the movement of both goods and people throughout the state. A statewide solution to traffic congestion is essential.

• Investing in water infrastructure helps fill another basic need for the people and businesses of California. Restoring levees in the Sacramento region, as proposed in the Governor’s $35 billion water infrastructure investment plan, serves two purposes: It will both boost flood protection and enhance the state’s ability to deliver a quality water supply throughout California, given that much of the water for the state flows through the fragile Sacramento-San Joaquin Delta.

An adequate supply of water is essential to business operations throughout the state, from high tech operations to fields and farms, as well as to the daily lives of the growing number of Californians.

• Dealing with school infrastructure needs also is a key for California’s future economic prosperity. Although voters have recently approved resources for new school construction, the money allocated for rehabilitating facilities has been exhausted and needs to be replaced because demand is so high.

The infusion of $38 billion in funding through the K-12 and higher education bond package will help provide the classroom space and up-to-date facilities our schools and universities need. Learning in these improved facilities will, in turn, better equip students to become the educated workforce California employers need for fast-changing operations in the global market.

Delay Costs More
The bottom line is that you can’t pour concrete - for roads, water systems or classrooms - without spending money. Our choices when it comes to investing in infrastructure are to pay now or pay later, and the more we delay, the more we will pay.

The practical consequences of the bonding proposal are not substantially different than setting aside a set portion of the General Fund for transportation or other infrastructure. Experience at the local level shows that issuing bonds up front is an essential part of a successful infrastructure-financing package.

Numerous counties have adopted additional sales taxes to provide revenue over a 20-year period to fund congestion-relief programs. The counties sell bonds at the beginning of the cycle to finance the projects, and then pay the bonds off with the added revenues that come in over the life of the tax increase.

This approach enables the counties to get the benefits of building the congestion-relief projects earlier and at a more affordable price than if they had to wait until they had accumulated sufficient revenues at the end of the 20 years of tax collections to launch the projects.

Similarly, on a statewide level, the Governor’s bond package can jump-start the effort to halt the deterioration in our roads, levees, water supply system and school facilities. The resulting construction will create quality jobs and prepare the state for future growth. Californians should support the Governor’s agenda to invest in California’s infrastructure.

Allan Zaremberg is president and chief executive officer of the California Chamber of Commerce.