May 14 2014 09:59 AM

Band-Aid bonds won't stop long-term bleeding

Attorney Cory Briggs is on the warpath for equal funding for neighborhood roads and infrastructure.
Photo by David Rolland

    In a meeting in late March, David Graham, San Diego City Councilmember Mark Kersey's chief of staff, sat down with activist attorney Cory Briggs to discuss a controversial lawsuit holding up roughly $120 million in bond funding for badly needed road repairs, fire stations, libraries and other projects.

    After some negotiation, Briggs said he'd agree to drop the lawsuit if Kersey, who chairs the council's Infrastructure Committee, would broker a deal committing the city to a fixed list of bond-funded projects. The city has such a list, but it can change at the discretion of the mayor and the City Council.

    After the initial meeting, Kersey's office never responded to the proposal, Briggs said. Kersey's office also declined CityBeat's request to comment on the exchange. The Mayor's office said it was never made aware of the offer.

    Based on a complex legal argument, Briggs contends the 30-year borrowing scheme—known as a lease-revenue bond—has been improperly executed and should be required to go to a public vote. At the heart of his concern is the idea that taxpayers are being burdened with debt they aren't benefiting from equally under the city's spending plan.

    "If you go to the voters with something that has these disparities in it, even the rich districts who are beneficiaries of the way things are now are going to vote against it," Briggs said.

    Under Mayor Kevin Faulconer's proposed fiscal year 2015 budget, infrastructure spending is concentrated in four City Council districts, according to a list of capital-improvement projects requested by City Councilmember David Alvarez.

    "It's going to be a priority of mine that we have equality in funding for all communities of the city, and we're going to track where the expenditures are going with all of our [Capital Improvement Program] funding revenue," Alvarez said at a May 6 budget hearing on infrastructure.

    While Council Districts 1, 2, 3 and 7 would collectively pull in more than 62 percent of non-sewer-and-water infrastructure spending under the proposed budget, the remaining five districts would receive less than 13 percent combined, including Alvarez's economically disadvantaged District 8, which has been allocated less than 2 percent of funding. About a quarter of the spending is proposed for projects, such as road resurfacing, whose locations have yet to be announced.

    The mayor honored an existing list of "shovel-ready" projects, said Almis Udrys, Faulconer's director of government affairs. "It takes a little bit of time to clean out these legacy projects that have been in the system for several mayors back and that have already had funding spent for design, etcetera.

    "There are projects from years ago before the city really did any sort of legitimate or logical planning-and-construction process that would just kind of get in," Udrys added. "There was never a lot of logic to it."

    The proposed allocation for the borrowed bond proceeds looks troubling, as well. While Districts 1, 2 and 3 would get 26 percent of funding combined, Myrtle Cole's District 4 would receive just 1 percent, and District 8 would get nothing. With 62 percent of all bond funds in a "citywide" project category, the yet-to-be released locations of street resurfacing projects will have a significant impact on funding equality.

    Of overall proposed infrastructure spending, a few large projects with citywide significance exaggerate the numbers, Udrys pointed out, such as about $98 million for the West Mission Bay Drive Bridge in District 2 and about $32 million to start expansion of the San Diego Convention Center in District 3.

    "No neighborhood's getting everything they want because the needs far outweigh the available resources to pay for them," Udrys said.

    However, even if work on the convention-center expansion and the bridge project were subtracted, City Council President Todd Gloria's District 3 would still receive more than $23.1 million and Faulconer's former District 2 more than $16.5 million in non-sewer-and-water infrastructure funding. That looks cushy when compared with about $4.3 million in funding for District 8, which includes some of the city's most neglected neighborhoods, such as Barrio Logan, Sherman Heights and Logan Heights.

    When asked about the inequities, Gloria said the city's infrastructure approach "should be prioritized based on need."

    "Some neighborhoods in San Diego—because of age, lack of appropriate previous investment and or access to funding sources like facilities benefit assessments—have needs that are more urgent than others," he said in an email. "As long as the city continues to invest based on need, the quality of life throughout all communities will improve."

    To that end, city officials have proposed a five-year infrastructure spending plan with a citywide "asset management system" to assess needs and investment strategies. Officials anticipate submitting a draft plan to the council's Infrastructure Committee in July.

    "It will show you the projects that are in the queue, as opposed to just guessing every year when the budget comes out," Udrys said. "It allows for much more transparency, and, frankly, it's just a better approach to planning."

    However, that raises questions about how the city will maintain and pay for these future infrastructure needs. With a whopping $2 billion backlog of deferred capital projects, the continued use of lease-revenue bonds to bolster the infrastructure budget is "not sustainable or recommended," according to a review of the mayor's proposed budget by the City Council's Independent Budget Analyst's office (IBA).

    The city's been using a series of such bonds since 2009 and plans to continue doing so until 2018, by which time the city will have borrowed roughly $591 million. Each bond is to be paid back over 30 years. In fiscal year 2015, the bonds will cost the city's general fund roughly $18.6 million in annual debt service. In 2019, the annual debt service will cost the city more than $39 million.

    That's why the IBA, along with Councilmembers Gloria and Alvarez, has been exploring a lower-interest general-obligation bond coupled with a tax or fee increase to be put on the November 2016 ballot. Planning for such a measure would take as many as 18 months and require outreach across all communities in order to build support.

    "I think we need to do something in November of 2016," Gloria said at last week's infrastructure budget hearing. "I don't think that's negotiable. I think we have to do that, or the next opportunity is 2020."

    Even with the use of costly lease-revenue bonds, streets will crumble and facilities deteriorate at a rate of up to 10 percent during the next five years, according to the IBA.

    "I think this council needs to decide if we want to get serious about infrastructure," Alvarez said at the hearing. "The IBA is presenting a very, very clear picture."

    Neither Faulconer nor Kersey would take a stance on a general-obligation bond that included a tax or fee increase.

    "We can't lease-revenue bond forever," Kersey said in an email. "But until we have a comprehensive, long-term approach to investing in infrastructure, like the multi-year infrastructure investment plan currently in development, it's premature to discuss going to the voters for more revenue."

    Faulconer is expected to submit his final budget on May 20. The City Council is expected to vote on the budget on June 9. Faulconer has 10 days to veto any changes. The deadline for a final spending plan is June 30.

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