The Burlingame Voice

High-Cost Rail - Part 159 Costs spiral out of control...again

Dan Walters and Ralph Vartabedian, both of Calmatters.org, are on the watch over the high-cost rail boondoggle as it claims to "create" tons of jobs (Walters) and as the costs just continue to boggle the mind and veer even further from budget reality (Vartabedian).  Here's some of the numbers from the latter piece

The headline reads: New cost estimate for high-speed rail puts California bullet train $100 billion in the red.  That's "in the red" which heretofore has been my working number for the whole budget.  Now it's just the missing billions!

The latest report from the California High-Speed Rail Authority projects costs for the initial segment at $35 billion, which exceeds secured funding by $10 billion. Other segments of the system are likely to have their projected costs increase, too. The state hopes it will get more federal aid.

New cost figures issued in an update report from the California High-Speed Rail Authority show that the plan to build the 171-mile initial segment has shot up to a high of $35 billion, exceeding secured funding by $10 billion.  The cost of that partial system is now higher than the $33 billion estimate for the entire 500-mile Los Angeles to San Francisco system when voters approved a bond in 2008.  What’s worse, that full system cost is set at up to $128 billion in the update, leaving a total funding gap of more than $100 billion for politicians to ponder....The $128 billion price tag does not include cost updates for two separate segments between Palmdale and Anaheim

This nightmare is apparently lost on one UC Berkeley law professor

Ethan Elkind, who watches California transportation issues as director of the climate change program at UC Berkeley’s law school, said the mounting problems cloud the project’s future.  “It is in jeopardy,” Elkind said. “It is dicey. There is no path forward for the full Los Angeles to San Francisco system. It is important that they get something done.”

The only thing that must get done is to kill this turkey before we blow through enough money to solve tens of serious infrastructure issues.  A smarter UC Berkeley guy piles on the tale of woe

Bill Ibbs, a retired UC Berkeley civil engineer who serves on the group and has consulted on international high speed rail projects, said he is concerned about the lack of attention to engineering risks.  “They don’t directly address the hard core engineering issues,” Ibbs said, particularly the 38 miles of mountain tunnels that are planned for Southern California alone. “What are the major engineering challenges that lie in front of you and why aren’t you talking about them in this report?”

The piece goes on to question the ridership forecasts and lays out the funding morass in more detail.  Click through if you can stand it. 

Five Units on a Five Thousand Foot Lot

As I type this, the city council is going into closed session for two issues:

4. CLOSED SESSION

1. Conference with Labor Negotiators Government Code Section 54957.6
   City Designated Representatives: Human Resources Director Maria Saguisag-Sid, City Manager Lisa K. Goldman, City Attorney Michael Guina, Chief of Police Michael Matteucci, Timothy L. Davis Attorney, Finance Director Helen Yu-Scott
   Employee Organizations: AFSCME and Teamsters
2. Conference with Legal Counsel - Existing LItigation (Government Code Section 54956.9(d)(1))

Yes In My Backyard v. City of Burlingame, San Mateo County Superior Court Case No. 23-CIV-00519

The YIMBYs are filing lawsuits all over the Bay Area and the state because, well, the state has handed them a cudgel and why not use it?  The Sunday Chronicle added some color that you can read about here.  I'll just grab the start and then some B'game specific bits:

Los Altos Hills resident Sasha Zbrozek is the first to admit that he is not a real estate developer.  “I’m just some random homeowner dude,” he said. “I’m not qualified to develop much.”  Yet, over the past few days, Zbrozek has become the face of the “builder’s remedy,” a fledgling movement that over the next year could transform the way housing development is approved across the Bay Area.

The builder’s remedy allows property owners to bypass most local planning and zoning rules if that city or county has failed to complete certification of a state-mandated eight-year housing plan known as a “housing element.” So far, the Bay Area is not doing too well: Only five of 109 jurisdictions had their housing plans approved by the state by the Jan. 31 deadline.

Currently, the property has a house and a pool on it, but Zbrozek has submitted two alternatives for redevelopment. One would add five townhomes and retain his current house and swimming pool. The other would require razing his house and pool and putting a 15-unit apartment building along with the five townhomes. If the larger project is approved, he will sell to an experienced builder and move.

It's nice that Mr. Zbrozek knows he's not a builder but is pretty confident he can find one to buy him out once he sets it all up.  Now onto the local comments

So far there are dozens of property owners looking at invoking the builder’s remedy, but only a few have pulled the trigger, according to Sonja Trauss, executive director of YIMBY Law, which has sued several cities for not having compliant housing elements.

Trauss said she knows of property owners in Burlingame, Fairfax, Oakland, Sausalito and Palo Alto who are likely to file applications, but that many are hesitant given that the builder’s remedy has been in effect for only two weeks.  Trauss predicted that the “sweet spot” for builder’s remedy projects will be five units on a 5,000-square-foot lot, which is the most common lot size in California. That is the scale of the projects in Burlingame and Sausalito that she expects to be filed in the coming days.

More than a year ago I suggested that the City start building a legal reserve to counter all of this destruction of R1 zoning.  It was excellent advice since it appears we are a juicier target than say Palo Alto

Meanwhile, wealthy towns such as Belvedere, in Marin, or Palo Alto have the financial resources to fight developments in court.  “The places that are most legally vulnerable are also the places where you are likely to face the longest slog in getting the project approved,” he said. “Maybe you are likely to prevail in Palo Alto, but Palo Alto is going to give you hell for a half dozen years along the way.”

I'd love to be a fly on the wall of that closed session.  There was also a piece in the DJ recently that quoted a different YIMBY attorney as saying he was living on an air mattress in an attic because he couldn't afford anything else.  Don't the YIMBY's want to pay a living wage?  If that claim is accurate, it's hard to see how he was talking about His Backyard.

What civic leadership on SB9 looks like

I was struck by the Daily Post headline shown below.  The Post columnists have been talking about the various cities in SoCal that are standing up to Sacramento on SB9--and standing up for their residents, but this is the first "news" piece I have seen from them or any other paper.  Good on 'em.  Redondo Beach, Carson, Torrance and Whittier--none of which I could find on a map if asked--filed a lawsuit against the state and AG Rob Bonta in March.  Deeper into the article we learn that

In June, the cities of Lakewood and Rancho Palos Verdes announced they had filed their own SB9 lawsuit which is similar to that filed by Redondo Beach.  The difference is that Lakewood and Redondo Beach are general law rather than charter cities, leading to slightly different legal arguments.

Double good on them.  B'game is also a general law city as noted on the city website:

The City of Burlingame was incorporated in 1908. As a General Law city, Burlingame is subject to the general laws of the State of California. The State Government code is the fundamental law of the City, specifying the powers and the form of government that will put these powers into service. This is different from a Charter City, which has more control over local municipal affairs. Charter provisions covering municipal affairs prevail over the State laws when the two are in conflict.

I would love to see B'game link up with Lakewood and RPV (which I can find on a map).  We may be at a slight disadvantage being a general law city, but there is Strength in Numbers.  It seems like a lot more important issue than some of what passes for a city council agenda.  That's what leadership looks like.

A Small Man in a Big Office

The political hack at the SF Comicle sucked me in with the on-line teaser about Newsom talking about "small men in big offices".  I had higher aspirations for a New Year's Voice post, but I got sucked in by Joe Garofoli's hyperbole.  Joe G. is the epitome of a In-the-tank Chronicle columnist.  He has no shame insight.  Boy, do I miss Willie Brown.  So here are just a few of Gavin's misses courtesy of Joe G.:

Newsom:  “I’ve been thinking a lot about time,” Newsom said to open his 21-minute speech. “Maybe it’s my age. Maybe it’s being a parent. But time is now on my mind.”

Did he not see the 50,000 jokes about Kamala Harris and "the passage of time"?  The dude is 55.  His speech writer must be 30.  Garofoli calls him "the guy in charge of the world’s fourth-largest economy — a place he calls the “nation-state” of California."  This year the only thing he might be "in charge of" is the nation's largest deficit.  Want to make a name for yourself?  Go find the $30 billion dollars of taxpayer money that you let the EDD send to fraudsters.  THAT would be like "being in charge" and might balance the budget.

Challenges?  Garofoli notes

And there’s a lot to do in a state where 161,000 people are unhoused, wealth inequality is vast, the poverty rate is high, housing is unaffordable and less than half of students are proficient in reading.

Newsom couldn't "house" the "unhoused" when he was the mayor of EssEff.  What makes anyone thing he can do anything productive across the whole state except threaten local governments' payments?  And "wealth inequality"?  Really Joe G.?--Newsom better hope the wealth inequality holds firm for the rest of his term since that is what is payin' the bills.  Here's the kicker:

“In our finest hours, California has been freedom’s force multiplier, protecting liberty from a rising tide of oppression taking root in statehouses — weakness, masquerading as strength. Small men in big offices.”

I take it back.  His speechwriter must be 23.  California lost 343,000 people to net out domestic migration in the last year and the states he is trying fruitlessly to demonize accepted most of them.  Not that I think that is a problem.  I'd be happy to see California "lose" another million or two so maybe our second-rate politicians could get a handle on the problems we have now.  Not holding my breath.  Happy New Year.  Stay dry and save some of the rainwater because we are gonna need it.

California exodus accelerates in 2022

A year ago, the exodus from our lovely state was news as we discussed here.  The trend has accelerated which should accelerate the review of the state's housing requirement numbers as noted here.  The odd thing about the faulty RHNA numbers is that no one wants to talk about them.  I have mentioned it to several electeds and a watchdog news organization and all I get is crickets.  As a city, try to ignore them and Rob Bonta will be all in your face, but question them and he's silent.  You would think when a state auditor says this about the calculations, someone would go "hold on":

“Overall, our audit determined that HCD does not ensure that its needs assessments are accurate and adequately supported. …This insufficient oversight and lack of support for its considerations risks eroding public confidence that HCD is informing local governments of the appropriate amount of housing they will need.”

If someone is saying "hold on" they are doing it quietly behind closed doors.  But this is what is occurring in California out in the open from the WSJ:

California Gov. Gavin Newsom boasted this week that his state is poised to become the world’s fourth largest economy. Perhaps, thanks to Germany’s economic struggles, but a new Hoover Institution report documents an accelerating business flight from the Golden State.

The report by Hoover senior fellow Lee Ohanian and Spectrum Location Solutions President Joseph Vranich finds that 352 companies moved their headquarters from California between 2018 and 2021. Twice as many businesses left last year (153) than in 2020 and 2019 and three times as many as in 2018. The top destinations: Texas (132), Tennessee (31), Nevada (25), Florida (24) and Arizona (21).

California’s high top marginal income-tax rate (13.3%) punishes small pass-through businesses that pay income taxes at the individual rate as well as managers in C-suites. Manufacturers get slammed by high electricity costs from the state’s climate policies. The Mercatus Center ranks California as the most highly regulated state in the U.S.

Human capital is also becoming more scarce. The report notes that California’s net out-migration to other states increased to 277,000 in 2021 from 34,000 in 2012. Over the last 10 years, California has lost 1.625 million residents to other states—more than the population of Philadelphia. Foreign migration has compensated, but less so in recent years.

Tally that up with the layoffs and hiring slowdowns being reported at the major firms in the Bay Area, and you could say my "confidence is eroded" in the RHNA numbers that drive all of the residential building being jammed down our throats.  And the electoral response?  Raise the top marginal tax rate some more (Prop. 30) under the guise of fighting wildfires and encouraging more electric cars--like we don't already have enough subsidies and browbeating for EVs. 

A Labored Labor Day

Just when you thought Sacramento couldn't screw anything else up, they drop a giant -expletive deleted- on fast-food chain businesses in the state.  There's some doubt that the Gavinor will sign this legislation into law, so perhaps the 16,753 franchise locations in the state run by 5,820 franchisees won't have to start laying off entry-level workers, raising prices and closing locations that are likely to be in "low income areas" unable to patronize high-priced fast-food.  Here are some details for your Labor Day consideration:

The bill passed by the Democratic Legislature this week creates a 10-member council appointed by the Governor and state legislative leaders with nearly carte blanche authority to fix wages, benefits and working conditions at most fast-food restaurants.  The state’s $15 an hour minimum wage is already among the highest in the U.S., but the council could raise it as high as $22 next year and an additional 3.5% every year after that. It could also require that employers provide paid vacation or “protest days” off as some tech companies do.

The Service Employees International Union championed the bill because it will help extort fast-food employers. Restaurants with collective-bargaining agreements that pay 30% more than the state minimum wage are exempt from most of the council’s orders, so owners would have an incentive to surrender to the union to avoid more costly regulation and potential lawsuits by the state Labor Commissioner.

If this is such a great idea, why stop with fast-food employees of chains with more than 100 locations nationwide?  All sorts of jobs "should" have a minimum wage 50% higher than the minimum wage--it's only "fair".  But what about "affordability"?  Panda Express on the Avenue raising its prices 35-40% on top of whatever the ingredient inflation rate is running at can't be good for "affordability".  Look out In & Out and Taco Bell, if Newsom signs this someone will start Burgers99 and Burritos99 with a limit of 99 locations.  Time to "stay in your lane", Sac.

Follow the money....out of state

Dan Walters at Calmatters.org is back on the economic case with a piece titled "California is leaking vital high-income taxpayers".  Before we go to his big picture, Calmatters also just reported the month-to-month changes:

For the second month in a row, the Golden State’s tax revenues fell short of projections: The state in July collected about $1.28 billion less than expected, largely due to lower proceeds from the personal income tax, according to a Monday report from the state Department of Finance. California in June collected about $2.4 billion less than expected.

That $97 billion dollar surplus burning a hole in Sacramento pockets could evaporate pretty quickly.  Here's some snippets from Walters' piece

Since 2010, 7.5 million people have left California while 5.9 million people have come from other states.  That gives rise to a question: Who is leaving California and why?  The Chronicle found that 39,000 San Franciscans who had filed federal tax returns for 2018 had moved out of the city before filing 2019 returns. Collectively, they took $10.6 billion in income with them while people who moved to the city during that period reported just $3.8 billion in income.

California’s top income tax rate, 13.3% on taxable incomes over $1 million, is by far the nation’s highest and when added to the top federal rate of 37% pushes the overall bite to more than 50%. Moreover, a tax overhaul during the Donald Trump presidency basically ended the ability to deduct state income taxes on federal returns.

If anything, California’s taxes on the wealthy are likely to increase. Proposition 30, a measure on the November ballot, would boost the top marginal rate to over 15%, raising money for programs to battle climate change, and another tax hike is headed for the 2024 ballot.  Income taxes account for three-quarters of California’s general fund revenues and the top 1% of California taxpayers generate nearly half of those taxes.  That’s just 150,000 taxpayers in a state of 40 million, so even a trickle of departures has a potentially huge impact on the budget.

Half of three-quarters is 37.5%.  Just saying.  The annual change in population has been trending down for 12 years, but we still need to destroy single-family residential zoning via SB9 to build more.  We are "leaking" vital taxpayers--nice phrasing from Dan.  And we are going to push more through the "leak" to fund climate change even after the Feds have just approved trillions for climate change.  All good.  Nothing to see here.  And in another slick Federal tax move, we are going to give the IRS $80 billion, but they still need to figure out what they will do with it.  Probably should have done that first.

 

High-Cost Rail - Part 158 Rubber-stamping the EIR

The Chronicle and the Daily Journal dutifully put the CHSRA Board's rubber-stamp of the EIR for the Central Valley to EssEff section of the "bullet train" on their front pages.  The Chron sub-headed "Despite win, major hurdles remain for project" and the DJ sub-headed Millbrae's pending legal action about a parcel of land near the station expansion.

Having your own Board "approve" your EIR is sort of like me approving the dinner reservation I just made.  The state legislature still hasn't had the courage to kill the beast as hoped back in May.  The Chron made some attempt to frame the challenges

Major hurdles to the project remain. For starters, California hasn’t figured out where it will get up to $25 billion needed to build the San Francisco and Silicon Valley bullet train extensions.   Democrats in the state Assembly, led by the powerful Los Angeles delegation, had pushed for years to take a chunk of the $4.2 billion in bond funds for the Central Valley line and instead spend it on regional transportation projects in major metro areas that could eventually connect with high-speed rail.

But that standoff ended in June, when the Rail Authority emerged with its bond funding intact, though its operations will be overseen by a new inspector general. Lawmakers also dropped a push to cut costs by using diesel-powered trains, rather than electrified track, in the Central Valley.  But the project has faced ridicule over repeated construction delays and soaring costs, with its total budget growing from $33 billion to at least $105 billion in the Rail Authority’s latest business plan — and potentially many billions more when the authority factors recent inflation into its estimates.

Trains were initially supposed to start running in 2020. Now, the agency doesn’t anticipate the first trains will start running in the Central Valley until 2029, followed by Silicon Valley in 2031.

Leave it to Quentin Kopp to summarize

Still, the project faces critics who say it’s drifted too far from the statewide system voters approved in 2008. Quentin Kopp, a retired state senator and former chairman of the Rail Authority Board, laughed at the idea of bullet trains running into downtown San Francisco.  “That’s called much ado about nothing,” he said. “This is destined for the graveyard of boondoggles now.”

I liked the Dilbert cartoon that ran in today's DJ--it's a fit with this non-news

  

Late Summer Musings on Politics

If you have read the Voice for much of its 19 years on-line you have run into the occasional "think piece" that spices up the usual fare.  The quiet weeks of mid-August before everyone gets back to our little town is a particularly good time for such a post.  With plenty of time to read things like book reviews of books I'll never read (perhaps that is the purpose of a book review), some gems can pop out.  Barton Swain at the WSJ did just such a favor in reviewing a new book about John Locke, the 17th century British philosopher.  Locke is sometimes referred to as "the first liberal".  Swain uses that as a jumping off point:

One way to sum up postwar American politics is to say that conservatives try to stop liberals from breaking the liberals’ own rules. The “rules” in this formulation are those of liberalism in the broadest sense: constitutional principles, the rule of law, rights-based protections. 

“Liberal” regimes aren’t supposed to impose a particular understanding of the Good on their citizens; they’re meant to ensure local and individual freedoms and enable citizens to figure out what the Good is for themselves. But some liberals—typically the highly educated and privileged sort—tend to forget they are liberals and try to define righteousness for everybody. They do this by reallocating citizens’ wealth according to their own ideals, regulating private economic behavior, dictating to local communities how they should govern themselves, imposing protean codes of correct speech and behavior on everybody else, and so on. Conservatives, in this admittedly biased way of putting it, are there to stop liberals from indulging these illiberal impulses; to remind them, in other words, that they are liberals, not potentates.

Well put.  We see the potentates very clearly in Sacramento; and the county and our city are not immune by any means.  We see Sacramento "dictating to local communities how they should govern themselves" all over the place.  It makes one wonder why someone who just wants to serve the community, instead of climbing the political ladder, would want to run for city council when Newsom, the state senate and assembly can dictate how everything will run?  We have an election in 13 weeks.  We will have at least one brand new city council member (in the new, open seat that was dictated to us), a new assemblywoman and a new federal House member.  Here's hoping they will be truly Locke-style "liberals".

Calpers: Losses pile up and cities pay up

Watching the performance of the state's pension manager, CalPers, isn't quite like watching paint dry, but close.  It is the largest pension fund in the country--and it has to be given how poorly the state is run up in Sacramento.  While it may seem arcane and far away, here is the WSJ's take on why we should watch:

The California Public Employees’ Retirement System returned minus 6.1% for the year ended June 30, the fund said Wednesday.   A multiyear downturn could be costly for states, towns and school systems around the country and by extension their residents, leading them to squeeze money from workers, taxpayers or other government services.  Calpers’ stock portfolio returned minus 13.1%, while bonds returned minus 14.5%, the pension fund said.  (Ed:  Private equity made up some of the loss but relying on it is tricky as valuations are being written down left and right.)

The lackluster return will mean California towns, counties and school districts will face higher annual pension contributions during their 2024 or 2025 fiscal year.  U.S. state and local pension funds have accumulated hundreds of billions of dollars since the last financial crisis in 2008, thanks to blockbuster returns from an 11-year bull market. Last year, huge gains in public and private equity markets drove median returns to nearly 27%, a 30-year record.

Some states also topped up their pension coffers with tax revenues from the stimulus-fueled Covid-19 recovery.  But all of those gains have been outpaced by the growth in the cost of the benefits that state and local governments have promised.

We shall see what the impact on the city budget is going forward.  We have been holding on pretty well -- you can look here for the last update from March.  I'll get around to addressing the move to raise local business tax rates in a bit, but Calpers' performance this year highlights the variability and risk associated with being tied so closely to the state.