LOS ANGELES -- Municipal bond market participants offered their views about how California will confront housing, education and transportation challenges Tuesday at The Bond Buyer's California Public Finance Conference.
Attendees were quizzed on a variety of public finance topics in a live market survey sponsored by S&P Global Ratings.
Using handheld transponder devices, participants provided answers to multiple choice questions while a soundtrack that ranged from ABBA to the theme from “Jeopardy” played.
Voters named pensions as the top public finance issue in California by 39%, followed by housing at 36%.
Survey participants sounded a more pessimistic note than the panelists on the question of how the state will deal with affordable housing and homelessness.
Only 6% were optimistic that a new state housing bond will make a dent in the problem, while 49% expected greater suburban sprawl and worsened traffic and 45% said the lack of affordable housing will lead to more corporate relocation.
In a related question, 42% believed the response to income inequality would be apathy and no progress. However, a majority predicted some action with 20% expecting more local government housing bonds and 32% expecting housing measures to pass more quickly.
Chris Mukai, managing director of Citi, noted that the statewide November ballot has two measures that provide housing bond money and that many localities from Los Angeles to Oakland have passed housing bonds in recent years.
The challenge will be in leveraging those funds to get the maximum impact and how long it will take to spend those funds, he said. It took more than a decade to spend much of the $2.85 billion voters authorized in a 2006 state housing bond measure, Mukai said.
“There’s going to be significant policy considerations with respect to the timing issues to get this money into play,” he said.
Lisa Smith, a managing director for public finances at MUFG, said financing is only one of the challenges when it comes to building affordable housing projects.
“You’re still having NIMBY-ism,” she said. “Nobody wants them in their backyard.”
Transit-oriented development – housing built near bus, rail and other transportation centers – was seen by survey voters as the top solution to increased traffic congestion with 63% choosing that answer.
Autonomous vehicles were selected by 25%, more freeway toll lanes by 5%, and 7% said train connections at the new Transbay Terminal in San Francisco would help.
Brian Mayhew, CFO and treasurer for the Bay Area Toll Authority, said transit-oriented development is important but limited in scope due to the lack of availability of empty land near transit centers.
High occupancy toll lanes are “the biggest bang for the buck,” and will only expand over the next few years, he said.
“If you control the freeways, you control movement on the freeways and you do more for keeping people moving and you do more for reducing greenhouse gases,” Mayhew said.
On the question of California’s future credit quality, 40% of audience members agreed with the panelists that the stock market and economy will be the major factor.
Smith said too much of the state’s revenues are reliant on personal income taxes from the state’s wealthiest residents.
“The state’s continued reliance on these high-wage earners and capital gains make it really susceptible to market volatility,” she said.
