California Treasurer Wants to Rethink Reliance on Bond Debt

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LOS ANGELES— California Treasurer John Chiang said the state should rethink its reliance on bond debt to fund infrastructure in a 25-page blueprint released Tuesday.

The blueprint was aimed at fixing California's dilapidated roads and bridges.

The state should take inventory of its infrastructure and then figure out the best way to pay for construction including a combination of public and private investments, according to the treasurer's report.

Chiang also said he wants to create a reserve fund to tap excess tax revenues when the state's economy performs exceptionally well.

He congratulated Gov. Jerry Brown on proposing the use of $1.5 billion of "one-time" revenues to attack deferred maintenance in his budget plan.

"My proposal builds on that step and is intended to encourage the state's leaders to talk about what bold steps we need to take to rebuild our state," Chiang said.

The administration agrees that investing in physical infrastructure – particularly with available, rather than borrowed funds – is a core function of state government and critical to its long-term economic vitality, said Evan Westrup, a Brown spokesman.

"We look forward to continuing to work with our federal, state and local government partners on solutions," Westrup said.

By going the pay-as-you-go route that the governor has proposed with the $1.5 billion transfer of one-time funds for infrastructure, the state's Department of Finance projects that the state will save $1.3 billion in interest and bond administration costs over 25 years, said Spokesman H.D. Palmer.

In addition, by using cash for this investment instead of borrowing, the construction schedule isn't wedded to the bond sale calendar—which will allow projects to proceed more quickly, Palmer said.

California Forward, a think tank, estimated the state needs to spend $853 billion on water, transportation and K-12 school infrastructure improvements over the next 10 years but will face a funding gap of $358 billion in paying for those needs, according to the report.

"Finding that money is an enormous challenge," Chiang said. "That is why I have come up with the necessary foundational steps in a long-range plan for rebuilding California's public works.

He recommended not only taking inventory of highways and bridges, but also of needed water projects, schools, university buildings, state buildings and parks.

Speaking before the California Business Roundtable, Chiang asked the state's business leaders to join him in "an effort to construct a 21st century economy," according to the release.

"I am urging legislators to think creatively about how to inventory and pay for nearly a trillion dollars in new transportation links, hospitals, schools and water projects," Chiang said.

The report also seeks legislation to make state and local governments more accountable for how the proceeds from the sale of municipal bonds are tracked. It establishes "fiscal red teams" to help distressed local governments craft recovery options short of bankruptcy.

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