Opinion

Frye: City Sounded Alarm to Wall Street About Prop. A

Frye: City Sounded Alarm to Wall Street About Prop. A

If you don’t know about the relationship between state low-interest loans for city wastewater and water projects, city bond offering documents and Proposition A‘s proposed ban on project labor agreements, you will probably want to read this to the end.

Fact is, they have a lot in common and it’s an interesting relationship.

On May 22, the City Council will vote on two agenda items, 51 and 52, that allow the city to borrow money from the State Revolving Fund (SRF) program at a “low 2.0933% for a 20-year term.” Both items are for public infrastructure projects; one is for wastewater and the other is for replacing old water mains. Combined, the city is seeking to borrow approximately $30 million at this low rate of interest.

Some background in the agenda:

[Since 1999] The City has received approximately $160,000,000 in low interest loans under the SRF Program. Utilizing the SRF 20-year loan program, approved loans of $29 million and $80 million, since July 1, 2007, will result in savings of approximately $78 million when compared to traditional 30-year bond financing.

It’s a great deal for San Diego ratepayers and taxpayers, and saves money because lower interest rates allow more projects to be constructed at a lower cost. But if Prop. A passes, these low-interest loans are just one of many state funds that could be a thing of the past for San Diego because state legislation precludes cities in California that have bans on project labor agreements for public works projects from receiving any state construction funding. This creates a significant financial risk for the public and the city.

But don’t take my word for it, simply because I oppose Prop. A and signed the ballot statement urging people to vote no.

Take a look for yourself and read what the city says about Prop. A in their bond offering documents, items 332 and 334, which also happen to be on the city council agenda this Tuesday. The bond offering documents, which include information that must be disclosed to the bond markets regarding material financial risks to the city, state:

Subsequent to Proposition A’s qualification for the ballot, the State Legislature passed, and the Governor signed, a law that would prohibit the use of State funds on local construction projects where the local agency, including a charter city, prohibits the use of PLAs. If approved, Proposition A could cause the City to lose State funding for City construction projects.

So the city is taking this seriously and think it is a material fact that must be disclosed, otherwise they wouldn’t disclose it. But it’s not just SRF loan money at risk; it’s all state grants and loans, which last year totaled $158 million according to the mayor’s office and city’s Independent Budget Analyst.

State Controller John Chiang has tried to educate people on this financial risk too. On May 3, he said, “If Prop A passes, San Diego would no longer be eligible to receive state grants for local construction projects.”

And even though the Prop. A proponents argue that the legislation denying state funding to cities with PLA bans is unconstitutional, the state’s legislative counsel reviewed it, and on May 3, provided a legal opinion letter to the governor stating that it was constitutional.

We can see where this is headed if it passes, and it’s this stuff that the Prop. A proponents really don’t focus on much in their voter education and outreach. But I think people have a right to know this and more.

For example, did you know that the city of San Diego has never been a party to a project labor agreement? Or that the mayor’s office and IBA estimate that implementing Prop. A will require $450,000 in yearly costs and a one-time startup cost of $500,000 to post some redacted construction contracts online in a searchable database? Did you know that those costs are not included in the FY 2013 budget?

And finally, because the Prop. A proponents did not include a funding source for these costs in the ballot measure, what do you think should be cut from the budget to pay for it? Pothole repairs? Library hours? Restrooms in public parks? Fire rings?

It’s your call, but at least you can’t say you didn’t know.

Donna Frye is a former San Diego City Councilwoman.


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38 comments
Jim Jones
Jim Jones subscriber

Unless we want to just disband the city and let the state run an Diego? Governor Brown for Mayor?

Jim Jones
Jim Jones

Unless we want to just disband the city and let the state run an Diego? Governor Brown for Mayor?

David Cohen
David Cohen subscriber

Proposition A is likely to be defeated for the good reasons many have already stated. Blind, anti-union hostility goes only so far before its defects begin to attract notice.

fryefan
fryefan

Proposition A is likely to be defeated for the good reasons many have already stated. Blind, anti-union hostility goes only so far before its defects begin to attract notice.

Omar Passons
Omar Passons subscribermember

the overall management of our city/region in service to the people who live and work here.

omarpassons
omarpassons

the overall management of our city/region in service to the people who live and work here.

Chris Brewster
Chris Brewster subscribermember

cal philosophy about PLAs is interfering with what might well be the best option in some cases.

B Chris Brewster
B Chris Brewster

cal philosophy about PLAs is interfering with what might well be the best option in some cases.

Jim Jones
Jim Jones subscriber

So I don't really see the issue you bring up as relevant.

Jim Jones
Jim Jones

So I don't really see the issue you bring up as relevant.

Jim Jones
Jim Jones subscriber

And since when has Frye cared about stewardship of tax dollars? The Union puppets would be calling us miserly if this cost was going into union coffers and we balked at it.

Jim Jones
Jim Jones

And since when has Frye cared about stewardship of tax dollars? The Union puppets would be calling us miserly if this cost was going into union coffers and we balked at it.

philip piel
philip piel subscriber

At some point tax payers may actually look for options that benefit San Diego the most instead of settling once again for the lesser of two evils or a solution that "disadvantages San Diego the least," call me a dreamer...

pmpiel
pmpiel

At some point tax payers may actually look for options that benefit San Diego the most instead of settling once again for the lesser of two evils or a solution that "disadvantages San Diego the least," call me a dreamer...

Chris Brewster
Chris Brewster subscribermember

Basically, what I am understanding is that there is a philosophical disagreement over whether PLAs are good business, but the City has chosen not to engage them, and if Prop A passes, we stand to lose big money. Isn't the pragmatic approach to vote no on Prop A and consider such an initiative only if: 1) The city awards contracts under PLAs, and 2) They can be shown to have been a bad choice fiscally? I guess the question is, which option disadvantages San Diego the least? Seems like a wait and see approach would be best.

B Chris Brewster
B Chris Brewster

Basically, what I am understanding is that there is a philosophical disagreement over whether PLAs are good business, but the City has chosen not to engage them, and if Prop A passes, we stand to lose big money. Isn't the pragmatic approach to vote no on Prop A and consider such an initiative only if: 1) The city awards contracts under PLAs, and 2) They can be shown to have been a bad choice fiscally? I guess the question is, which option disadvantages San Diego the least? Seems like a wait and see approach would be best.

Mark Giffin
Mark Giffin subscribermember

You consider this representation?

mgland
mgland

You consider this representation?

philip piel
philip piel subscriber

I know, more "Radio Rhetoric" right?

pmpiel
pmpiel

I know, more "Radio Rhetoric" right?

Scott Shewmaker
Scott Shewmaker subscriber

I'm not sure I like PLAs, but I think a blanket ban is unnecessary and will likely have negative fiscal implications for the city. So why do it?

NorthPark
NorthPark

I'm not sure I like PLAs, but I think a blanket ban is unnecessary and will likely have negative fiscal implications for the city. So why do it?

Ian Trowbridge
Ian Trowbridge subscribermember

Instead of using comments on this opinion piece to insult Donna Fry or vent on unions, work to change state law if you don't like it and try to understand the likely financial consequences should Prop. A pass.Let me just echo Donna's comment: if you vote for Prop. A don't say you didn't know the likely fiscal consequences of preventing San Diego from receiving low interest loans from the state. That really surprises me as most of you are intelligent fiscal conservatives.

iantrowbridge
iantrowbridge

Instead of using comments on this opinion piece to insult Donna Fry or vent on unions, work to change state law if you don't like it and try to understand the likely financial consequences should Prop. A pass.Let me just echo Donna's comment: if you vote for Prop. A don't say you didn't know the likely fiscal consequences of preventing San Diego from receiving low interest loans from the state. That really surprises me as most of you are intelligent fiscal conservatives.

philip piel
philip piel subscriber

Donna, by all means keep spending your time jumping up and down saying "look over there, look over there," the tax payers of San Diego know what the real issue is and we're not going to bow down to Sacramento hacks, local union bosses or the local politicians these union bosses purchase with the hard earned dues money from union members.

pmpiel
pmpiel

Donna, by all means keep spending your time jumping up and down saying "look over there, look over there," the tax payers of San Diego know what the real issue is and we're not going to bow down to Sacramento hacks, local union bosses or the local politicians these union bosses purchase with the hard earned dues money from union members.

Joe Jones
Joe Jones subscriber

Truly, truly pathetic.

jad555
jad555

Truly, truly pathetic.

Jeff Brown
Jeff Brown subscriber

The labor unions have the entire state by the short hairs - don't they? Wow - the conclusion I draw from this article is that labor unions should be barred from all such contracts given the fact that their bribery has put their puppets into office to craft such devious legislation as this.....

Jeff92130
Jeff92130

The labor unions have the entire state by the short hairs - don't they? Wow - the conclusion I draw from this article is that labor unions should be barred from all such contracts given the fact that their bribery has put their puppets into office to craft such devious legislation as this.....

Mark Giffin
Mark Giffin subscribermember

As long as the voters keep electing state representatives that only represent Unions this kind of Baloney will continue.

mgland
mgland

As long as the voters keep electing state representatives that only represent Unions this kind of Baloney will continue.

Jim Jones
Jim Jones subscriber

Do we want to stand with Frye here and take our orders on how to handle our local projects from Sacramento? I don't, Sacramanto is what got the State in the mess it is in today, and at some point we need to start separating ourselves from the madness and controlling our own destiny. In long run we will be far better for it.

Jim Jones
Jim Jones

Do we want to stand with Frye here and take our orders on how to handle our local projects from Sacramento? I don't, Sacramanto is what got the State in the mess it is in today, and at some point we need to start separating ourselves from the madness and controlling our own destiny. In long run we will be far better for it.

Omar Passons
Omar Passons subscribermember

On the one hand, proponents say the escape clause permitting PLAs where state funds are at issue protects the loss of state funds. Though it's not clear what percentage of major, local public works are done without state money, so it's less clear what the ongoing validity of this proposed ban would be. I like the idea of union and non-union shops being able to compete freely on price and quality (with evaluation bump to standardize for comprehensive health). It doesn't seem that Prop A gets there. Perhaps Joanne Faryon will ask at the last debate where each candidate will get the $450K to implement. Would love to know where each candidate will look in the budget for this one.

omarpassons
omarpassons

On the one hand, proponents say the escape clause permitting PLAs where state funds are at issue protects the loss of state funds. Though it's not clear what percentage of major, local public works are done without state money, so it's less clear what the ongoing validity of this proposed ban would be. I like the idea of union and non-union shops being able to compete freely on price and quality (with evaluation bump to standardize for comprehensive health). It doesn't seem that Prop A gets there. Perhaps Joanne Faryon will ask at the last debate where each candidate will get the $450K to implement. Would love to know where each candidate will look in the budget for this one.