Sunday, February 12, 2006

"Design-build has proven in California and elsewhere as a way to waste money."

A Feeding Frenzy for Lobbyists

The governor's proposed $222-billion public works bond has advocates for firms and unions lining up for a piece of the action.

February 12, 2006

By Jordan Rau,
Los Angeles Times
Copyright 2006

SACRAMENTO � Richard Gephardt, the former congressional leader and two-time presidential candidate, recently dropped by California's Capitol to chat with a fellow Democrat, Senate President Pro Tem Don Perata. The subject was not politics but private toll roads, according to people familiar with the meeting.

Gephardt works for Goldman Sachs, the investment bank that is making millions advising Chicago and Indiana on how to sell toll roads to private companies. That idea, largely resisted in California, is now back on center stage here as part of Gov. Arnold Schwarzenegger's $222-billion proposal to revamp roads, levees and schools across the state.

His plan includes $16 billion for privately run toll roads, mostly for commercial traffic. It was crafted with advice from a Goldman Sachs senior advisor, Kathleen Brown, a former state treasurer.

As the governor's aides and legislative negotiators hammer out the details in the Capitol, the largest public works project in state history has launched a frenzy of lobbying, already a $215-million annual business in Sacramento.

Many members of the Third House, as the state's lobbying corps is known (the Assembly and Senate being the first two houses), are fully engaged � much as California's political consultants were last year during the $250-million-plus special election.

"Any time you begin to divvy money up, everyone thinks they should get more," said Dave Ackerman, a lobbyist for Associated General Contractors. "Groups know what they want to try to protect and what they want to do. They're staking their turf out."

Individual projects so far are not named in the bonds, but advocates are positioning themselves to be first to obtain money from state agencies if voters approve the plan. More urgently, lobbyists hope to influence the criteria written into the bond initiatives that will direct how the money will be doled out.

Private toll roads, water storage projects, new jails, parks, retrofitted hospitals � all have active lobbyists pushing to be included in the massive bond issue. Many of the ideas also have well-financed opponents.

Water storage projects � including off-river dams � are an idea that the governor wants to back to the tune of $1.25 billion. Environmentalists think the public should not subsidize such projects, and some Democratic legislators want to take the money out of the bond proposal.

Republican senators who represent districts where the projects would be located are making them a priority.

"People are currently trying to assess which projects have the most promise, and anybody who has an interest in that is just weighing in on that part of the debate," said Anson Moran, manager of the Delta Wetlands Project, which would turn two below-sea-level islands in the Sacramento-San Joaquin Delta into reservoirs. Edelstein & Gilbert, a Sacramento lobbying firm, is pushing the project on behalf of the private owners of the islands.

Unions for prison guards and police officers are battling county sheriffs over Schwarzenegger's proposal to spend $2 billion expanding local jails. The California Correctional Peace Officers Assn. and the Peace Officers Research Assn. of California complain that the proposals are poorly thought out and would not prohibit private companies from running the jails. The guards union objects to the idea of shifting state prisoners to the new cells that would be built in local jails.

The break in law and order's united front is rare, but there is little love lost between the unions and Schwarzenegger, who unsuccessfully pushed an initiative last year that would have restricted the way unions could collect dues from members.

Opposition is so intense among lawmakers, many of whom place jails as a low priority anyway, that the administration has not been able to find a Senate sponsor from either party for that section of his plan.

Many Sacramento interests are busy trying to persuade legislators to broaden the governor's proposal beyond bricks and mortar.

Environmentalists are pressing for money to be set aside for parks, saying otherwise they may back a competing $5.4-billion bond measure that would devote much of the money for conservation and park improvements. Perata (D-Oakland) has listed parks as an important component of whatever deal is ultimately worked out.

The Service Employees International Union, which represents many medical workers, wants money to retrofit older hospitals so they will be protected from earthquakes. Assembly Speaker Fabian Nu�ez (D-Los Angeles) has listed this as one of his priorities.

"We do think there are some hospitals that need some help with the financing, although many hospitals are well able to afford this themselves," said Beth Capell, a union lobbyist.

One might expect hospital owners to be joining that push. In fact, however, the state's hospitals have been lukewarm to the idea. They have been lobbying to delay a 2008 deadline for hospitals to make many of their buildings earthquake-proof. Hospital officials fear that lawmakers will retain the mandate but put up only a small amount toward the cost of the retrofits, which hospital lobbyists say could total more than $40 billion.

"If the Legislature were to allocate a little bit of money, like $1 billion or $2 billion, and think that is going to solve the problem, that is not a good thing," said Jan Emerson, a vice president of the California Hospital Assn.

Much of the lobbying revolves around smaller but politically charged components of the governor's plan. For example, the Professional Engineers in California Government, a union with 9,300 members, is trying to kill provisions that could take work away from Caltrans engineers by allowing the contractors that build bridges and roads to design them as well. Such methods are called "design-build."

"We don't want to see the money wasted, and design-build has proven in California and elsewhere as a way to waste money," said Bruce Blanning, the union's executive assistant.

Schwarzenegger's proposal to use private-public partnerships to expand the routes used for transporting goods from California's ports has drawn international attention.

One firm expressing interest is the Macquarie Infrastructure Group, an Australia-based company. The firm is part of a consortium that last month won a $3.8-billion contract to maintain and run a 157-mile toll road in Indiana. The consortium also leased the Chicago Skyway last year for $1.8 billion, a deal in which Goldman Sachs earned $9 million for giving financial advice to the city.

Macquarie hadn't employed a Sacramento lobbyist since 2001. But last April it retained California Strategies & Advocacy, a firm led by Bob White, a longtime Republican operative who advised Schwarzenegger in his 2003 recall campaign.

Among Democrats, who hold the majority in both houses of the Legislature, the idea of private toll roads is one of the most controversial parts of the governor's plan. Gephardt and a Macquarie executive hope to convince legislators that the idea makes sense when they testify before a state Senate panel Tuesday.

Richard Costigan, Schwarzenegger's legislative secretary, said the governor's proposal was modest and aimed primarily at commercial users of roads, such as trucks that carry goods shipped into ports.

"It's not like we're going to turn Interstate 80 into a toll road," he said.

� 2006 Copyright Los Angeles Times