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Budget's cap-and-trade negotiation yields compromise for housing, planning, transit

Martha Bridegam on
Jun 17, 2014

[Updated 6/17/14 from earlier postings since 6/13/14]

[Corrected 6/18/14, 6/23/14]

The on-time budget bill sent to Governor Brown on Sunday, June 15 contains a deal for use of cap-and-trade proceeds with the high-speed rail funding the Governor wanted and more housing and sustainability money than there might have been.

If Brown signs the budget as is, the "Affordable Housing and Sustainable Communities" program will get about $130 million in the 2014-15 fiscal year, out of a total pot of $872 million in cap and trade revenue. Then in future fiscal years starting with 2015-16, the same category will receive 20% a year of the cap and trade proceeds as one of several continuous appropriations. Half of the 20% must go to affordable housing projects designed to reduce greenhouse gases -- or at least, that's stated for the years from 2015-2016 onward.

That result exceeds the $100 million for "transit oriented development grants" proposed by the Governor last winter (see http://bit.ly/1pbs4vt) but is a compromise from earlier legislative proposals that had called for as much as $400 million or 40% of cap-and-trade to fund a combination of transit, affordable housing and sustainability projects.

Bill Higgins of the California Association of Councils of Government (CALCOG) linked the results to the work of outgoing Senate President Pro Tem Darrell Steinberg, D-Sacramento. Higgins wrote on June 13: "Sustainable Communities and SB 375 related funding is the only thing to come out of the investment plan with the same commitment to ongoing funding as High Speed Rail. That is pretty significant. That is a direct result of Senator Steinberg's effort and leadership."

The cap-and-trade budget deal figures appeared first in a Budget Conference Committee handout late June 12, then were repeated in the Assembly floor report at http://ow.ly/y2kOL. The floor report said, "In addition, when the $400 million General Fund Loan from the Cap and Trade fund is repaid, these funds are dedicated to High Speed Rail."

Despite Republican opposition to the high-speed rail portion, the same numbers held almost completely steady through the budget negotiations on the completion deadline day, Sunday, June 15. Reportedly, though, Sen. Kevin DeLeon (who has since been elected Senate President pro Tem to succeed Steinberg) publicly mentioned a plan to add "cleanup" language on high-speed rail during the coming week.

The figures for 2014-15 were lightly tweaked in the actual main 2014-15 appropriations bill, SB 852 (http://bit.ly/1q6vfpw), as shown by a glance at expenditures from the "Greenhouse Gas Reduction Fund". An expenditure for weatherization that was given in the floor report as $75 million was shaved to just over $70 million. The "$130 million" fund for "affordable housing and sustainable communities" shows an appropriation of $129,201,000. [Correction: the differences are in there after all: they're in separate appropriations out of the Greenhouse Gas Reduction Fund directly to the departments that will be managing the respective allocations.]

The continuous appropriations of cap-and-trade funds for future fiscal years passed as SB 862, (http://bit.ly/1py6fJT). That same bill adds two new members to the Strategic Growth Council, which is to administer the Affordable Housing and Sustainable Communities funds. The provisions call for one new member to be appointed by the Speaker of the Assembly and the other by the Senate Committee on Rules.

These two legislative appointees are to be added to an existing roster heavy on gubernatorial appointees: six state agency heads, the Director of State Planning and Research, and one member of the public appointed by the Governor, who is currently Robert Fisher of The Gap. If, as is likely, the new appointees are local elected officials, their membership on the board could create new complexities regarding conflicts of interest in allocation decisions.

The "Affordable Housing and Sustainable Communities" funding is to be allocated to the Strategic Growth Council, with the SGC to decide how to administer the "sustainable communities" funds apart from housing. SB 862 adds a new division, Sec. 75200 et seq., to the Public Resources Code to outline distribution criteria.

Projects to be funded would need to be consistent with state environmental priorities and "support implementation of an adopted or draft sustainable communities strategy or, if a sustainable communities strategy is not required for a region by law, a regional plan that includes policies and programs to reduce greenhouse gas emissions". Additionally they would need to fit on a list of project categories beginning with "Intermodal, affordable housing projects that support infill and compact development" and "Transit capital projects and programs supporting transit ridership."

The rest of the list is similar to categories proposed earlier in the session as part of the unsuccessful AB 574 (see http://bit.ly/1kwfAu1), but adds emphasis on infill, compact development, "improving connectivity and accessibility to jobs, housing, and services," and serving disadvantaged communities.

Under a separate heading, the Transit and Intercity Rail Capital Program and Low Carbon Transit Operations get $25 million apiece in the first fiscal year. From the second year onward they get more: 15% of the cap and trade money, of which 10% goes to transit and intercity rail, administered through CalTrans and the California Transportation Commission, and 5% goes to low-carbon transit operations, to be distributed via the State Transit Assistance formula and administered by CalTrans.

All projects must report their progress in reducing greenhouse gases to the SGC and the Air Resources Board. Since 25% of cap and trade funds must benefit disadvantaged communities. The bill calls for CalEPA to work with the Air Resources Board and hold at least one public workshop before identifying which are disadvantaged communities for purposes of the allocation. This involves a revision to the existing Health and Safety Code Sec. 39711 but it hangs on to the existing broad definition of the term in that statute.

A broader budget analysis by the Western Center on Law and Poverty noted that appropriations for housing included $100 million for the Department of Housing's Multifamily Housing Program and $10 million for rental and utility assistance for drought-affected households. Further it noted the passage of the Prop 41 ballot measure authorizes $600 million to house veterans and their families. Among minor benefit increases and liberalizations in the CalWORKs program (the new benefit will be $703 per month for a family of three), a $20 million appropriation is to provide "rapid re-housing" assistance.

The League of California Cities has a much more detailed analysis of the main budget bill and all the trailer bills for items relevant to local governments, available at http://bit.ly/1q6I7Mo.
As the new cap-and-trade budget and allocation program develops in detail, it may be helpful to watch CALCOG's resource page at http://www.calcog.org/index.aspx?nid=96 for postings of further key documents.

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