Long Beach Question: Much like everything else, who is going to pay for it?

Posted on September 17, 2012

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It is no surprise to find out that JCW is firmly against public private partnerships for building public infrastructure because historically it has always been the people that lose when these projects shoot over budget. In California, examples abound of these failed initiatives that make private investors rich and fail to deliver on the public good or any of the purported the savings that will materialize as a result.

Consider these recent California PPP failures:

The Hwy 91 express lanes in Orange County ended up costing Caltrans 166% of what it would have cost them to go at it alone. It was supposed to be a company would build and maintain hwy 91 express lanes for 35 years, much like the project of this post. However, the private entity neglected to maintain non-toll portions of the hwy91 express lanes causing Caltrans to buy them out of the 35 year lease.

cha-cha-cha ching! Much like the AOC will be renting the old, empty and vacated mammoth lakes courthouse, the private developers made money hand over fist, both coming and going in this deal and the people lose.

Belmont High School AKA Roybal Learning Center (LAUSD) – Initially slated to cost 110 mil, they built upon an abandoned oil and gas field that was bubbling up methane and hydrogen sulfide gas and was straddling a fault line.  The private developer failed to mediate these hazards and more than half of the new, unoccupied learning center was torn down. $377 million dollars later the people of Los Angeles have about 40% of the school they initially set out to build.

On Friday, Cheryl Miller of The Recorder published an article about the new Long Beach Courthouse:

Capital Accounts: Bill Comes Due for Much-Hyped ‘Public-Private’ Courthouse

Cheryl Miller
SACRAMENTO — It’s still more than a year away from completion, but the new Long Beach courthouse is already a showpiece.

The 531,000-square-foot building-to-be doesn’t even have a complete exterior yet but it already has its ownwebsite, telephone hot line and webcam featuring the local temperature and heat index readings.

The bells and whistles reflect the hype over the judiciary’s first attempt at a public-private financed courthouse project on the site. Private investors provided the capital to build the 31-courtroom downtown facility in a scheme that promised a cheaper building delivered faster. The public will cover the costs over a 35-year lease-to-own plan.

Problem is, that first bill is coming due soon and nobody seems sure who is going to pay it. That could spell trouble for other courthouse projects planned around the state.

In an Aug. 20 letter to Interim Administrative Director of the Courts Jody Patel, state Senate Budget Chairman Mark Leno warned judiciary leaders not to look to the state for help when the first service fee for the Long Beach courthouse must be paid in the next fiscal year.

“Given the enormity of California’s budget crisis, it seems highly unrealistic for the AOC to expect the state general fund to support the Long Beach courthouse project,” Leno wrote.

The San Francisco Democrat said judiciary leaders should consider tapping internal construction funds to pay for the first round of Long Beach bills — projected to total $44 million in 2013-14

More wonderful planning by the central directorate in San Francisco under the esteemed leadership of Cantil-Sakauye and George: Spend money that you don’t have and you haven’t budgeted for (about 22 million a year or $709,000 per year per courtroom for 35 years) and make those payments with other funds meant to finance bonds for other courthouse projects because you should have known from the onset that the state general fund wasn’t going to willy-nilly pick up the tab on this. The legislature always expected the payments to come out of judicial branch proceeds to pay the rent, so to speak while our esteemed leaders always believed a twisted version of the field of dreams.

If we build it, they will pay.

A front-loaded 22 million a year in payments would surely impact the SB1407 program which would rely on a similar amount to finance other projects with bond money. That would be tantamount to eliminating another large scale construction project similar in costs, size and scope to Long Beach or the nixing of more than 1/2 dozen (or more) other smaller courthouse projects around the state. The only advantage is for $709,000 per courtroom per year in rent money, the courts should experience a reliable building that isn’t going to be built and degrade in place due to a lack of effective maintenance much like all other projects are experiencing.

The questions about the project that is slated for completion next year and how it is to be paid for have just begun. While completion is slated for the fall of 2013, there has been little in the way of success of public-private partnerships and mitigating cost overruns. While the project is represented by the AOC as currently under budget, the AOC can say that because their budget for this project amounts to non-existent oversight.

The budget for this project is borne entirely by Meridiam Infrastructure as it is technically their building. However, in PPP’s such as this, any changes to the approved project are typically borne by the customer. On this project in particular, there was no plan checking done by AOC engineering staff so they couldn’t begin to tell you what to expect or what changes will need to be performed to make this building functional on day one. You shall receive what Meridiam gives you with a hope that it suits your purposes.

Let’s hope that the Governor George Deukmejian courthouse doesn’t turn out to be another PPP disaster but it brings into question: In the era of Cantil-Sakauye transparency and accountability, who should pay the price for this failure of leadership to identify funds to maintain the current infrastructure while building more they cannot possibly maintain? Who should pay the price about not identifying where the Long Beach rent was coming from? Accountability vaporized with the last group of Chief Justice appointees and is never going to happen under the current re-arranged deck chairs leading the AOC today.

The writing was on the wall at Long Beach well before the contracts were awarded. No smart assemblyperson that wants to be re-elected is going to turn down a public works project in their district so the only people we can fault are those that predicted “If we build it, they will pay”, much like many of their other “if we build it, they will pay” boondoggles.

What would be an enlightening exercise for the Judicial Council and the AOC is this: Any program or project, both current or future that they already haven’t clearly and publicly identified the source of ongoing funding for, that project and the people associated with it gets nixed. This must include courthouse maintenance and construction.