The Long Beach boondoggle gets more press coverage

Posted on November 14, 2012

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It is being referenced to in growing circles as the long beach courthouse boondoggle. At a 35 year operating cost of 2.3 billion dollars, money has yet to be appropriated by anyone to pay for it. The only money appropriated thus far for courthouses comes out of the existing courthouse construction funding provided for by SB1732 and SB1407.  Because Long Beach is a PPP (public-private partnership) and because PPP’s aren’t recognized as public debt or subject to voter approval (which they should be) it appears that the AOC was granted the authority to enter into this PPP but the source of the AOC’s funds either wasn’t identified or it was identified as a sequestration of monies intended to repay 1407 bonds.

Did the issue of how the judicial council was going to pay this 2.3 billion dollars ever come up in any judicial council meeting?

Granting someone like the AOC the authority to enter into an agreement to build a PPP project is a little different than signing on the dotted line appropriating the funding for such an endeavor insofar as assumptions must have been made as to the source of funding. Absent any accompanying legislation appropriating any funds, one would assume that the funds will come from the SB1407 program and that the interest rates and other attractive terms being paid to this private developer would be much, much higher than the interest rates charged in the public bond market by leaps and bounds.

According to the AOC, the project vendors are spending 490 million to actually build the courthouse. All other money paid at a rate of 53 million a year represents not only the financing of the structure but extra funds for maintenance and operations of the building that are subject to automatic CPI increases. The AOC likes to label the project “performance based infrastructure” but what they don’t tell you is that anywhere else they developed performance based criteria, like in their building maintenance contracts, AOC management insists on a much rosier picture in their reports on their vendors than what is actually being delivered to the courts. While the vendors of the past should not have been paid bonuses for their sub-par performance, they were usually paid those bonuses over the protests of AOC line workers that were fielding the numerous complaints.

This project is starting to get more media attention as a project that has run amok and costs too much. The local citizens and supervisors are outraged that the project cost could bounce upwards of 125 million and not include a tunnel to the jail and that according to the LAO, the assumptions that VFA made in their report were flawed because – in the usual AOC fashion – they did not commission an independent report, they commissioned justification for building the courthouse on a PPP-PBI basis. They estimate that the AOC could have spent 160 million dollars less by using the CM@Risk process over PPP-PBI.

So what is the future for this project?

The AOC is trying to inform legislators that they authorized DOF to give the project their blessing and that the general fund should pay for it since they gave it their blessing. Legislators, like Senator Mark Leno are pointing at the obvious. The AOC already collects the funds necessary to pay for this courthouse via penalty assessments and that this pot of money should be used to pay for the long beach courthouse as well.

It will be interesting to see how this all plays out in the other two branches of government over the coming months since it is the other two branches of government that write the checks. I don’t believe that legislative intent ever considered a 2.3 billion dollar price tag. The legislature was looking at a 490 million figure as the costs to build…not a 2.3 billion dollar figure on the costs to operate.

Should this kind of money be diverted out of the court construction program it has the potential of canceling other courthouse projects which isn’t necessarily a bad thing. Next year we anticipate more court and courtroom closures than all of the courtrooms being built – much like the last two years. Deferred maintenance on the AOC’s building portfolio will continue to rise by at least another 250 million (to a staggering 3 billion) and existing real estate assets will increase in their rate of decline.

Of course you know that this was all a part of the AOC’s plan from the onset: Build a self-perpetuating machine that would forever be in the new construction business because new construction is justified by accelerated deterioration caused by sub-par maintenance on existing real estate assets. That’s right….. accelerated built-in obsolescence of most of those real estate assets through neglect.

Building new courthouses is flashy. Fixing existing courthouses isn’t.