For Clients & Friends of The Gualco Group, Inc.
IN THIS ISSUE – “Extremely dry and serious.”
Largest regional water agency declares drought emergency
-California’s Dems v. Business Interests: Legislation & Ballot Skirmishes Escalate
-Sharp Drop in Office Building Value Hits Local Government Tax Revenue
-Cyber “Intrusion” Penetrates State Dept. of Finance
-Southern California Drought Emergency
-Micro Electric “Kei Cars” Driving to US
Capital News & Notes (CN&N) harvests California policy, legislative and regulatory insights from dozens of media and official sources for the past week. Please feel free to forward this unique client service.
FOR THE WEEK ENDING DEC. 16, 2022
California’s Dems v. Business Interests: Legislation & Ballot Skirmishes Escalate
CalMatters commentary from Dan Walters
Over the last decade, as Democrats solidified their dominance of the state Capitol, they have repeatedly attempted to change how private businesses operate in California
Those efforts have taken many specific forms, including mandates on employee benefits, making it easier for unions to organize workers, and regulating — or even prohibiting — products and services offered to customers.
All such efforts were aimed, their legislative and interest group sponsors said, at expanding equity and accountability for the benefit of workers and consumers.
Whatever their motives, as those efforts proliferate, the affected businesses have done what they could to block or at least modify what was happening.
Nevertheless, those seeking more governmental regulation of business practices have scored some major victories and in response, affected businesses have increasingly used referenda to erase new laws or initiatives to repeal or modify them.
Those countermeasures have a mixed record of success, to wit:
— In 2014, the Legislature passed and then-Gov. Jerry Brown signed legislation to ban single-use plastic bags for groceries or other consumer goods. An industry referendum to block the new law failed in 2016.
— In 2018, the Legislature eliminated cash bail for criminal defendants. Two years later, the bail bond industry persuaded voters to reject the law.
— In 2019, legislators passed a sweeping law that reduced the ability of businesses to use freelance workers under contract. Rideshare and delivery companies such as Uber and Lyft placed a measure on the 2020 ballot to exempt themselves from the new law. Voters passed it, but it’s since been challenged in court.
— In 2020 the Legislature prohibited the sale of flavored tobacco products, saying they encourage young people to smoke. However, the tobacco industry’s referendum to block the ban was rejected by voters this year.
Corporate use of the ballot to thwart the Capitol’s Democrats is likely to continue.
The fast food industry has submitted signatures for a referendum to overturn the creation of a new agency, dominated by unions and union-friendly appointees, that would set wages and working conditions for fast food employees. If it qualifies, the law would be suspended until voters decide the issue in 2024.
The oil industry submitted signatures to the Secretary of State, which, if verified, would result in a 2024 ballot a referendum to overturn a newly enacted law that would ban new oil wells within 3,200 feet of schools and other public facilities. If it qualifies, it also would go on the 2024 ballot.
Another oil industry referendum is likely if the Legislature passes Newsom’s proposal to impose limits on its profits from gasoline sales and impose financial penalties for exceeding them.
Newsom’s original proposal was an excess profits tax, which would not have been subject to referendum because the state constitution declares that tax measures cannot be challenged via referendum.
However, non-tax laws, unless passed with two-thirds margins as “urgency measures,” are subject to referendum. If Newsom’s limit/penalty law is enacted next year as a non-urgency measure, the industry would have a 90-day window in which to qualify a referendum. The law would be suspended until voters had the final word.
The proliferation of business-sponsored ballot measures to overturn what legislators and the governor decree has angered groups, such as unions and environmental and consumer rights organizations, that support more oversight of business practices.
They are pressing the Legislature to make the qualification of ballot measures more difficult.
However, Newsom and his predecessor, Jerry Brown, have opposed such changes for the simple reason that governors sometimes turn to the ballot themselves to enact laws that the Legislature is unwilling to pass.
Sharp Drop in Office Building Value Hits Local Government Tax Revenue
Wall Street Journal excerpt
The sharp decline in office building values is likely to become a growing problem for the budgets of cities, schools and other jurisdictions that depend heavily on property taxes from these building owners.
Most municipal budgets haven’t suffered much yet. For a variety of reasons, declines in property values typically take years before they are reflected in the real-estate assessments of most taxing jurisdictions.
But municipalities might soon start feeling pain, say lawyers and appraisers throughout the country. Property tax is the largest single expense for most office landlords. Many hope to reduce it to help offset lost revenue from the sluggish return of employees to their desks and the cascading damage it is causing to local businesses catering to these workers. More recently, job cuts in the tech sector are reducing demand for workspace.
Office building values are falling because most businesses are switching to remote or hybrid workplace strategies that require less space. Vacancy rates in many business districts are near record levels and landlords are being forced to offer concessions like free rent or pay for extensive interior work to attract tenants.
Higher interest rates, meanwhile, have reduced the prices investors are willing to pay for office property partly because they have increased the cost of financing deals.
Average quality office buildings have lost about one-quarter of their value since the beginning of the pandemic, according to real-estate analytics firm Green Street. Meanwhile, assessors who have started to take the pandemic into account in some cases are reducing assessed values an average of 10%, said CBRE’s Mr. Frey.
In jurisdictions that reassess property values annually, owner appeals of tax assessments are up 30% to 40% compared with a typical year before the pandemic, said Bryan Frey, a managing director in the valuation consulting business of CBRE Group Inc.
Office building values are falling because most businesses are switching to remote or hybrid workplace strategies that require less space. Vacancy rates in many business districts are near record levels and landlords are being forced to offer concessions like free rent or pay for extensive interior work to attract tenants.
Higher interest rates, meanwhile, have reduced the prices investors are willing to pay for office property partly because they have increased the cost of financing deals.
Average quality office buildings have lost about one-quarter of their value since the beginning of the pandemic, according to real-estate analytics firm Green Street. Meanwhile, assessors who have started to take the pandemic into account in some cases are reducing assessed values an average of 10%, said CBRE’s Mr. Frey.
Cyber “Intrusion” Penetrates State Dept. of Finance
Sacramento Bee
The state Dept. of Finance was hit with a “cybersecurity incident.” The news comes ahead of a Jan. 10 deadline for Gov. Gavin Newsom to unveil his budget proposal for the upcoming fiscal year.
The California Cybersecurity Integration Center, which is investigating the “intrusion,” offered few details but said in a statement it had been “proactively identified through coordination with state and federal security partners,” adding that “no state funds have been compromised” and the finance department is continuing work on Newsom’s budget blueprint.
According to the tech publication Cyberscoop, a notorious ransomware operation called LockBit claimed responsibility for the attack and said it had stolen 76 gigabytes of data from the state finance department, which it plans to publish if the agency doesn’t meet unspecified demands by Dec. 24.
The breach comes not long after Los Angeles Unified, the state’s largest school district, was hit with a ransomware attack, exposing schools’ cybersecurity vulnerabilities.
Southern California Drought Emergency
LA Daily News
Despite recent stormy and wet days in Southern California, the Metropolitan Water District’s Board of Directors declared a regional drought emergency this week.
The resolution, announced on Wednesday, asks water agencies to cut down on imported supplies as the region enters its fourth consecutive dry year. If significant rainfall does not occur this winter, the district may issue mandatory water restrictions to the 26 agencies it supplies in April.
“Even though there have been some recent storms this past week, the conditions on the State Water Project are still very, very dry,” Brad Coffey, water resource manager at the Metropolitan Water District, said in a Wednesday interview.
“The reservoirs are about half of where they are normally at this time of the year,” he added, “and the conditions on the Colorado River – although there has been some snow there as well – are extremely dry and serious.”
The MWD imports around half of the water used in Southern California from the Colorado River and from the northern Sierra Mountains through the State Water Project. Some communities rely almost entirely on these imports, while other areas have self-sustaining water sources; many use a combination of local and imported water.
The timing of the MWD’s announcement may seem odd, given the recent storms that battered the Southland. But the MWD — which provides water to 26 agencies, from Anaheim to Pasadena — decided to call for voluntary water restrictions early in the season, given that California has been experiencing a prolonged drought and it would take a huge amount of rain to change that this year, Coffey said.
The announcement was also a stark reminder that the region is so parched, it will need a more than a few scattered showers this rainy season if it wants to escape the drought. MWD’s declaration, experts and water officials across Southern California said on Wednesday, also underscores the need for the region to adapt to climate change and the longer droughts it has already started to cause.
The past three years have been the driest in California history.
“If we don’t have an extremely wet winter, we will need to elevate to our highest level (of conservation) – a water supply allocation for all of Southern California. Substantial and immediate conservation now and in the coming months will help lessen the potential severity of such an allocation,” Metropolitan General Manager Adel Hagekhalil said in a written statement.
Many of MWD’s member agencies already limit the number of days a week residents are allowed to water lawns and gardens.
In Long Beach, for example, residents are asked to only water two days a week and to refrain from watering outdoors within 48 hours of rain. That city, the second most populous in LA County, has frequently touted its water conservation efforts — and did so again on Wednesday.
“Long Beach’s water use has exceeded the savings rate that many in the state have had on average, as well as some of the agencies in Southern California,” said Anatole Falagan, assistant general manager at the Long Beach Water Department.
“We’re very proud of the response that the community has had to the calls for conservation,” Falagan added, “and we expect that we’ll continue to outreach to the community so that the conservation message sticks well into 2023.”
The Los Angeles Department of Water and Power is also already in compliance with the MWD’s order, Anselmo Collins, DWP’s water system senior assistant general manager, said during a Tuesday board meeting.
Because of that, Collins said, LADWP customers won’t see much of a change under the MWD’s declaration.
Beyond water restrictions, many communities are investing in water recycling projects to convert runoff and wastewater into usable water, in an effort to lessen their reliance on imports from the MWD.
The Inland Empire Utilities Agency, for example, is currently developing an advanced water treatment facility to recycle 15 thousand acre-feet of water from the Chino Groundwater Basin annually.
Micro Electric “Kei Cars” Driving to US
Bloomberg
There’s a new generation of electric vehicles emerging in cities around the world: small, weather-protected urban runabouts that fall along the wide spectrum between two-wheeled EVs and traditional cars.
These conveyances are already widespread in East Asia, and they’re gaining popularity in Europe as well. North America could be next.
But that won’t happen unless cities can provide places to operate them, as well as clarity about their legality. For minicars to deliver on their promise, US policies — at the federal, state and local levels alike — will need to grow up.
They’re significantly smaller and lighter than traditional automobiles, and most are slower. Some are capped at 20 miles per hour; a few can hit 70. But they are more stable and substantial than battery-powered bikes, scooters or mopeds, with three or four wheels and usually some kind of shell to protect occupants from weather. Last but not least, minicars generally cost somewhere between $4,000 and $20,000 — well below the price of a new car, but more than e-scooters and e-bikes.
In Japan, lightweight “kei cars” are fixtures of the nation’s crowded cities. Electrification has given them a new jolt of energy: Minicars now represent around 40% of Japanese automobile sales.