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IN THIS ISSUE – “Difficult Decisions Lie Ahead

FOR THE WEEK ENDING JUNE 12, 2020

Capital News & Notes (CN&N) harvests California legislative and regulatory insights from dozens of media and official sources for the past week, tailored to your business and advocacy interests.  Please feel free to forward. 

READ ALL ABOUT IT!!

 

Newsom is Popular, But His Future is Perilous

Capitol Weekly

Gov. Gavin Newsom has been riding a high tide of approval from Californians for his handling of the Covid-19 pandemic, but he could be heading for stormy weather.

His recent poll standing has been what politicians dream of. A June 3 survey by the Public Policy Institute of California (PPIC) says nearly two-thirds of Californians (65 percent of adults, 64 percent likely voters) approve of Newsom’s job performance. That is a big jump from his 53 percent approval in February.

Californians (58 percent of adults, 56 percent of likely voters) say that things in the state are generally going in the right direction, the PPIC reported.

“Governor Newsom is receiving high marks for his handling of the COVID-19 crisis, and most Californians are surprisingly upbeat about the direction of the state,” PPIC President and CEO Mark Baldassare said.

But things may not stay politically rosy for the governor in coming months.  California’s tax revenues are projected to decline more than 22 percent and the state estimates that unemployment for the year will hit 18 percent.

That means Newsom, a Democrat, is going to have to deal with an unprecedented, pandemic-triggered state budget deficit — he pegs the deficit at $54.3 billion — that the state constitution declares must be closed before the next fiscal year starts on July 1. By law, the document must be approved in the Legislature by Monday and sent to Newsom’s desk, who will have two weeks to act on it.

Meanwhile, amid continuing protests over police misconduct, Newsom is walking a careful path: He opposes calls to defund police departments, as demanded by some protesters, and supports demands to eliminate law enforcement’s use of the carotid hold. He also came under fire for not loosening California’s shelter-in-place restrictions soon enough, then came under fire again from some who said he loosened them too soon.

The annual “May Revise” to the governor’s proposed $203 billion budget — down from the $222 billion plan he unveiled in January — contains $14 billion in spending cuts, including a 10 percent slash in state workers’ salaries and in state support for higher education. (One bright spot — the state has a record $16 billion “rainy day fund” that will be thrown into the effort to ease the fiscal crisis.)

“Difficult decisions lie ahead,” Newsom said in a message accompanying the revised budget.

It’s likely most of the Democratic governor’s headaches won’t come from Republicans. They will come from various interest groups fighting to avoid drastic cuts in their state funding.

But at least so far, reaction from some major players has been less than ferocious.

The University of California, a major recipient of state money, issued a mild statement on Newsom’s proposed cuts: “The University of California recognizes the unprecedented challenges California is facing in the wake of COVID-19 and regrets that Gov. Newsom was put into a position to steeply reduce the University’s budget in response to the State’s dramatically diminished revenues. Regardless, UC stands with the governor and the Legislature to help lift the state out of this economic crisis.”

Others saw it differently.

Eloy Ortiz Oakley, chancellor of the community college system, acknowledged that state faces a  “difficult fiscal condition,” but called on lawmakers to “support and strengthen” the colleges. The latest budget draft seeks more than $590 million in cuts to the student funding formula, in addition to other reductions. California’s community college system is the largest in the country.

The Democratic-dominated Assembly and state Senate have agreed on a spending plan that “builds on the Governor’s framework to further protect jobs and preserve vital services, while recognizing the sober economic outlook facing California,” Assembly Speaker Anthony Rendon (D-Lakewood said in a statement.

Along with other governors, Newsom is looking pleadingly toward Washington and the Trump Administration for bailout money.

“Federal government, we need you,” Newsom says.

Across the state, opinion is divided on the revised budget, with 43 percent favoring (40 percent likely voters), 43 percent opposing (46 percent likely voters), and 14 percent saying they don’t know or haven’t heard anything about the budget (15 percent likely voters). Across partisan groups, 48 percent of Democrats, 31 percent of independents, and 26 percent of Republicans approve; 38 percent of Democrats, 52 percent of independents, and 62 percent of Republicans oppose.

Although there may be a rough road ahead for Newsom in the immediate future, political junkies are already speculating what the pandemic/budget problems might mean for Newsom beyond that.

The speculation goes like this:

–Former Vice President Joe Biden is going to be the Democratic nominee for president this November, and he’s said he’s going to pick a female running mate.

–Newsom’s term ends in 2023. If he were to win a second term in this heavily Democratic state, he would be in office until 2027, giving him a free ride for a presidential bid in 2024, should a President Biden, by then 81, decide not to run for a second term.

–Newsom would therefore probably be running for the Democratic nomination against whatever politically ambitious woman Biden had chosen as his vice-presidential running mate. U.S. Sens. Kamala Harris or Elizabeth Warren? Michigan Gov. Gretchen Witmer?

The handsome governor of California vs. a sitting female vice president – a political junkie’s dream.

https://capitolweekly.net/newsom-politics-policy/

 

Governor’s Plan: Solving Homelessness in 4 (Not-So-Easy) Steps

CalMatters

Gov. Gavin Newsom’s ambitious new plan to make a permanent dent in California’s homelessness crisis — more than 150,000 unhoused individuals, including more than 100,000 sleeping outside — would create hundreds of properties like Sacramento’s downtown Hotel Berry, an 80-year-old motel transformed into 104 supportive housing units for the formerly homeless.

As part of ongoing budget negotiations with state lawmakers, Newsom wants to spend $600 million in federal emergency dollars to expand Project Roomkey, a joint state and federal program that has leased more than 15,700 hotel rooms for homeless Californians deemed especially susceptible to novel coronavirus. Roughly 9,600 of the rooms are currently occupied, according to an administration spokesman.

Phase two of the project is buying as many hotels or motels as possible for more permanent homeless housing by the end of the year, when the $600 million must be spent or be returned to the feds.

California has never tried buying so many properties to house its homeless population in such a short period of time. Affordable housing builders say they’re generally excited about Newsom’s proposal, which according to the administration’s preliminary, rough cost estimates could purchase as much as 6,000 units of new housing.

But veterans of these types of motel conversions also warn the process is more complicated, time-consuming and expensive than the average Californian might think. What Newsom wants to do in six months often takes years — and that’s before anyone starts swinging a hammer.

“We have to figure out how to make this work in the most efficient way possible,” said Ray Bramson, chief impact officer with Destination: Home, a nonprofit that provides homeless housing in Silicon Valley. “And it’s going to require some creativity.”

Here’s how motels are typically converted to more permanent homeless housing, step by painstaking step, and how the Newsom administration hopes to take those steps as speedily — and inexpensively — as possible.

Step 1: Buy the hotel

  • Cost: $100,000-$175,000 per room but varies across the state.
  • Time: 2-3 months negotiations, not including escrow. 

When the owner of a 70-room Econo Lodge motel in a lower-middle-class part of west Anaheim decided he wanted to retire in 2017, Vicky Ramirez sensed an opportunity.

Her team at Irvine-based Jamboree Housing had been eying properties in the region for permanent supportive housing. Orange County has an estimated 6,900 people experiencing homelessness, and cities within the fifth largest county in the country had been feuding with one another over where homeless housing should and shouldn’t be located.

In roughly three months, Ramirez negotiated a purchase and sale agreement with the owner: $9.2 million for the 1-acre property, or $130,000 per unit.

Land isn’t cheap in California, especially in high-cost coastal regions where the state’s homeless population is disproportionately located.

Data provided by the California Hotel and & Lodging Association, a hospitality industry advocacy group, indicate hotels that could be targeted by the state — think budget chains like Motel Six or smaller, independent motels with 150 units or less — regularly fetch over $100,000 per unit in Los Angeles County. A 40-room Travel Plaza in Compton sold for $4.5 million last year; a 21-unit Budget Inn on Sunset Boulevard, $2.8 million.

Costs just get steeper in the Bay Area. Bramson, who is helping developers explore motel conversions in Santa Clara County, says some properties can run as much as $17 million an acre.

Low-income housing developers caution that prices vary considerably from region to region and according to the quality of motel. Extended stay hotels that come pre-furnished with kitchenettes will be more expensive than deteriorating single-room-occupancy motels, which may be cheaper upfront but will require more rehab or outright demolition to turn into supportive housing.

The Newsom administration is tentatively budgeting $100,000 to $150,000 per unit, according to an administration official not authorized to comment publicly. They’re hoping a glut of hotel owners, pummeled by the pandemic-induced collapse of tourism, will gladly exit the industry. That, combined with a recession-induced dip in commercial real estate prices, could mean a once-in-a-generation bargain.

Lynn Mohrfeld, president of the California Hotel & Lodging Association, says the state won’t be competing against the typical bidders for hotel properties — larger hotel chains — because those companies aren’t in acquisition mode right now.

But he cautions that for the owners of many hotels participating in Project Roomkey — the very properties the state wants to target first — selling is a very different proposition than a temporary lease.

“These are closely held, long-term assets and unless the economics really force their hand and they can’t make their mortgages and foreclosure is knocking on the door, I don’t think the state is going to walk in and buy a hotel for a song,” Mohrfeld said.

The higher the purchase price, the fewer the number of units of homeless housing California can acquire.

Step 2: Get approval from the city 

  • Cost: Hard to quantify, but the quicker the cheaper. 
  • Time: 1-2 years, but much quicker if the governor gets his way.

Price is typically less of a sticking point in getting a motel owner to sell than the prolonged escrow period requested by homeless housing developers. Property sale limbo typically lasts between a year and eighteen months.

Why does it take so long? Because nobody wants to pay $10 million for a motel the city won’t let you turn into housing.

Homeless housing developers must shepherd projects through a series of regulatory steps that need the sign-off of city planning departments and sometimes city councils. One uniquely essential step for most motel conversions: getting the city to change the zoning on a motel property from “commercial”  to “residential” use.

For the Anaheim Econo Lodge conversion, the city took about six months to approve the necessary zoning change. After that, the city planning department debated issues like relaxing minimum room size requirements (converted hotel rooms are smaller than studio apartments) and cosmetic changes needed to make the property look more like a typical apartment complex.

Ramirez, who applauded the Anaheim City Council for their relative speed getting her project approved, nevertheless said Jamboree had to pay an extra $300,000 to the hotel owner to extend the escrow period while the project made its way through regulatory hoops. All in all, the Econo Lodge conversion needed about 2 years to get the approvals and permits needed to start construction.

And that was with relatively little neighborhood opposition to a project on the outskirts of town next to an El Pollo Loco and another low-income housing complex — not in the heart of a thriving commercial corridor or minutes from a suburban bedroom community.

“Community opposition at public hearings, that can really sway planning commissioners and city council members,”  Ramirez said.

The Newsom administration can’t afford an 18-month escrow period while converted motel plans are reviewed by local governments. It has six months to buy $600 million in real estate before the money evaporates entirely.

To speed up the regulatory process, the administration is proposing taking away much of the power cities have to shape the look of a converted motel. Tucked into Newsom’s plan is a provision that would allow Project Roomkey acquisitions to be developed without a city adjusting its zoning rules or holding public hearings. Hotel conversions would also be exempt from undergoing state-mandated environmental reviews. There would be little opportunity for local governments to quash projects they don’t like.

Several cities in Southern California lodged or threatened legal action when counties leased hotels for emergency homeless housing without their approval in the first few months of the pandemic. Hotels are also often an important tax revenue source for cities because of occupancy and sales taxes, although those revenues are declining rapidly because of the coronavirus pandemic.

Given the compressed time frame, properties in larger cities with more motel conversion experience and large homeless populations could be prioritized over places where local opposition is likely.

Step 3: Construction (finally!)

  • Cost: Less than $10 million, but will vary according to type of homeless housing. 
  • Timing: 6-12 months, but will vary according to type of homeless housing. 

How you physically transform a motel to homeless housing — and how much money and time it takes to do so — depends greatly on what type of homeless housing you want to build.

Research suggests that permanent supportive housing is the gold standard for preventing the chronically homeless from returning to the streets. It requires a good deal of construction work, though.

Individual rooms must be retrofitted to accommodate stoves, sinks, mini-refrigerators and a microwave; electrical and plumbing systems for older buildings often must be updated to current code; sound attenuating insulation might be required to prevent neighboring residents from disturbing one another. Per state law, nearly all housing projects utilizing public subsidies must pay union-level wages.

Many motels, including those that are currently being leased as part of Project Roomkey, simply aren’t big enough to convert to permanent supportive housing. The “supportive” element requires a good chunk of real estate to accommodate multiple offices for case managers and rooms for group counseling and other activities. If individual studios can only fit a kitchenette, a large fully operational kitchen somewhere in the building is ideal.

Motels with large ground-floor offices, parking lots or even pools that can be converted for staffing space are thus attractive, and more expensive, options.

“It’s unlikely you’re just going to take a normal hotel and turn it into a supportive housing environment without major and significant changes,” said Bramson.

Bramson says $600 million will only go so far if the state focuses exclusively on properties ripe for a quick conversion to permanent supportive housing. Many motels could more easily be repurposed for transitional or bridge housing, where the formerly homeless stay while waiting for more permanent housing options. Those temporary housing sites will still frequently need renovation work, but not to the extent of permanent housing.

An administration official not authorized to speak publicly said the state hopes to create “service-rich” sites out of acquired motels, but will leave it up to local governments to decide what that means exactly.

Step 4: Running the building

  • Cost:$10,000 per unit per year (but varies).
  • Timing: Ongoing.

Bruni Rocha is part of the support staff that keeps the Hotel Berry running: a building manager responsible for upkeep and repairs; a night clerk to provide security; a supportive services staffer to run cooking classes and other life skills programs; and janitorial staff to keep common spaces clean and functioning; and her, the supportive services manager.

That doesn’t include the case manager from a separate nonprofit that makes sure about a dozen residents keep up with their mental health appointments; or the social worker from Veterans Affairs that checks up on the vets in the facility and makes sure their paperwork is in order.

“You can’t just put somebody that was formerly homeless in a building and expect them to have all the life skills that they need,” says Rocha.“They’re used to being on the streets.”

The cost of operating permanent supportive housing, or even less intensive supportive housing, adds up quickly and does not go away.

Homelessness service providers, some Democratic state lawmakers and the local governments responsible for paying the operating costs have pushed the Newsom administration to include more funding for operating the hotels and other sites the state wants to purchase.

Newsom hopes local governments can tap billions in federal aid made available to cities to respond to the pandemic. Some of those funds are specifically targeted to protecting homeless populations from the pandemic. Ohers, including $1.3 billion the state is directing to locals, could be used for homeless services or public health, public safety or other pandemic-related services.

Finding enough service providers and properly trained staff has proven a frustrating and common constraint for counties  leasing hotel rooms for homeless people especially susceptible to the virus.

At $100,000 per unit — again, a sanguine estimate — Newsom can buy 6,000 hotel rooms with the money he plans to use from the feds. Assuming local governments can shelter one person per room, that amounts to about 5.5% of California’s unsheltered homeless population.

No one in the Newsom administration believes their proposal will immediately and single-handedly solve California’s homelessness crisis, especially as a recession-induced eviction wave threatens to spill more low-income Californians into cars, shelters, and the streets.

But converting motels, as expensive and time-consuming as it can be, is still significantly cheaper than building supportive housing from scratch. Ramirez estimates that when all is said and done, the Econo Lodge conversion in Anaheim will cost about $363,000 per unit.  In Los Angeles, an audit last year found homeless housing cost $600,000 to build, more than the average price of single-family-home outside California.

Democratic leaders in the state Legislature and Newsom are currently negotiating details of the Project Roomkey plan as part of broader negotiations over the state budget. The budget must be passed by June 15.

https://calmatters.org/housing/2020/06/motel-conversion-homeless-housing-california/?utm_source=CalMatters+Newsletters&utm_campaign=d01b926797-WHATMATTERS_NEWSLETTER&utm_medium=email&utm_term=0_faa7be558d-d01b926797-150181777&mc_cid=d01b926797&mc_eid=2833f18cca

 

Majority of Californians Support Medicare-For-All, Poll Finds

UC Berkeley Institute for Government Studies

The latest Berkeley IGS Poll finds that over half of all Californians agree that a “single-payer system, such as Medicare-for-all in which all Americans would get their insurance from a single government plan, would improve the nation’s ability to respond to disasters and pandemics such as COVID-19.”

Between April 16 and 20, 2020 the Institute of Governmental Studies (IGS) and California Institute of Health Equity & Access (Cal-IHEA), polled 8,785 registered voters about COVID-19 and their degree of support for a single-payer health care system.

While most Californians, about 55%, somewhat or strongly agree that a single-payer health care system would improve the nation’s response to disasters and pandemics such as COVID-19, the level of support varied by party, region, race, age, ability to access medical care during the pandemic, and the perceived financial threat of the coronavirus pandemic.

https://escholarship.org/uc/item/1n25x39s

 

Warren Supporters Bring Tax-the-Wealthy to Silicon Valley

Vox

Tech billionaires may have dodged Sen. Elizabeth Warren and her promise to tax their wealth. But one Warren supporter is taking that fight to the billionaires’ backyard: Silicon Valley.

The battle is now moving into new territory: From the campaign trail of Iowa and New Hampshire to the supermarkets of Palo Alto, California. That’s where an activist named Kevin Creaven is pursuing a clever, although legally questionable, strategy to tax the fortunes of billionaires.

A single Warren loyalist is unlikely to pose a serious threat to America’s wealthiest. But he represents the most brazen attempt yet by an interloper to parachute into Bay Area politics to make a broader national point about tech fortunes. And he shows how, despite Warren’s failure to capture the Democratic nomination, her idea for a wealth tax has leaped well into the mainstream and ignited a new wave of aggressive activism toward tech billionaires.

Creaven, 29, a chemical engineer for San Diego’s county government, moved to Palo Altojust last month in order to introduce a ballot proposal to institute a Warren-style wealth tax on anybody who lives in the city. His proposed wealth tax simultaneously capitalizes on two unique things: California’s permissive rules for ballot initiatives and on the geographic concentration of some of Silicon Valley’s richest.

Within those 25 square miles of Palo Alto is a wildly disproportionate amount of America’s most extravagant fortunes: Mark Zuckerberg’s $85 billion, Larry Page’s $65 billion, and Laurene Powell Jobs’s $25 billion, to name a few.

Creaven sought out the California city that had the right mix of liberal-enough politics, easy ballot access, and plenty of billionaires. That packed geography is a vulnerability for the country’s billionaire class. And if Warren isn’t going to be president, his ballot proposal is a pretty workable backup plan to a national policy.

“When you see that 66 percent of people support any issue and you live in a direct democracy, I think someone should take charge and get that done. I don’t think we should live as if we’re under some tyranny,” Creaven said. “I just don’t see a viable way to get this done federally.”

Creaven’s proposal, like Warren’s, would assess a 2 percent tax on every dollar over $50 million in net worth and a 3 percent tax on every dollar over $1 billion. Creaven says the latter rate alone could lead to over $10 billion a year in tax revenue. (He admits that figure comes from a crude analysis he conducted by examining the reported net worths of the dozen or so Palo Alto residents on the Forbes 400 list.)

Tossing in a dash of entrepreneur Andrew Yang’s ideas, Creaven also wants to use that money to send a $2,500 check to every resident of Palo Alto in the first year of the new tax.

The proposal, to be sure, would have to clear many bars before Zuckerberg or the other mega-billionaires should start clutching their dollars closer. Creaven needs to secure about 2,300 signatures for his initiative to qualify for the November ballot, a relatively low threshold that he feels confident he’ll meet. But then there is the question of whether it could actually clear the two-thirds supermajority it would need to pass — a steep climb in the high-income, fiscally conservative city of 65,000.

Then come the legal challenges, which are not uncommon in the aftermath of ballot initiatives but seem practically inevitable here given concerns about its constitutionality in California. For example, no California cities have their own income taxes, because they are “preempted” by California’s state income tax regime.

David A. Carrillo, executive director of UC Berkeley’s California Constitution Center, said it’s possible the courts might take some unusual steps in this case.

“California courts are usually reluctant to prevent measures from going on the ballot, but this may be the rare measure that’s too legally suspect to go to the voters,” Carrillo said. “And getting it on the ballot might be self-defeating,” he added, because it could “doom future attempts to tax the wealthy.”

Creaven said he had not consulted a lawyer on the measure, which he wrote himself, but argued that a wealth tax was more similar to a local property tax than a city income tax.

Wealth taxes, previously a fringe idea, proved to be one of the breakout hits of the Democratic primary, surprisingly popular with not just liberals but a majority of Republicans as well. Yet Nancy Shepherd, a former mayor of Palo Alto, said that she felt the relative popularity of the idea was an insufficient rationale in a city with a median household income of $137,000. Shepherd thinks the wealth tax proposal would be unlikely to pass in Palo Alto, though it might fare differently in a neighboring city like, say, Menlo Park, where about 10 percent of residents live in poverty.

“People in Palo Alto don’t mind people making money,” she said. “I’m not sure that this has the urgency to solve a problem. Initiatives should be solving a problem.”

There are also bound to be concerns about the enforceability of a wealth tax that’s imposed in just one city. Mark Zuckerberg technically lives — or, in legalese, domiciles — in Palo Alto. But if he’s facing a billion-dollar tax bill in Palo Alto, he might move his domicile to San Francisco or Lake Tahoe, where he also owns homes. Powell Jobs has two other homes just in Silicon Valley. Creaven’s proposal tries to solve this with two ideas: an “exit tax” for any billionaires who exit Palo Alto, and by making evasion a crime (which troubles some legal scholars.)

The idea of a more local version of a wealth tax has made some progress elsewhere in the country. Seattle, Washington, instated a 2.25 percent tax on certain households in 2017, though that measure has since been ruled unconstitutional by the courts. Burlington, Vermont, is considering a wealth tax of its own, though those proceedings have been postponed due to the coronavirus pandemic.

Creaven is the latest in this line of activists. He was never involved in politics until he was inspired enough by Warren to donate to her campaign. Then he started a new political group, Breathe Free America, that is also sponsoring a push for electric cars in Palo Alto in a separate referendum that he is personally funding.

Now, his money is paying for four other organizers who have begun helping him collect signatures at grocery stories outside Palo Alto supermarkets like Safeway and Trader Joe’s, just miles from the mansions of people like Zuckerberg.

But Creaven sees all of these taxes on tech billionaires as merely a good enough alternative for what he really wants: regulation of their business practices.

“[Tech billionaires] might not be paying taxes through regulation the way that other industries are,” Creaven said. “They have a blank check to do whatever they want. And I think we’re seeing right now the immense amount of damage that’s being done by the tech industry. And we can’t really regulate them.”

https://www.vox.com/recode/2020/6/8/21282130/elizabeth-warren-wealth-tax-palo-alto-tech-billionaires

 

Economic Shutdown Sinks California Exports

Beacon Economics

As expected, exports of California-produced merchandise plummeted in April, according to a Beacon Economics’ analysis of the latest U.S. trade statistics released this morning by the U.S. Census Bureau.

California businesses shipped a total of $10.406 billion in merchandise abroad in April, a nominal 24.9% decline from the $13.865 billion in exports recorded in April 2019. Shipments of manufactured products by California firms were down 24.4% to $6.778 billion from the $8.964 billion one year earlier.

Similarly, exports of non-manufactured goods (chiefly the state’s agricultural products and raw materials) were off by 13.2% to $1.485 billion from $1.711 billion. Moreover, as has been the case in the past several months, the state’s export numbers were further pulled down by a 32.8% drop in re-exports, to $2.144 billion from $3.190 billion.

“You simply cannot shut down economies here and abroad without serious repercussions in international trade,” said Beacon Economics’ International Trade Advisor Jock O’Connell. “This was our worst April since the Great Recession.”

Still, California fared better than the nation as a whole. Total U.S. exports for April were off by 29.5% from one year ago, falling to $95.617 billion from $135.539 billion. As a result, California’s share of the nation’s overall merchandise export trade in April was 10.9%, up from 10.3% in April 2019.

The drop in California’s exports were roughly consistent with the 12.2% decline in containerized maritime exports through the Ports of Los Angeles, Long Beach, and Oakland as well as the 16.7% fall-off in airborne export tonnage from LAX.

Export shipments of almonds, California’s leading agricultural export, were down 5.3% at 103.5 million pounds. Almond prices have been steadily declining since late last year. In this case, the culprit was not China but India, which imported 52% fewer almonds from California this April than last year.

The state’s exports of manufactured products suffered from widespread factory closures in April, including the Tesla facility in Fremont, which effectively choked off exports of electric automobiles.

“The good news is that most of the high frequency data we have suggests that April was the bottom from an economic activity perspective,” said Christopher Thornberg, Founding Partner of Beacon Economics. “From initial unemployment claims to credit card transactions, May is coming up better than April and, with public health mandates being eased, June should be even better, indicating strong rebound.”

Still, Thornberg warns that international trade will likely take longer to recover than the economy overall as the declines in travel have limited global transactions and that will show up as weaker trade flows later in the year.

https://beaconecon.com/publications/california-trade-report/

 

Tooleville: The Struggle for Drinking Water

Fresno Bee

An ongoing struggle between two communities less than a mile apart illustrates the challenges California faces as it tries to deliver clean, affordable drinking water to more than 1 million residents without access to what the state has called a “basic human right.”

Nestled among orange groves in Tulare County, the community of Tooleville has just 391 residents. Hardly a town or a village, it’s a place with a name and a few dozen homes along two dead-end roads off the highway. The drinking water it draws from two nearby wells is often so contaminated with farming-related nitrates and pesticides that residents have been receiving free bottled water from state and county agencies.

Less than a mile west of Tooleville is the city of Exeter. Its 10,500 residents have paved streets and schools. They get their water from a municipal system without harmful contaminants.

Since at least 2001, Tooleville residents have been trying to persuade Exeter city officials to extend that municipal service to their community. In September 2019, the Exeter City Council turned them down once again.

Tooleville’s plight is a common one in California. Although the state was the first in the nation to identify water as a basic human right, fulfilling that promise has been painfully slow.

“Water really is the story of California right now; it’s about the haves and the have nots,” said Blair Robertson, a spokesman for the state water board. “It’s a story of liquid gold.”

Most Californians who lack access to safe and affordable drinking water live here in the Central Valley, where clusters of homes and trailer parks are dotted amid vast cropland — home to nearly a tenth of the nation’s agricultural output and the farmhands who tend to it. They live in what the state calls disadvantaged unincorporated communities, or DUCs. Most of these communities are predominantly Latino. DUCs in the San Joaquin Valley are roughly 68% Hispanic, compared to just 37% in other unincorporated places.

Many DUCs are close to towns with safe drinking water, and experts say the best solution for them is to consolidate their water systems with larger neighbors.

But wealthier communities rarely choose to consolidate voluntarily, usually citing cost as a factor. Exeter’s mayor, for example, said at a recent council meeting that her city had enough trouble meeting its own water needs without taking on Tooleville’s problems.

Officials with the California Division of Drinking Water say they don’t yet know exactly how many of the state’s disadvantaged communities would benefit from consolidation; it’s something they’re still in the process of studying. But research by the Center for Regional Change at the University of California, Davis, suggests that nearly two-thirds of 450 DUCs in the Central Valley alone would be good candidates.

There have been only about 100 consolidations statewide/ since California began monitoring voluntary consolidations in October 2016. An IRW analysis of state records indicates that state agencies or state-backed bond grants helped support only about 10% of the consolidations.

In 2015, California gave the State Water Resources Control Board power to force communities to consolidate. In 2019, the California State Legislature passed a landmark bill to help fund water utility operations and maintenance costs in underserved communities.

But just one mandatory consolidation order has been completed. And many disadvantaged communities, including Tooleville, have discovered they’re not eligible for mandatory consolidation, because their water doesn’t consistently fail to meet state and federal standards. Instead, it teeters on the brink of noncompliance — one day suspiciously clear, the next day cloudy and perhaps toxic.

“The way the law is written, we can’t step in,” said Caitlin Juarez, one of two division partnership coordinators at the state water board. “There’s not a lot we can do.”

Remote farming communities like Tooleville were once havens for families seeking opportunity in the valley’s fertile fields.

Jose Mendoza, 75, immigrated here from Tarimoro, Mexico more than 40 years ago, because, as he put it, there was nothing left for him there.

“There was no work there, and we were very poor,” he said.

Mendoza, who is now retired, started a family in the valley. He built a life picking oranges, plums, peaches and grapes.

Tooleville was an oasis for him and other farm workers until the late ’80s when the water turned bad. The town’s two wells began drawing in nitrates that for decades had been filtering into the groundwater from fertilizers and pesticides on the fields above.

Nitrates are colorless, odorless compounds that can cause blood disorders in infants. Tooleville’s water also frequently contains high levels of hexavalent chromium, a toxic heavy metal, and coliform bacteria, which is typically an indication of sewage contamination.

“If you think about the origin of these communities, when they were founded as just a few houses or a neighborhood, they basically stuck a straw in the ground,” said Clary, the water program manager at Clean Water Action. “Groundwater was cheap, it was plentiful and you didn’t even have to disinfect it if it was serving a small enough area. But the difficulty is, as soon as you have a problem, then you have these big expenses.”

Mendoza said white residents in Exeter came to see immigrants from Tooleville as hardworking people who were willing to do the jobs other people wouldn’t.

Today, roughly 45% of Exeter’s population is Hispanic, compared to nearly 82% in Tooleville. Exeter’s median household income is $42,600, while Tooleville’s is just $28,500.

Mendoza said the water crisis has made the economic and racial disparities “more and more and more bad.”

The history of California’s unincorporated communities dates back to the mid-1800s during the state’s gold rush and population boom, according to Jonathan London, the faculty director at the UC Davis Center for Regional Change.

In contrast to the nation’s burgeoning eastern seaboard, land was cheap and available in California. The west offered endless expanses of wild country where towns and cities began cropping up along sources of water.

But low-income communities, or DUCs, like Tooleville were often left isolated with no means to incorporate.

“They’re like colonies, many of them,” London said, “cut off from everything and everyone around them.”

The resource divide between Tooleville and Exeter likely stretches back decades. A 1971 report by the Tulare County Planning Department actually recommended that water and wastewater resources be withheld from Tooleville and 15 other unincorporated communities it described as “non-viable.”

“These non-viable communities would, as a consequence of withholding major public facilities such as sewer and water systems, enter a process of long-term, natural decline as residents depart for improved opportunities in nearby communities,” the report stated.

In 2013, the national research and action institute PolicyLink mapped the DUCs in the San Joaquin Valley, a portion of the Central Valley south of the California Delta. That research inspired the Center for Regional Change to measure water justice among the DUCs in that part of the state.

The findings, London said, were disheartening.

Of the community water systems that intersect or partially intersect those disadvantaged areas, 38% consistently fail to provide safe drinking water. Nearly 75% of the people served by out-of-compliance systems are black and/or Latino.

Yolanda Cuevas liked to wear black. But when she and her husband, Benjamin, moved to Tooleville a little over a year ago, she faced an unexpected problem.

“When I put them in to wash, they came out another color, a lighter color,” she recalled.

The well water that fed her home reeked of bleach. After showers, her skin itched.

It wasn’t until Cuevas, 57, went to a community meeting that she discovered that the water coming out of the faucets in her new home was contaminated with coliform bacteria, arsenic and hexavalent chromium.

Cuevas was among the Tooleville residents who filed into Exeter City Hall on Sept. 10, 2019, to make their latest pitch for consolidation. They were accompanied by representatives of the Leadership Counsel for Justice and Accountability, a nonprofit that provides organizational, research and legal support for disadvantaged communities.

She addressed the city leaders at one point, pleading for help.

“I have two grandkids that I have to worry about them,” she said. “Every time that they wash their mouth, I have to take a bottle of water for them to rinse their teeth. When they take a shower, I have to take some clean water for them to rinse it out.

“Please help us,” she added.

The little group was optimistic that Tooleville’s drinking water problems would finally be solved.

Michael Claiborne, the Leadership Counsel’s senior attorney, said he had a verbal agreement with the state to fund a mile’s worth of pipeline and bolster water resources in Exeter. He said the state would even consider covering the cost of a new storage tank for Exeter and refinancing some of the town’s existing water infrastructure debt.

All the city council had to do, he said that night, was agree to engage the state water board in the remaining negotiations.

Exeter Mayor Mary Waterman-Philpot wasn’t convinced.

“I wish Santa Claus was real,” she said.

A few minutes later, the council unanimously voted to take no action on a consolidation plan.

“I think, in general, we all feel like we all need to be responsible to Exeter first and make sure that we can provide them safe drinking water at an affordable price, and, you know, make sure that ours are up and running before we would even consider expanding to Tooleville,” the mayor said.

Since that meeting, Clairborne has talked with Tulare County officials about Tooleville’s predicament. He said one of them told him there was another reason Exeter rejected Tooleville’s plea — the residents had become “too aggressive” in their push for clean-water access.

“It seems like a regular occurrence that when small communities of color like Tooleville ask for a basic service like access to safe drinking water, they get labeled as aggressive,” Claiborne said.

Because Tooleville doesn’t qualify for mandatory consolidation, it can’t rely on the state for help in its battle with Exeter.

But as recently as three years ago, Tooleville would have been a candidate for the mandatory program, because its water contains high levels of a known carcinogen. The federal government classifies hexavalent chromium, or chromium-6, as an “unregulated contaminant,” which means utilities only need to test for it, not treat it in their source water. But in 2014, California became the first state to set a maximum contaminant level for chromium-6, and Tooleville’s water exceeded it.

In 2018, however, a Sacramento County court struck down the regulation, saying the water board hadn’t done enough to weigh the potential economic impact the stricter regulations could have on water utilities. The court’s action meant that Tooleville is no longer eligible for the free bottled water shipments provided through the state’s Cleanup and Abatement Account. Instead, deliveries are provided through a Tulare County program that operates on an income-level basis. Only those families whose household income is within 80% of the state’s minimum poverty guidelines are eligible.

From 2014 to 2019, 112 communities with out-of-compliance water received 465,000 gallons of bottled drinking water, according to data the IRW requested from the state. There were 51 communities being served at an annual cost of more than $4 million.

Meanwhile, the level of chromium-6 in Tooleville’s water supply keeps rising.

Andrea Galdamez, with the nonprofit Self-Help Enterprises, has been busy knocking on doors in Tooleville, trying to persuade people to sign up for the county program. Although technically their water meets state standards, she repeats a well-known fact of life in Tooleville: “Please don’t drink the water.”

Since California’s mandatory consolidation law took effect in 2015, just three consolidation orders have been issued and only one has actually been used to force a merger. It was between the city of Tulare and the Pratt Mutual Water Co., which serves residents of Matheny Tract, a disadvantaged community south of the city.

In that case, the two communities had reached a voluntary consolidation agreement when city leaders in Tulare were sidetracked by the prospect of instead delivering water to a new housing development.

Ken Smith, 56, has lived in Matheny Tract his whole life.

Tract residents are so close to Tulare that they tell outsiders they live in Tulare, Smith said, even though, on paper, they really don’t.

“We love Tulare,” Smith said. “If anyone asks me where I’m from, I don’t say Matheny Tract; I say ‘Tulare, California.’ I’m proud of that, but they’re not proud of us.”

When all parties are in agreement, consolidation is the state’s focus, said Juarez, with the California water board. But consolidations can be expensive, and until recently, California hadn’t set aside a steady stream of funds to address all of its water problems.

The state water board is responsible for drafting the contaminate limits in California, weighing health concerns from the Office of Environmental Health Assessment against financial constraints so consumers are safe and their water bills are manageable. But Robert Brownwood, assistant deputy director for the board’s drinking water program management branch, said there’s a lack of reliable medical data, particularly for contaminants that aren’t regulated by the EPA.

He said the effects these contaminants may already be having on the public are largely unknown. Is a mysterious rash that comes and goes — or birth defects in a newborn — caused by the water faucet at home? In most cases, it’s impossible to say for sure.

“My soul struggles with that so much,” Brownwood said.

It’s not uncommon. Flint, Michigan, and Newark, New Jersey, didn’t know their drinking water supplies were causing health concerns until it was arguably too late. It’s impossible for a state alone to gauge the health effects of thousands of water constituents — some of which are yet to even be discovered, he said.

Brownwood said his office’s charter gives it authority but not the funding to study the effect of California’s water on public health.

“We have not been given a penny in the 30 years I’ve been here to do anything like that,” he said. “(It’s a) flaw in the system. I’ve been beating that drum for four years now.”

Last year, Gov. Gavin Newsom pushed through a set of controversial fees on larger water systems and farmers that’s expected to generate $130 million a year to begin addressing some of these problems. It’s unclear whether any of the funding would be made available for public health research, but the money will help fund the costs of mandatory consolidations and supplement operating and maintenance budgets for systems that opt to treat their own water rather than consolidate.

This year, that fund was renamed the Safe and Affordable Funding for Equity and Resilience Program, and a portion of it has been designated specifically for small, disadvantaged communities.

“I cannot underestimate how big a deal this bill was,” said Jensen, of the Community Water Center. “I remember us talking about a source of funding to help cover operations and maintenance costs for water systems as if we were talking about the goose that laid the golden egg, you know? It was something that was never going to happen. Five — almost six — years later, we got it done. It happened.”

Small community funding is expected to clear the way for areas where drinking water is consistently out of compliance, but the way forward for communities like Tooleville remains uncertain. Still, CalEPA Secretary Jared Blumenfield told the state water board in August that Newsom is committed to long-term solutions for California’s ongoing drinking water crisis.

“There are communities that have not had affordable or safe drinking water for, in some cases, decades,” he said. “And that, I think, is the thing that this governor was really motivated by. How, in the fifth largest economy in the world, can we have a million-plus people who don’t have access to safe and affordable drinking water?”

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