Senate Standing Committee on Governance and Finance

The Senate Governance and Finance Committee will come to order. So good morning and welcome to our Committee. The Senate continues to welcome the public and has provided access to both in person and teleconference participation for public comment. For individuals wishing to provide public comment via the teleconference service, the participant toll free number is 877-226-8163 and the access code is 6948930. We also have representatives who are participating remotely. For our remote participants, please mute your phones or computers. Please select unmute before you begin speaking.

Our IT personnel will put you back on mute when you are done. Once recognized to speak, please make sure you can be seen on the screen, state your name, and then you're ready to address the Committee. For today's hearing, we will be hearing all of the panel of witnesses on the agenda prior to taking any public comment. Once we have heard all of the witnesses, we will have a public comment period for those who wish to comment on today's topic.

Before we begin, I'd like to ask that you please turn off cell phones and take conversations outside of the room so we can hear the testimony presented. So welcome to this oversight hearing on local government infrastructure. We know that building and maintaining infrastructure is a core responsibility of local governments and ensures California's continued economic progress.

As local governments look for ways to accommodate new housing development and encourage economic growth, we need to ensure that they are equipped with the tools they need to meet their infrastructure needs. However, local governments face many barriers when it comes to meeting these needs. The damage that recent storms have caused reminds us how important infrastructure is to protecting lives and property.

We are here today to learn more about the current infrastructure needs that local governments have, how the state partners with local agencies to address these needs, maybe even the need for the state to get out of the way so that we can have local government meet their needs, and the barriers that local governments face when building infrastructure projects.

The Committee will first receive an overview from the Legislative Analyst Office and the Department of Housing and Community Development on how the state has worked with local governments to address their infrastructure needs. Second, the Committee will hear from local government officials to learn how they are addressing their infrastructure needs. And then finally, the Committee will hear from local officials and other stakeholders who will discuss the different challenges that confront local governments' ability to meet their infrastructure needs.

The hearing will help us learn more about the gaps and the barriers confronting local governments and assess how the state can partner with them so that all of California can enjoy the benefits of the state's continued economic progress. Now, so let's go ahead and jump into the Committee and hear from the Legislative Analyst Office. We have Carolyn Chu, Chief Deputy Legislative Analyst.

And from the Department of Housing and Community Development, we have Megan Kirkeby, Deputy Director for Housing Policy, and Jennifer Seeger, who's the Deputy Director for State Financial Assistance. Welcome, and we're so happy to see you here in person.

Good morning, Chair and Members. My name is Carolyn Chu from the Legislative Analyst Office. I'll be presenting from a handout that I think the sergeant is passing out right now. And for those in the audience, there are additional copies, and for those watching online, the handout should be on our website at lao.ca.gov. So as the Chair mentioned, I was asked this morning to give a brief overview of state infrastructure spending, including, at a high level, how the state supports locals in some categories of infrastructure spending.

So starting into the handout, turning to the first page, how do we define infrastructure spending? Infrastructure spending is spending to support the designing, planning, and construction of major capital assets.

This can also include the rehabilitation and renovation of those assets. The responsibility for different types of infrastructures varies by the level of government. To some extent, the state's infrastructure spending is guided by the state's five-year infrastructure plan, but there's significant spending that happens outside of that plan as well. In areas of statewide interest, the state provides support to local governments largely through providing funding through revenue sources or bond issuance to help local governments pay for critical infrastructure needs.

I'll highlight a couple of examples, and I'll touch back on them later in my presentation as well. The first is transportation. In transportation, the state provides a portion of the revenues from the state's excise and sales taxes on diesel fuel to help support state local roads and mass transit. The state also provides a portion of this transportation improvement fees as well to local governments for those purposes.

For schools, the state has sort of a cost-sharing agreement to help support school construction, in which the state generally pays for about 50 percent of school construction costs. This percentage can increase depending on local school districts' ability to raise their share of the resources. Typically, the state has supported school construction through the issuance of general obligation bonds backed by the state.

In housing and homelessness, the state historically provided tax credits to private builders to support affordable housing construction, and the state also historically has issued bonds every so often to support the construction of affordable housing, both by local governments and private entities. In other areas, local governments are primarily responsible for their infrastructure needs. This includes local parks, police departments, and fire stations. As I'll go into a little bit more, there are two primary mechanisms for paying for financing infrastructure, and that is cash.

So revenues available at the time the project is approved, and bonds, both general obligation bonds and lease revenue bonds. Turning to the next page, this figure is a little bit dated. It's from 2018, but the story remains the same, and it gives you a sense of which level of government between the state and local governments is responsible for a large proportion of the state's kind of critical infrastructure.

So you can see the division of responsibility for transportation, schools, resources, criminal justice, prisons and jails, as well as sort of a miscellaneous category there at the end. So as you can see, there's a significant portion of infrastructure that the state supports as well as those that are supported by local governments. Turning to the next page, page three, this chart shows you a ten-year picture of funding from the state to support infrastructure by policy area. The total over this ten-year period is 100 billion dollars.

This is pre-pandemic spending, just to be clear, and I'll loop back to why that's important in just a minute. As you can see, most of the state spending to support infrastructure actually went to locals, and some of the largest categories were transportation and education. Turning to the next page, page four, this figure breaks out the fund source for infrastructure over that same ten-year period. As you can see, the largest source of financing for infrastructure has been bonds--or was bonds during that time.

Importantly, general obligation bonds, as I mentioned, are paid and backed by the General Fund. So this bond category does reflect, to some degree, General Fund spending as well. The next largest category are special funds. So that's like the excise and sales tax on diesel fuel, as well as other fees that are levied for specific infrastructure types of projects, particularly in the resources area.

And then a small sliver of General Fund, sort of on a year by year basis, was provided for things like designing and planning for infrastructure projects. Turning to the last page, the story changed a little bit in recent years. This figure shows you the total capital outlay spending that was allocated as part of the 2022-2023 budget. And this figure is quite unique because--or what this figure represents is quite unique because this represents General Fund spending on infrastructure in the last budget package.

It totals over 24 billion dollars. So that's quite significant relative to recent history in terms of state-supported capital outlay. Now, with the recent surpluses that the state experienced, one of the key factors in the Legislature's decision-making was the state appropriations limit, and the state appropriations limit placed significant constraints on what the state could allocate those surplus funds towards. One of the excluded categories of spending is capital outlay.

And so that is part of what drove some of these allocations because the Legislature had significant flexibility to allocate revenues towards these purposes. The other note I'll make about this figure is that the definition of capital outlay for the purposes of the state appropriations limit is broader than just infrastructure. Under the state appropriations limit, capital outlay spending includes improvements to land.

So this figure, especially in resources and environment, reflects projects to improve land, either for forest management or restoration of wetlands or drought mitigation, types of activities which we would not necessarily usually include in the category of infrastructure.

So some of the things that I'll highlight just in this figure that the state allocated funds towards that were part of that capital outlay package were the energy package, the drought package, significant transit and rail and active transportation program needs, housing and homelessness, particularly in the last budget, the Bridge Housing program, and then providing General Fund revenue towards school facilities and student housing at the universities. So with that, I'll conclude my comments, but I'm happy to answer questions.

Thank you very much for that thorough explanation. Very important to understand how things may have changed based on budget priorities. So thank you for that. Next, we'll hear from Megan Kirkeby, Deputy Director for Housing Policy.

Thank you very much.

And thank you to my colleague for reminding me to turn on my microphone.

It's different when your're here in person.

Yes. Apologies for being a little out of practice, but thank you for having me here today and especially on this topic. It's something that we talk a lot about at HCD. HCD is committed to a future where every Californian can live, work and play in healthy communities of opportunity, and ensuring the state has enough housing available at affordability levels near jobs, amenities and services is central to that vision.

Where we live informs the schools that our children can attend, our commutes to work, our access to services, and how we plan for housing infrastructure is deeply ingrained in the success of our transit infrastructure systems, those that require sufficient density of households to function and thrive sustainably. None of our work happens in a silo. For us to increase housing availability, we must also invest in infrastructure that will support the construction of those homes and the quality of the life for the people living in them.

Our infrastructure paradigms do need to adapt at times so that we can fulfill all of our housing goals. HCD has been really proud to be the steward of many planning grant programs over the years that have helped local governments and regional governments begin this transition and update their planning around how we ensure we have sufficient infrastructure as well as housing near all the services, jobs and schools and amenities that people need to live a fulfilling life.

So REAP 2.0 is the latest iteration of those planning grant programs, the Regional Early Action Planning grant 2.0. We got to have a 2.0 because we had such a successful 1.0. And that is a 600 million dollar statewide investment that will accelerate infill housing development and reduce vehicle miles traveled or driving, and affirmatively further fair housing.

This program grows out of the success of our prior planning grant programs like SB two, the local Early Action Planning grant program that provided grants to all 539 jurisdictions in the state. The first iteration of the regional Early Action Planning grant program that provided funds to regional governments to help seed activities at the local level and create efficiencies. This expands on those programs by integrating housing and climate goals as well as affirmatively furthering fair housing. These funds for this program are very flexible.

They can be used for planning efforts or implementing existing plans, as long as they relate to the construction of housing and infrastructure to support future housing development in climate-smart places. Most of the program's funding, about 85%, flows directly into the 18 metropolitan planning organizations, so those regional governments and those regional governments can subgrant a portion of those funds to local entities within their boundaries, like cities, counties, transportation agencies.

The remaining funds are split between rural and tribal applicants, who can compete for 5% of the funds or $30 million, as well as an allocation for higher impact transformative projects. This was a new piece of this iteration of the REAP program, in which a wide range of applicants, rural, tribal, counties, cities, any eligible applicants can apply who have an innovative idea of how they are going to spur housing development and infrastructure.

So there's a $30 million piece that anyone can apply for who is going above and beyond the basic rules of the program. So applications for this program were due at the end of last year, and they're currently under review by our HCD led interagency team. I think you'll hear later today from the Sacramento region on what they're doing with their refunds and their planning grant program. And there was a lot of interest in this program.

There were set asides for those regional governments, but the other two aspects of it were competitive. We received applications from 67 applicants requesting $161,000,000 more than there was funding available. Applicants to the competitive rural tribal allocation requested more than twice the funding available, and higher-impact transformative applicants requested almost five times the available amount of funding. This oversubscription is in part due to the success of our outreach and technical assistance efforts. We did one on one TA meetings with state staff.

Our state staff were able to do one on one TA meetings to all applicants. In addition, we provided proactive outreach and TA to tribal applicants, including help with application drafting, identifying projects. HCD also reached out to every single federally recognized tribe in the state early to spread awareness of the program and hosted a tribal consultation. HCD is working with the Office of Planning and Research, the Strategic Growth Council, and the Air Resources Board to ensure that we're taking a multidisciplinary approach to this program development.

They'll also be part of application reviews and award decisions. Through this partnership, our interagency group brings subject matter expertise in infill housing, reducing driving infrastructure investments, and furthering existing local and regional plans. Many of these infrastructure investments that we've heard regional governments talk about that they want to spend their money on include things like upgrading existing infrastructure and planning for future infrastructure needs.

As you move to infill development, sometimes your underlying infrastructure wasn't ready for that approach, and we are hearing all the time about local and regional needs around this kind of infrastructure upgrading. It's also about expand. We're also having a lot of requests around expanding active transportation options, including bicycle and pedestrian plans. As well as access to establish more seamless regional transit systems between and across communities.

There are some types of infrastructure investment that are ineligible for REAP 2.0 funding because they do not further the program's goals and objectives. So those would be things that are not in service of reducing commuting or reducing VMT. So ongoing transit expenses are ineligible.

The award announcements are expected in the summer, but we've been seeing a lot of energy from our regional and local partners in applying for the program, and it's a fun part of my job, but I get to hear about everybody's regional plans and what they wish they could do if they had a little more money on the table.

So I'm very grateful to the legislature for giving us this funding and this ability to work with these regional governments as we hear about what they're doing around high traffic corridors and reducing integrating more complete streets into their community, establishing sewer service to allow for density and infill development that wouldn't have been possible otherwise. Directly investing in infrastructure improvements that support the implementation of new homes, thousands of new homes. And HCD is really excited about everything that we've seen come through our door.

Of course, we wish we could find everything, but it's our job to probably make the hard decisions on the two competitive programs. And these infrastructure investments really are critical to getting housing production off the ground. I don't want to undersell that piece of it because you're going to hear from my colleague about our infill infrastructure grant program. The planning is essential. If we don't start to plan in a different way, we are not going to meet our other policy goals.

But that planning needs to be followed up with implementation. That was a big part of this iteration of REAP 2.0 was to begin to think move from planning to implementation. But you still need that direct investment in infill infrastructure as well to get this housing off the ground. So you're going to hear from my partner, Jennifer Seeger on that piece of the puzzle.

Very good.

Good morning, everyone. Thank you for having us here today. So the department currently administers 21 various state-funded housing and community development programs that provide either loans or grants to support the development of rental and homeownership housing. Today I would like to really focus in on one of those programs that is primarily targeted to the implementation aspect of infrastructure dollars that are needed to unlock critical housing site, and that's our Infill Infrastructure Grant program.

So while the REAP program, as discussed by my colleague, focuses primarily on the planning aspect, the Infill Infrastructure Grant program provides grant funds for infrastructure improvements necessary to unlock vacant or underutilized commercial or industrial infill sites, really recognizing that these sites represent a significant untapped resource for the development of new housing across the state and can also contribute to the state's climate goals through the reduction of vehicle miles traveled and really creating a sense of place for working families.

The Infill Infrastructure Grant program, or the IIG program as we refer to it, was first launched in 2007, and to date, HCD has successfully implemented 10 funding rounds under the program, awarding more than $1.3 billion in infrastructure funding grant dollars, which will result in the creation of just over 20,000 new housing units statewide.

The program's primary objective is to promote infill housing development, and this objective is accomplished by providing financial assistance for capital improvement projects that are part of or necessary to facilitate the construction of housing. Eligible improvements include water or sewer or other utility service upgrades or improvements, streets, roads, transit linkages, traffic mitigation features, site preparation or demolition, sidewalks, streetscape improvements, as well as the development of parks and open space.

Most recently, in 2023, a new 400 million dollar two-year investment was approved to build upon the existing IIG program, creating what is now known as the Catalytic Infill Infrastructure Grant program. I like to think of this as the original IIG program on steroids.

Whereas the original IIG program supported the development of mostly single site development, the new catalytic component focuses exclusively on large catalytic investments of land, for example, unlocking those larger-scale former commercial and underutilized sites that have the great potential for housing but lack the infrastructure necessary to facilitate higher density residential development with a mix of uses, including affordable and mixed-income housing.

The Catalytic IIG program also expanded the eligible uses of the grant funds to include factory-built housing and costs related to the adaptive reuse of existing structures to facilitate the conversion of uses to residential. Both of these new allowable uses help to expedite the availability of housing and work to reduce the cost of traditional new construction. In November of 2022, we released a solicitation for concept proposals under the new catalytic IIG program announcing the availability of $105,000,000 in funds.

These concept proposals were to help us better understand both the opportunities that exist statewide as well as the needs and the specific infrastructure investments that are required to help move these projects forward.

Of the funds that were available, 15% of those were targeted to small jurisdictions, and while the program has threshold requirements for units to be created as a result of the investment in the infrastructure funds, applicants have two paths to meet those threshold requirements either through a single site so your large scale, maybe underutilized, or a vacant shopping mall or strip mall, or through a scattered sites approach of various non-contiguous parcels.

So allowing jurisdictions to compete for these funds depending on the individual kind of needs in their community. So similar to the REAP program, there was an overwhelming interest in the program and the development received 55 concept proposals from 36 local governments of every shape and size across the state, and they requested more than $765,000,000 in infrastructure funding to help advance their housing outcomes. This is almost an eight to one over subscription of available funds.

Just last week, the department invited 18 proposals from 11 of these jurisdictions to participate in our phase two of the award process. These 18 proposals have identified the need for more than $380,000,000 in infrastructure funding and have the potential to unlock just over 9000 new housing units. With the amount of funds available, we anticipate making awards to between 4 and 6 of these communities.

Award announcements are expected in the early summer, and construction on the various infrastructure improvements should be underway by late summer or early fall, which is just within one year of the launch of the program. So we're really excited to continue this program, and it was a good learning experience for us to also see the number of proposals that were received and the level of interest. And it really shows kind of the needs of infrastructure, particularly related to housing across the state.

So happy to answer any questions you may have.

Very good. We're going to bring it back to the committee. I'm going to ask the committee members to be brief in their questions. I do want to make sure we have enough time to hear the last panel and to do it before the noon hour. So, Senator Blakespear, thank you.

I will be brief. So I appreciate what you all shared. Thank you for coming today. There seems to be a lot of money spent on infrastructure and allocation for the future and also excitement about grants and planning opportunities you see from locals. I think it's important, though, to ground that in what the background paper shared with us, which is that the report card for California's infrastructure gave us a C minus for overall infrastructure.

And there was also a really good example of, in San Francisco, a public restroom costing $1.7 million to actually build and then go through this really onerous regulatory process, which some of the process are city created. So multiple city departments, parks and rec and arts Department, and all these kinds of different commissions. But then some of it is utilities.

And coming from being a mayor of a city, the utilities regulatory process would sometimes delay projects for months and months and months, as well as Coastal Commission, city and county approvals. And so I just wanted to see if you are focusing on how is it that we can deliver more. So, Ms. Kirkeby, you said planning is essential, but needs to be followed up by implementation.

And I guess I would just like to see that there was a really clear connection between planning grants and then also building, because I think there are a lot of cities that can get stuck in an analysis paralysis situation where it's very fun to start a new study and to get a grant from the state to study things. But then it's like, are you actually going to build that housing?

So both of your presentations are exciting, but it's like, we really need to see that housing and the other projects like these public restrooms. So do you have any thoughts on that?

Yes, absolutely. I think that's actually the best part about this work, is the planning grants here have to all be showing how they're accelerating housing production, which means really taking a hard look at those governmental constraints that are part of your processes. That was a big piece of our work on these planning grants was to not fund a study that goes nowhere.

So that was a pretty explicit prohibition in the programs, was, we are not going to fund a study that is a study, that we only funded things that were specific planning documents in the interest of a specific outcome. And you also need to be showing that you are doing that work you're talking about, Senator, of examining your governmental constraints, looking at how they are in the way of housing in your community.

And as part of this, a lot of this work came out of the fact that we've raised the bar substantially on local governments to sort of change the way of doing things around housing. And a lot of that comes into play with this housing element cycle, which I know you were very familiar with.

But a lot of that required a deep dive into governmental and non-governmental constraints and examining, you had to tell us as HCD, anytime you identified one of those constraints, what's your program to specifically address that constraint? And so that work, obviously, it is not an instantaneous move in some cases, but I think that is an underlying goal for all of this work in my mind.

And why we do this work is we have to change the way we've been doing business around housing, and that starts at the infrastructure level as well. I could not agree more and would say that we have a shared goal in that question.

And I would just add to that as part of the criteria that we use in allocating these funds. We're really looking for policies that advance both adaptive reuse, infill development that have been approved at the local level. We're also looking at readiness of the projects to move forward. So that is a significant amount of the scoring criteria that we use in allocating the funds.

Senator Seyarto.

Thank you for all the information this morning. One of the questions I have is there's a big difference between infill requirements in urban areas and then also the requirements for building housing out in suburban areas. Those are newer areas that we're adding housing, not replacing buildings with other housing. What percentage of this infrastructure investment help is being directed toward urban areas versus suburban areas? Because the suburban areas are struggling mightily.

And one of their struggles is one of the comments that I heard was ongoing transit not compatible with goals. If there is a goal for housing, there better be a goal for people to drive from wherever they're moving way out to their jobs and things like that. And we can't just say, we have to stop that. So what is that balance? How do we find that balance? Are you guys aware of that balance, the need for infrastructure?

I would say this is a place where I think there has been a seat change. And I would like to say I think I'm part of pushing this is if we only focus on getting housing near transit, we have forgot a huge source of VMT reduction potential. Suburban communities with jobs need support to intensify their land use. You are not going to put a subway in the middle of every city because it's not transit-ready yet.

And that transit readiness comes from having a density of population that could support that transit system. But in the meantime, if we are able to build additional housing near very job-rich suburban communities, we are going to reduce commutes, we are going to allow people that work in that community to live in that community, and there are going to be huge benefits that are far-reaching.

And so I think a big part of this work is acknowledging that climate change is not going to be 10 cities in California. We are all going to be changing the way that we build to allow people to have more access to jobs and services and reduce those commutes for many places where people work but are not able to live in those communities.

And I will say with the rural tribal set aside, part of the reason we went to that move was we wanted to have a different shaped program which doesn't speak to your suburban piece. A lot of that happens within the regional, the large region piece, but on the rural tribal. We ran the program differently. It was a much simpler application. It was really about where are you starting from? Where are the jobs in your community? Where are people working?

What could just getting from where you are to the next step look like? And that might be more basic sewer, water infrastructure that might be looking at where the farm worker communities are in your community. And are there ways to improve transit access or improve housing situations there?

And so I think there has been a movement here to really recognizing that if we're going to build in a smarter climate-smart way, we need to not just be thinking about 10 places, but be thinking about 539 cities and counties throughout California, as well as many of our tribal governments and what their housing and infrastructure needs are.

Right. And that's a challenge. You guys have the whole state to look at.

Yes.

Represents an area, and they have their unique problems and issues. And you were talking about basic infrastructure. And suburban areas with cities that were less than 30 years old, 35 years old have different needs. They need much more basic infrastructure. You're not going to take all the roads out of LA, right? Well, we just need to get to where we have the roads, the interconnect.

We have the roads, the water, the energy distribution and flood control so that we can actually build upon those things to get to where people want us to be someday. Because without those things, we don't even have jobs. We don't have the right jobs to help people buy houses, so they wind up having to commute. I'm just saying, don't leave us behind.

That's right.

And make sure that we're treated differently than other areas, just like you were talking about the tribal lands, because we are different. We are in different stages of growth, and we are still getting hammered about needing to build. We can't build houses if we don't have the infrastructure. Thank you.

Thank you.

Senator Durazo.

Thank you. Thank you all very much. For Ms. Chu, I just wanted to understand the overview of the infrastructure responsibilities that we have as they relate to local areas. And this information that you provided for us is that infrastructure that costs, that are covering transportation, schools, housing. But then there's other infrastructure that the state's involved with. So I just want to know. Broadband, water, all those other. I'm not sure how that all fits into the information that you've provided.

If there's a quick answer, otherwise, you can provide that in another way to us. Thank you.

Sure. I'm happy to follow up as well. But in terms of a quick answer, when it comes to water, that would be included in the resources category on that figure in page three. And so this figure is only representing state-supported infrastructure. So when it has the local portion on the figure, that's representing the amount of state funding that's going to local governments for these particular policy purposes. And you reference broadband as well?

Broadband is only a recent general fund and federal fund expenditure that the state's been supporting. So, correct. It's not represented here, but I'd be happy to get you those numbers. It's about, I think, $6 billion in recent years between federal and state funds toward those projects.

Are there other big areas like water broadband that are included that I can identify, or are they in a separate part of our budget?

No. This figure really represents, really the vast majority of state-supported infrastructure spending from the time period, which is 2007 to 2016-17. So it is pre-pandemic. It is a little bit dated. So as you point out, it's missing some of those big categories the state has started to invest in with general fund resources, broadband and particularly housing and homelessness as well.

That's not really represented here because at the time of this, when we put together this information, the state's main mechanism for supporting that type of infrastructure is through the state tax credit, which at that time was about $100 million a year.

Thank you very much. If there are no other questions, minor, I'll make real brief. Thank you very much for being here today. This is really helpful information. It would be helpful if you could provide a map on both of these or the two grant programs in HCD that you talked about. My concern is with access for rural communities. The IIG has been phenomenally successful, but has excluded much of rural California. And that's the complaint that I hear over and over again.

Hopefully it's changed over time so that it's relevant to smaller communities. And the Regional Early Action Planning grant program intrigues me.

But whenever you tell me that it's trying to meet our climate goals, that's a big red flag for me, because my experience when I served in the Administration and I was on the Strategic Growth Council and the first grant program for climate change related to housing, the Affordable Housing Sustainable Communities grant program, all of it went to urban centers because it was heavily weighted towards reducing greenhouse gas as opposed to achieving other goals in rural areas.

And then when you talk about the partnership between OPR Air resources and HCD is phenomenal, but if you don't include GO-Biz, you're missing the jobs portion of it, which is that if GO-Biz continues to seed jobs in urban centers, and then rural and suburban communities are responsible for housing those workers, and then you hold us responsible because I have suburban and rural parts of the community to reduce greenhouse gas, reduce VMTs, which, by the way, was never intended for rural California.

It doesn't work in rural California, then it's a perverse disincentive for, a perverse disincentive that increases the cost of housing in rural areas. So I just put that out there. You can't answer it in terms of the solutions right now, but I just want us to be aware. You're absolutely right, Ms. Kirkeby, is that we need to start looking at how we change the paradigm that we're looking through.

And if you're going to extend public transportation down to the suburban and rural communities and then say, okay, along the transit lines, you have to increase densities, that works great. But if you're going to say you got to increase densities and you're not going to get any transit infrastructure, and, oh, by the way, we're not going to fix your roads because that is growth inducing, and VMT doesn't allow you to do that, then it's really hurting our ability to create affordable housing.

So I want to be able to get on to the next. So I don't have any questions, but I really appreciate the information and maybe more discussion on some of that would be really helpful. So thank you very much to this panel. We're going to move on to our second panel, which is laying the foundation, assessing current local government infrastructure needs. And I'd like to invite Matt Machado, Director of Public Works, County of Santa Cruz.

Mike Miller, city engineer, City of Tulare, and Robert Grantham, General manager, Rancho California Water District. Welcome. And, yeah, I do think we have someone on.

Michael Miller will be on the Zoom, whatever. So maybe we start with Matt Machado. Welcome.

Thank you. Good morning, Chair, Members. There we go. My name is Matt Machado. I'm here from Santa Cruz County. I have a couple hats there. I'm a deputy CAO, Director of Public Works and Director of Planning. And so I have a unique perspective on the topic that you're discussing today. So I'm looking forward to sharing some of our perspective. And I think our perspective is similar in all 58 counties. I've seen it firsthand as my career has developed.

So the examples I shared today, I do believe represent all of our state. I'm going to start by just stating a few obvious things that you all are talking about, but we strongly believe that successful housing needs adequate infrastructure, which includes transportation, parks, and utilities. Just what you're talking about today. Inadequate infrastructure is a financial burden on new housing and causes significant delays to building housing. Our own CIP is an indication of our needs.

In our transportation and flood control area, we have $600 million of needs today. In our parks area, we have $35 million in needs. This is just in our tier one CIP. And then in utilities, we have about a $25 million need. And this is to support our housing plans. One of the largest contributing factors to this lack of funding is our local disasters. We've been subject to a lot of flood and fire as many counties in our state.

These local disasters are really depleting our resources and reducing our investment and our much needed infrastructure, which is there to support housing. So just in Santa Cruz County in 2017, we had some storm damage. Our damage was $140,000,000 just to public infrastructure. And then in 2020, we had the CZU fires. We had $20 million of public infrastructure damage. And then just this year, 2023, and the numbers are still growing, just today even. But right now, we're more than $60 million in public infrastructure damage.

This is really an impact to our own resources. Additionally, these disasters also reduce the number of housing units and our 2020 CZU fires, we lost over 900 homes. And then in this 2023 storm damage season, right now, we have over 200 homes damaged, and the number is rising today. So this is a significant burden on us, and it really diminishes our ability to build housing. We have received significant funding from FEMA and federal highways, but the funding is slow and it's rather incomplete.

Oftentimes, our local match is more than 20%. And so if you add up those numbers and you look at the local match and have to wait many years to receive that federal funding, it's a significant struggle for us. The years of delay actually has a cost to us. We actually have to borrow money to fund the disaster relief, the disaster repair, and we accrue negative interest. And it's significant.

And so as a state, we're here to ask for some assistance in that area, and I'll explain a couple of areas where I think the state can help local agencies and counties in particular. With regard to that negative interest, if the state were able to provide short term loans so that the counties can rebuild and await for federal funding, that would be a significant advantage to us. And I think it would be a benefit to infrastructure and housing together. I will end on a couple pauses.

Could I ask real quick, my apologies for interrupting is, when you say short term loan, could you give a timeframe? How long does it take you to get reimbursed by FEMA? And is that what you're looking for?

Yes, that's exactly what we're looking for. And what we're seeing today is about a two year time frame for FEMA and Federal Highways to secure. I am going to end on a couple of positives. We are very appreciative of the state legislation's efforts on a couple of bills that are in action right now. AB 400 and SB 706 are helpful to us. Both of those are efforts to implement projects, streamline projects, design, build, progressive design, build, and those efforts are helpful. So thank you for that.

I guess the last thing I would end is another area. It wouldn't be necessary legislation, but it would certainly be coordination with the state. But state natural resource agencies, we could really use some help streamlining those efforts, especially with regard to disaster repair. We understand new capital projects have to go through a process, but emergency repair, having to go through that same process, it really delays and is very costly to getting our infrastructure back open so that we can improve our housing situation. So thank you for your time today.

Thank you very much for your practical solutions. That's exactly what we're looking for. Appreciate that. Moving on to Robert Grantham, and then we'll go to the Internet.

Thank you. Good morning, Chair Caballero, Vice Chair Seyarto, and Members of the Committee. It's really an honor to be here, and I appreciate the time. So just a quick introduction. Rob Grantham. I'm the general manager of the Rancho California Water District in Southwest Riverside County. It's a beautiful part of the state. We're very honored to serve that community. Just our area, we serve 150 square miles in that $1.2 billion in annual economic activity.

So we serve residential, commercial, industrial and ag, which is part of the community, the heritage of the community. Our mission is to deliver reliable water wastewater services, and it really does intersect well with what the state's missions: 2.5 million new homes, providing housing across the state, the 10% water supply shortage that the Governor identified in the 2022, water supply strategy, meeting the carbon neutrality by 2045.

But in that doing so in a practical way, how do we achieve that metric with competing interest, as we're looking at EV, et cetera? Can we continue to do our job, and how might we do that? So that is a request of the Legislature. As a special district, water, wastewater, it's not homogeneous. We have San Francisco and LA, and we have Central Valley. And we have urban, rural, coastal, inland, but we all have unique or aligning objectives.

We need to upkeep our infrastructure, which is really critical, and that's the core of what we do. But we also need to plan for growth, many times doing it in advance of growth occurring. And that cost burden, meeting new regulations operationally, but also trying to gain efficiencies. And one thing that I'd like for you to hear is that we're really good partners. We're good partners within our own community. We're good partners across the water wastewater sector.

And we are good partners and want to continue to be good partners with the state in trying to achieve those goals. In terms of identifying what the funding gap is, the last time the State Water Resource Control Board did a survey, they identified next 20 years, just local infrastructure, not even water supply, was about $100 billion. So just in context, the SRF program, state revolving fund loan program, is a phenomenal resource. It's about $1 billion a year. So call it 20%.

Last year's request, 5.6 billion. And that gets to the funding gap that we're talking about today and appreciate the support. So where does our funding come from? Rates for us, property taxes. But there's a practical limitation to raising rates and what the public can afford. And so how do we achieve that? We also have developer impact fees as developers contribute their fair share to building that infrastructure and that capacity, and then loans and grants.

And so when we're fortunate to get grants, and the idea that interim financing, whether it's from federal funds, FEMA, or even just state revolving fund loans in that process, especially for those that have less financial capacity, that bridge gap is really a critical consideration. So we appreciate that. Partnerships. One thing that water agencies in general, we can't just look within our own service areas. We need to look and are acting well beyond our boundaries. And that's what we're doing today.

And that's really do appreciate the support in terms of SB 366 and looking at those water supply requirements across the entire state. But I'll highlight two projects that I think they're worthy of note that's in Riverside County, in western Riverside County. We're working with our partner agencies on regional planning, additional groundwater storage, stormwater capture, potentially desal projects over at Camp Pendleton, and then working across the county lines: San Diego County, looking at expanding recycled water, maximizing every drop that we have.

And so we are really looking at how do we expand what we do and do it by sharing costs where really trying to achieve those financial gaps. So in closing, I just I thank you for the time today and I'd like you to consider us as an ongoing partner. So thank you.

It's great. Thank you very much. Appreciate your testimony here today. Now I'd like to ask the moderator if you could please open the line for Michael Miller, city engineer, City of Tulare.

Yes, good morning. Thank you, Senator Caballero and Members of the Committee. My name is Michael Miller and I'm the city engineer for the City of Tulare. City of Tulare was founded in 1872 and incorporated in 1888. We're located on highway 99 between Fresno and Bakersfield. We have a population of around 70,000 and it's growing at a rate of about 2% per year. So we're traditionally a farming community.

And even though our economy is diversifying, we still rely heavily on the agricultural industry and particularly the processing of dairy products. Some of our major industries are Land O Lakes, Kraft Cheese, Haagen-Dazs and Saputo Cheese. And as a city, we're very proud of our ties to agriculture and grateful that these companies have chosen to make Tulare their home. We're also home to the World Ag Expo, the largest outdoor agricultural expo in the world with over 1,200 exhibitors and attendance of more than 100,000 people a year.

One of the consequences, though, of having these industries located in the city is they generate a lot of truck traffic, which results in significant wear and tear on our roadways. And like many local agencies throughout the state, we are struggling keeping up with the needs to upkeep our roads and streets. With the current level of funding available to us from state gas tax revenues and our local transportation sales tax measure, we're just not able to maintain our roadway network at its current condition.

Our overall pavement condition index, which is a performance measure used to qualify the condition of our roads, has continuously dropped over the past 15 years, and as vehicles are becoming more efficient and we're seeing the transition to electric vehicles progress, we anticipate that the funding we receive from state gas tax revenues will continue to decrease, sending us in the wrong direction.

So one thing I would suggest for state policymakers is to consider the need to restructure how revenues are generated for the gas tax program and how they're distributed to local agencies. Currently, we're also struggling with significant construction cost escalation and inability to obtain construction materials in a timely manner. In particular, traffic signal equipment is taking 10 times the amount of time it used to take to get. It's just not available out there for whatever reason.

One of the other issues that we're dealing with is our water supply and distribution system. We are an aging city. A lot of our infrastructure has been out in the ground for a very long time and it's in need of replacement. Given the past couple of months, it kind of feels strange to mention drought. But we all know that the drought conditions that we're experiencing today took many, many years to develop, and it's not going to change overnight.

The City of Tulare relies entirely on groundwater extraction for our potable water, and as groundwater levels have dropped, we're finding the likelihood of encountering constituents of concern in our water increasing. Treating groundwater to remediate these constituents is very costly, both in the cost to install the equipment and the subsequent cost of ongoing maintenance of that equipment. And if this becomes an issue that we have to deal with throughout our water system, the burden on our ratepayers would be crippling to them.

So funding assistance through grant programs will be critical to local agencies to address these types of issues. That kind of brings me to another point about grants. Unfortunately, we often find that the timelines associated with grant funding are too far out to address the needs, which typically have a degree of urgency. Application procedures are tedious and time consuming, especially for local agencies with limited staffing and consultant budgets to apply for grants.

We're usually going up against larger agencies that are far better equipped to put together successful applications. So too often we opt not to expend the effort to apply for grants and seek other local funding options which could have been used to address other needs. So I would urge policymakers to streamline grant delivery timelines, application procedures, and find ways to make them more available to smaller local agencies. A good example for us is our local MPO.

Tulare County Association of Governments receives some transportation funding directly from the state and disperses it on a local level. We're able to do our application process directly through them. They have the staffing available and the relationships to work directly with us to put together successful applications, and it just works very well. So that's all I have at this moment. I'm free to answer any questions you might have.

Mr. Miller, very quickly, that last statement that you made, the grants to the MPO, and then they re-grant, what are those grant funds generally, in what area are the grant funds? Do the MPOs receive the money and then disburse them?

The congestion mitigation and air quality, CMAC program, Safe Routes to Schools, those types of projects, the ATP grants, they play a large role in helping us and dispersing those funds.

Okay, thank you very much. I appreciate that. It's the reason that I asked for distribution maps that show where the resources have gone, because I think I found it very telling to see those maps and to realize that in a 10 year period it's the big cities that have gotten a majority of the funds. And we're trying to be fair about this. It's not fair.

So I appreciate your statement and we'll look at how the MPO gets these resources because that was the whole purpose of setting up the MPOs, was to be able to do some functions at the local level, to prioritize regionally. So thank you for that. So I'm going to bring back to our Committee to see if anyone has any questions of this particular panel. Looks like you're in luck. It's going to be easy. You have one. Sorry about that. Senator Seyarto.

A couple of things. The regulatory process that you have to go through to be able to get projects on the ground and done, do you find that those are creating a significant or not significant hurdle in achieving the goals of your organizations, your respective organizations?

Yeah. So for Santa Cruz area, absolutely. That's a huge hurdle for us, you know, it depends on your area. We're central coast, we have a mountainous region, we have Coastal Commission areas, the coastal zone, and we have a lot of waterways. And so it's very challenging. It's challenging for all projects. And as I mentioned earlier, I think disaster recovery, it shouldn't have to be that difficult. You had an existing road that collapsed. All you want to do is put the road back.

And when you have to jump through all those hoops for storm damage repair, it's almost impossible at times. But yes, it's a huge hurdle for us, and we'd love to get into the details of that. We could speak to all the different steps and levels of challenge, but to answer your question, yes, it's a big challenge for us.

That would probably be another whole meeting.

Easily.

And I absolutely agree. And particularly in response to disaster and emergency response, we're very grateful for SB 23, which is attempting to streamline just in the water wastewater industry. We have very well intended, and I'll say it that way, regulations, but they're not ubiquitous. They're not consistent across the region. And so in San Diego County, South Riverside County, we have one regional board. It's very different actions, just going north to the Santa Ana regional board.

And so the challenges are truly local and trying to streamline as we go forward. We're very grateful for the thoughts. I understand the challenges in trying to get streamlining as well.

Mr. Miller. I didn't want to leave him out.

No, I would just agree. I fully understand the need for accountability, but it does seem like the reporting requirements have become more onerous every year and just makes it more difficult.

Thank you.

Senator Blakespear.

Yes, thank you. In the background paper that was provided, it referenced this, SB 991 from Newman, which was in 2022, providing local governments the authority to use progressive design build for water projects. And it talks about how there's an off ramp process that is new compared to the previous ways projects were built. And I was wondering if you find that exciting, think it'll be used, or is it sort of small or what is your assessment?

So I'll put it this way. We're very grateful for the flexibility that it provides. Depending on the type of project, we will go traditionally design, build, and design, then hire a contractor, design, bid, build, excuse me. And then design, build. But progressive design build really does provide additional flexibility. It provides off ramps, and it'll be an individual agency decision on whether they use it. But the fact that we do have more options is always helpful, and so we're grateful to that.

Good.

Completely agree. We actually do water and sewer in Santa Cruz as well, and completely agree with flexibility. Thank you.

Thanks.

Very good. Thank you very much. We'll follow up on some of the efficiency issues, because I think, speaking for myself, I'm very committed to having us do things better. Sometimes we set up these processes because somebody, frankly, screwed up and we're trying to avoid it in the future, but then the processes become onerous and burdensome. And you're absolutely right. When we hit an emergency, sometimes you just got to go in and fix it, and then to be hamstrung doesn't.

Supervisor Eddie Crandell from Lake County, Arnoldo Rodriguez, City Manager for the City of Madera, and I understand he's going to be on the line, Kacey Lizon, Deputy Executive Director for the Sacramento Area Council of Governments, Carol Kim, Business Manager for the San Diego County Building and Construction Trades Council, and Christopher Sullivan, the Pre-Construction Project Manager for Sundt. Welcome. Thank you so much for joining us here today. We'll start off with Supervisor Eddie Crandell from Lake County.

Wonderful. There we go. Chair Caballero and Committee Members, thank you for having me here. I'm very humbled and honored to come here on behalf of Lake County. I serve District Three of Lake County. If you're not familiar, it's right above Napa Valley. We surround a lake. We have 65,000 citizens that live in Lake County. And I wanted to state that the panel before, I feel like even though I worked on a lot of this, I feel like they said everything.

So I'm just going to go on to other specifics in regards to what we struggle with in Lake County. With the assistance of our public works water resources director, public services director, and our special districts administrator, they helped me kind of come up with a lot of this stuff. And so I wanted to highlight that where it states with regard to weathering the storm, we know all of the issues with wildfires. Lake County has been stricken with eight years at least, with continuous wildfires.

And now, we did ask for water since we're in a drought, and now it's like, Mother Nature is like, here you go. So now we're in a situation where floods are more likely and our tributaries are really full of sediment and vegetation, and then we're struggling with the permits. And so a lot of our resources are always triaged to the most recent emergency with staff being a struggle. We all know that whole dynamic. So I'd like to go on to where it states how we can better prepare as local governments, and I'm interpreting that as 'us,' as counties.

One of the things we did as a county with regard to the wildfires is we've created what's called the Lake County Risk Reduction Authority, which is in essence like a JPA that has comprised of a County of Lake Board of Supervisor--Lake County Watershed Protection District Supervisor, fire protection district with fire chiefs, public water systems, incorporated cities, and seven tribal nations, which are in Lake County as well. And so it's committed to a number of different initiatives which revolve around wildfire.

But I will say the last thing about it is it intends to pursue grant funding and donations along with prospective alliances with California Earthquake Authority, Blue Ribbon Commission, and local tribes. And so, Blue Ribbon Committee--they said Commission, but it's Committee--and as you know, it's AB 707, which was implemented in 2017. And so Cecilia Aguiar-Curry, our Assemblywoman, had helped get that Blue Ribbon Committee, which is rehabilitation of Clear Lake.

And so one of the solutions that I have is that that's what Lake County had implemented, but the struggle is, of course, keeping someone on staff and obtaining the grant funding. Now, one of the other solutions I have as an elected official, as you all know, don't like to come with gripes and no solution. I don't know if my solution has been already said and I heard with regard to what is its REAP. It seems like it's very similar.

In my previous service, I was a tribal chairman for the Robinson Rancheria of Pomo Indians, which is in my district. And in that, we had what's called tribal set-aside. Now, tribal set-aside was always--really, we were really grateful for that. And if there was another tribe that received it, we felt like we had an opportunity, unless it was a bigger tribe that has the resources, like Pechanga and Graton and all them. It's like, 'wait; you guys have the resources.'

Which is really similar to rural counties and urban counties, and so when I came into this position, I realized, wow, this is so similar. And so if there was something along the lines where it could be looked at like a rural set-aside, I think that would be a more streamlined to doing so. I do like the idea of loans that was mentioned before. And so I think that with that, it would ensure that--I'm sorry--well, it would ensure--

Yeah, I lost it. So I'm just going to say it would give the rural counties a better opportunity to obtain some funding to take care of these things. And the rest basically has already been said. So I don't want to go too far into it, and I want to give my colleagues an opportunity to speak as well.

Thank you so much. Appreciate that, and the rural set-aside makes a lot of sense, so appreciate that. They can compete against each other as opposed to the big cities. Next, I'd like to turn the mic over to Kacey Lizon, Deputy Executive Director.

Thank you, Chair Caballero and Members of the Governance and Finance Committee. I am Kacey Lizon, Deputy Executive Director for Planning and Programs at the Sacramento Area Council of Government or SACOG. We are very proud to be the region that hosts the state capital of California. What I do want to lay out for you is that we are a two and a half million person region, and 80 percent approximately of our land area is in agriculture and forest, so just to ground us in, I think all of the comments that you've been hearing so far today.

About 20 percent then of our region's land area is, I would say, suburban first and then a little bit of urban, which you see in Downtown Sacramento, and then our rural communities. Six cities and 22 counties. So very much everything that I've been hearing today has resonated with our experience. You're probably familiar with SACOG, given our role in regional transportation and housing planning in the Sacramento region.

And today I'm honored to be here to talk to you about our efforts to promote location-efficient, community revitalizing growth by helping our member agencies plan and implement the other necessary infrastructure, in addition to transportation to support housing development. In the Sacramento region, achieving our state greenhouse gas reduction will mean intensifying housing development in existing communities. That is a very large part of our strategy.

With the support of all 28 cities and counties of SACOG, we've created the Green Means Go program, which I will talk about. I've got some handouts for that. That program is to accelerate infill development and reduce driving. 26 of our 28 jurisdictions--so those jurisdictions are rural, urban, and suburban jurisdictions--26 of them have designated green zones that can accommodate housing consistent with our regional sustainable community strategy. Designating means that they have locally identified areas where they have policies in place.

They have at various levels of planning to encourage infill housing development, and those areas in our sustainable community strategy, if that growth occurs, will actually reduce driving, reduce vehicle miles traveled over the time period of our plan.

In designating Green Means Go, the feedback that we heard--or in designing it, actually--the feedback we heard from developers and local governments alike was that in our region, the number one hurdle to advancing climate-smart housing was the cost to upgrade water, sewer, drainage, and the other underground infrastructure upgrades that are needed to develop in infill areas. These green zones are areas along smaller town main streets. They are older suburban commercial corridors of which our region has a vast amount.

They are throughout our six-county region. The infrastructure in these green zones today can be over 50 years old and they were originally built to support single story, low-intensity commercial buildings, sometimes even lower intensity industrial buildings, and lots and lots of parking. So they are not ready for the mixed infill housing that we are trying to bring online. Making that housing growth and community revitalization pencil often requires all upgrades to that.

And we estimate that that's about 400 million dollars of public investment and infrastructure upgrades that's needed to catalyze the infill development that's envisioned in all of these communities across our region. While the number is daunting, our early investments are showing some promise. And this is where I want to hearken back to REAP 2.0. SACOG is investing our REAP 2.0 dollars into funding in our green zones. And I also have a handout for you that highlights what we are doing with that funding.

So 26.4 million dollars of our investment is going into capital projects in locally designated green zones. The ones that are receiving the funding have 7,900 acres of infill opportunity and of that, roughly 5,000 of those acres are high-density, meaning that they are designated for 30 unit dwelling units per acre or more. The total planned homes within those green zones that have received funding is nearly 11,000 homes.

And based on housing element inventories, that would mean 3,700 moderate income units and 7,200 lower income units that could come online with additional investment. So we consider REAP 2.0 a down payment with real near-term benefits. We are concerned, however, that many state programs, as you've heard earlier today, aren't well calibrated for the housing and infrastructure needs in the SACOG region. We are inland California market and because of that, those programs don't work.

A lot of times the funding programs want to be the first money in to a corridor or district, and really we need--I'm sorry--they want to be the last money in. And we are seeking for these funding programs to be the first money in to really again catalyze, attract, work with local efforts and local funding to bring in the development that we want to see.

Because the funding programs right now want to be the last money in to a development, that means that cash-strapped local governments, they need to do the upfront planning and infrastructure upgrades to attract a developer, which again is very difficult to do in an inland California market. It's also difficult when you have a staff-strapped local government trying to do that outreach. So all of this is not possible without catalyst funding from the state. Ultimately as well, local governments need tools to finance ongoing infrastructure upgrades in these areas because even the catalyst alone is important.

But there will be, as we've heard, the need for maintenance and repair and honestly ongoing upgrades that we need to do as our communities evolve. So I have, as I said, provided some background materials. I just want to make sure to show what they are, about the program itself, as well as how we are working with the state to fund through REAP 2.0, the first set of projects. Thank you.

Thank you very much. Thank you for the handouts as well. Christopher Sullivan.

Hi. Thanks for having me. My name is Chris Sullivan. I am with Sundt Construction and I'm also the Legislative Chair for the Design Build Institute of America, Western Pacific Region. The Design Build Institute of America is made up of general contractors, designers, and what we call owners, which would be on the government side as well. And that's advocacy for design-build.

I had--a little bit about me, I was a practicing architect for 12 years before I went into construction, and I've been in construction for another 12 years. I've spent probably 90 percent of my career working on whether it's federal, state, local, and city government projects. I'm familiar with all sorts of delivery methods, all sorts of contracts and procurement methods from those agencies. I've primarily worked in the southwest, mostly California, some in Arizona, and some in Nevada.

And a quick--Sundt, our company, we're a 133-year-old construction company. We're one of the biggest in the country. I think we do about two billion a year. We have about 2,000 employees throughout the southwest. Only area we don't go is the northeast. We have four divisions, a building group which does vertical construction, so buildings, we have a transportation division, which does roads, bridges, the like. And we have industrial, which does wastewater treatment plants and semiconductors, mining, manufacturing, things like that.

And we also have a renewable, which does large-format PV. So with all of that, the point is that I've had a lot of experience working with agencies and getting things built, and I just want to share some observations. And one of the things I've seen, whether it's on the federal side or the state or the local side, is that there's processes in place to prevent nepotism, right? It's taxpayer dollars.

And these processes exist to prevent from just giving a contract to your buddy, which I think separates us in the United States from a lot of other places, which is a really great thing. And as a taxpayer, I appreciate that. And as a contractor, general contractor, I appreciate that because the market is fair. I can compete, right?

The consequence to those, whether it be from public contracting code or the federal--they have the FARS, which is a giant book like this--or the education code, is that those projects become a very big ship that's very hard to steer. It's very hard to move. There's a lot of paperwork. And so in a traditional method of design-bid-build--I call it hard bid where I come from--you identify a problem here.

You go out for funding on your side for a very lengthy period, usually a year. It could be two years, sometimes five years. Then once the funding is available, you go into design. Design takes usually at least a year to get something designed. There's agency reviews, there's quite a process. And then I come in way over here at the very end, where I put a number to it and I bid it, and then it goes out and we go and build it.

Well, the time that's passed, the need that was way over here has likely changed. Right? So by the time I get to here, if a change needs to be made, and the change costs money, as it often does, you have to sometimes go all the way back to the beginning of that process. It's extremely inefficient. The other thing that we've noticed now, and you may be aware, there's globalization and the changing markets, right?

So everything is sort of tied together now to the point where if there's a pandemic or a war or even if a ship gets stuck in a canal somewhere, the supply chain--because a widget gets mined in Italy and processed in China and then comes to New York--everything gets stuck and suddenly everything stops and prices skyrocket. So we're seeing in the industry huge market swings like we've never seen ever before. Steel will triple double.

I think someone mentioned earlier, a gentleman from Tulare, that there's lead times on things that we can't get. So when I build a new building right now, I can't get switch gear, which is the electrical box that goes on the outside of the building. It's got a one-year lead time. So we're trying to rent switch gear to put onto buildings to get them operational until we can get the actual stuff in. That's where we're at right now.

The consequence of all of this is that because of the slow moving way that any sort of federal funds or state or local funds work, that's an added risk to the contractor. So when we see risk, we put money on it, which, again, spikes costs even more. So, to combat these things, to help make, basically the government more nimble, there is some enabling legislation.

Design-build has been around, I think, 20, maybe 30 years now, but design-build, it does improve that process where now I am designing and building it at the same time. However, I give you the price still at the very early stages. And so I can't tweak that price, again, without going back to that original all the way back to the procurement side.

So Progressive Design-Build, which is sort of the next evolution of that, makes it more nimble to where there is--during that design phase, the contractor is working with everyone real-time and pricing is there real-time so that we can steer it, so that if a need arises or changes, we can be nimble and say, 'well, that's going to cost ten million dollars, but if we do it this way, it's five million,' and we can adjust to the market in a real-time way.

It also gives, I think someone mentioned earlier, too, there's an off-ramp. So if the price becomes too prohibitive, there is an off-ramp to either shelve the project or go to a general contractor. And I think that preserves the idea of the nepotism, that you're not just piling on money. It's a safeguard, and I think that's really beneficial as well.

So, really, to me, Progressive Design-Build, it combines the best of all of those things to make the government more nimble, which is really beneficial for someone from my world. So thank you very much.

Thank you very much. I appreciate your testimony here today. We'll move on to the teleconference line, and we have a couple of participants on the teleconference line. If we could start with Arnaldo Rodriguez, City Manager, City of Madera.

Senator Caballero, good morning. Good morning.

Good morning.

My name is Arnoldo Rodriguez. As Senator Caballero stated, I serve as the City Manager for the City of Madera. The first 16 years of my career, I spent as a city planner. So a lot of the issues that have been discussed today, I feel like I have intimate knowledge of some of the challenges at the local level. So can just a little bit of context. The City of Madera, we're 66,000 people located at the heart of California in the San Joaquin Valley.

We're obviously one of the most financially distressed areas, not only in the state, but in the country. So a lot of the items that have been discussed today, they directly impact the City of Madera. Some of the issues that I'll be talking about today are specific to Madera. However, I think that a lot of other regions within the state can directly relate to them, especially in the Salinas Valley, Coachella Valley, and the San Joaquin Valley stretching from Kern County all the way up to Chico.

So, a couple of things: one of the biggest challenges that I see as we're growing as a state is we have a lot of aging infrastructure in our communities. I wish I could say that Madera is the only community with that, but I speak with my colleagues around the state. They feel the same way. Some of that infrastructure is controlled at the local level. However, some of it is not. For example, PG&E serves the City of Madera.

I understand that there's other utility companies that provide some--kind of serve other areas. Another big challenge is that we have increasing expenses, but our revenues have not kept pace with either inflation or simply the cost of doing business. Development impact fees, as has been alluded to earlier, cannot mitigate existing deficiencies in an infrastructure.

So, while I think a lot of new construction will financially take care of itself because of CFDs or Mello-Roos districts, the challenge that a lot of us face is that most of the neighborhoods that were built prior to 2000 and are not subject to Mello-Roos or CFDs, so a lot of our housing stock is older, especially in the Central Valley, and we cannot tax our way out of it or raise these capacity up.

The other challenge that we have is that economically depressed areas such as Madera and the Central Valley tend to be the most impacted because it's all proportional. So, a couple of things that I do want to highlight in terms of some major infrastructure challenges that we're experiencing right now, for example, in the City of Madera, PG&E lacks the capacity to add additional users. So while we understand that some other communities, there's a lag between when PG&E can serve them.

Here in the City of Madera, we cannot add additional users, specifically industrial users. PG&E's notified us, we have met with the CPUC. They simply cannot add additional users. So right now, the City of Madera, we are at a standstill. We, for the most part, have no industrial development, with the exception of one or two buildings that are being constructed right now. But we cannot add new users.

So you have one of the most economically depressed regions in the State of California, and we cannot grow and we cannot create jobs in the city. And that's extremely frustrating. There's a lot of frustration in the community. Site selectors have all but ignored us to this point. They're no longer even contacting us. About a year ago, it was still, when do you expect to have capacity? Right now, we are telling people, by the end of 2025. If we're lucky, 2026. We're keeping our fingers crossed.

The other challenge that we have, while it's not necessarily a city issue, the health care industry is suffering. We recently lost our only acute health care hospital or adult--kind of service for adults specifically, in Madera. Our local hospital with 106 beds recently filed bankruptcy in the past week. They closed on New Year's Eve. And so that's another challenge that's going to be pressing, I think a lot of us collectively, throughout the state. That's only the private infrastructure.

In terms of the public infrastructure, we obviously have water challenges. We are more than welcome to have recharge basins, but they're extremely expensive. In the Central Valley, a lot like the City of Tulare, as was mentioned earlier, we rely 100 percent on our potable water comes from groundwater. The challenge with that is we have to deplete aquifers as the water table drops. It obviously cost more to pump and to treat the water, which is a direct increase for our ratepayers.

And while water can use overall has been decreasing over the past couple of years per user, the challenge that we have is we continue to deplete it at a faster rate that we're replenishing it. The other challenge that we're having is we are being required to construct additional capacity in terms of above-ground water tanks to ensure that we have adequate water pressure to meet state standards, and then also for fire suppression. Those systems are extremely expensive.

For example, we are currently in the process of designing a 20 million dollar above-ground water storage tank, and that's extremely expensive for a community of 66,000 people. That's, again, largely impoverished. In terms of wastewater, I don't think Madera is the lone city in this position.

A lot of our infrastructure that dates back to the 1970s or prior to that--which, again, is the vast majority of the housing stock, not only in Madera, but I think the state--it's degrading at a faster pace than can be replaced. Just two months ago, actually, on January the third, the city's only sewer trunk main, which carries approximately five million gallons of raw sewage per day, collapsed in two areas.

We were extremely fortunate that we were able to avert a disaster, and one of the two water lines was constructed in 1977. So while it sounds like it's a long time ago, again, 1977's not that long ago. And in terms of wastewater, I think there's a lot of cities like Madera that we are more than willing to construct recycled water wastewater treatment plants.

The challenge is they're cost-prohibitive, and you need a lot of technical expertise, and a city like Madera, we're not in a position to retain that or to recruit someone to assist us with that. Some of the drainage, and this was alluded to earlier, I think, the past couple of days or weeks, some of us are quickly forgetting that we're still in a drought. We've been in a drought for an extremely long period of time.

While I think--it's been a very good reminder, though, that we need additional storage capacity, and that's obviously going to take a tremendous effort at the state level, but I think at the local level, we can do a lot of things, too. With that being said, though, it's going to come down to cost. The other thing that I think it's reminded us of, that we have undersized infrastructure or aging infrastructure that's led to a lot of localized flooding.

This is an enormous loss due to damage. The closure of businesses here in Madera; we're extremely lucky that we only had five businesses, and I say only because it could have been significantly more. But the challenge with that is our storm response is extremely labor-intensive. We have deployed our city resources 24/7 around the clock. And again, while we're fortunate we can do that, it's extremely expensive. And again, we have not experienced the same level of rain as some of our surrounding communities have here locally.

Some of the roads as well. Obviously, and this was alluded to earlier in terms of just roads overall, but with the recent storms, we're going to need a lot more resources that are currently available to us to repair the potholes and the damage that's upgrading or replacing bridges. Fortunately for the City of Madera, we have not had that. However, with that being said, though, we have a lot of dated bridges in our community. We lack bridges.

We lack a lot of sidewalks, curbs, gutters, street lights, especially in bypass neighborhoods. Again, these are the neighborhoods that were constructed from the 1920s all the way through the 70s. A lot of those lack those resources. So when we talk about safe routes to school, while we want to be good partners, the challenge is when you're going into older neighborhoods, it's very challenging. You have trees that we have to repair, OverLine, either utility lines or cable lines. So that's very challenging.

The other item is that funding for sidewalk repair is nonexistent. While there are grants for new sidewalks, there are no funding opportunities to repair sidewalks. And so going back to new communities or, say, greenfield development versus infill, greenfield development will take care of itself as part of the process. The challenge we have, I think, for a lot of us that are on this call is existing neighborhoods that are largely bypassed by private development.

We recently applied for and were awarded half a million dollars in CDBG funding. We're an entitlement city. We receive about one million a year. So for one year, we took half of that just for sidewalk repair and low income neighborhoods. The challenge is, we probably have to multiply that several times over to try to simply repair some of the buckled sidewalks we have in our community.

Some of the other challenges, some of these are positive things, I think, for the state, and they're probably long overdue. The challenge--and the only challenge that I see with them is that they do lead to increases in rates. For example, Senate Bill 1383--long overdue. The challenge with that that I see is that it did lead to a direct increase in rates for the ratepayer. So, a couple of things.

When we're talking about low income neighborhoods such as Madera, every time we try to do something, it leads to one thing, and that's the increases in rates. And just a broad overview: these are all subject to Proposition 218. We have solid waste. We have water. We have wastewater, drainage, and street sweeping. Very anecdotally, the City of Madera, this past summer, we prepared a Proposition 218 study. The City of Madera received 23 million dollars in ARPA funding. We allocated 100 percent of that to sewer and water.

So, again, 100 percent of that went to backbone infrastructure, not to address new growth areas, but to go into the older parts of the community that, again, have infrastructure. Even with that, our rates still increased. If we had not done that, our rates would have increased close to 29 percent, if I recall. We were able to mitigate a lot of that, but again, SB 1383 was the large majority of that, and that was the cost for the increase. So a lot has been talked about grants.

I think those are excellent. The challenge for communities like ours, they're tempting to, and the other challenge is that some grants do require pre-planning. And, again, that's something that's very difficult for communities such as Madera. Therefore, at times, not always, but sometimes, we're simply not eligible because of lack of pre-planning. And while we want to do it, we simply don't have the resources. So every year, we can only apply for a couple of grants because, again, they are time-consuming.

One thing that I would ask is that as the state moves forward--some grants are very good at doing this, others, not so much--is that they be clear on the front end if they're for planning grants or project grants. The City of Madera, we recently applied for a grant for a project of five million dollars. Only 35 million was awarded to the state. 30 million went to Long Beach for a capital. It was for a construction project.

The remaining five or so million was all for planning grants. But the biggest challenge is that I think local communities such as Madera simply don't have the technical expertise to be competitive in some of these grants that oftentimes go to some of the more developed communities or some of the coastal communities. A couple of other things that I haven't mentioned, but I did just simply want to highlight parks.

Mr. Rodriguez, if you could do it quickly, that'd be great.

Absolutely. We have state highways, both capacity maintenance, rail, lack of grade separation that divide our communities, in particular, older underrepresented communities, housing and schools, potential solutions, forgivable loans or matching funds, having the state provide direct technical expertise to underserved communities, and then if grants could potentially be formula-based and the formula bases could come using HUD formulas or any other type of formula. So with that, thank you very much for your time.

Thank you. Thank you very much for that. I appreciate--since you're located in my district, I have a complete list of everything that you've talked about. We've talked about this in the past, so it's not new to me, and I appreciate your testimony here today. Our next witness or presenter is Carol Kim, the Business Manager for the San Diego County Building and Construction Trades Council. Welcome.

Thank you so much. Thank you, Senators. I appreciate the opportunity to speak on behalf of our labor unions and the folks who are actually building this infrastructure in a lot of places across the state. As the leader of a local Building Trades Council, my focus and concerns are largely around job quality and the labor standards that allow workers who are on these infrastructure projects to have good quality jobs, which, of course, support a more resilient economy overall.

But I think when we're talking about this particular topic and issue, these issues, we should all be clear that the entire economy--public safety, public health, resilience to extreme weather and other climate change--all of this relies on functional infrastructure. So it's a compounding investment that goes beyond jobs, and that's an opportunity to also choose a more resilient economy in the meantime.

I think that all of the people who've spoken today have kind of hit a lot of the things I'm going to mention, but I'm going to be concise. Essentially, we need to move forward with urgency to address public infrastructure. We've talked about things like water projects, including stormwater collection. These have taken years to move forward, and it's a real problem, and we're seeing it right now in a lot of places.

It's pouring rain here in San Diego, and definitely there's a lot of flooding and all kinds of other concerns. The combination of failing infrastructure, more extreme weather, and underfunding means too many localities are chasing their tails just to keep up with patches to keep the infrastructure barely usable when serious investment in upgrades to make that crumbling infrastructure work right and hold up to storms in the first place would be safer and more cost-effective.

It's similar to the incredible expense of being poor that many of us have heard about. You can't ever scrape enough together to afford quality for necessary basics, so you ultimately end up spending more on poorly made, low-quality stop gaps. And I think our local government agencies are really struggling with that, and a lot of that has to do with things that they have all mentioned, which really is around the planning.

I think we also need to note that when we talk about the need for the greater housing development, which has taken up a lot of discussion on these panels, this panel, and the ones before me, the lack of modern, robust infrastructure means that locally, our governments are also coping with high amounts of resident and constituency pushback against densification and the development of needed housing. The advocacy of NIMBY activists is real and creates barriers of political will to drive the changes and turns that we need.

And that's largely due to the fact that they always blame infrastructure. We don't have the infrastructure to support more people in this community, and they're not completely wrong. We know that the infrastructure is coming at some point, but to be able to develop and add hundreds, sometimes thousands and tens of thousands of folks into a new neighborhood can often really feel like we're putting the cart before the horse, and the local residents definitely feel that and believe it.

And they put the pressure on local elected officials and policymakers to not make the choices they need to get that housing built and built well. So it would be much better to be able to secure funding and proactively structure priorities via state and local government than wait for all of these things to happen and slow things down even further.

I want to just note, too, that one of the things that we often see here locally--and I know in other places--one of the barriers is the fact that the lack of planning and the lack of ability to actually apply for these grants and get these projects moving and constructed means that we end up sometimes with lawsuits that force governments to do that.

Local governments to actually engage in the work, and in that process, we also see that work happening and basically the courts deciding how these infrastructure projects are going to be built or when and where, et cetera, in really suboptimal ways, ways that don't always make sense for the local landscape, et cetera, and the timing that's necessary. So we shouldn't be prioritizing the types of projects or even overall budgeting needs based on what lawsuits come first, right?

If lawsuits go through before the funding does, we could see catastrophic budget impacts at the municipal level all over the place because those dollars will be required to be pulled out of General Funds, et cetera. The other last thing I would note is there seems to be a reasonable amount of funding that's available that gets left on the table because, again, the lack of capacity around planning--really at the local agency level--is a real problem and a real barrier.

For instance, there's a lot of available funding for indoor air quality in schools right now. While our unions are working with other labor groups to drive applications for that funding and again, get those projects moving, it's the planning that's required to get those dollars converted into actual infrastructure that happens within the agencies themselves that really are the barrier, the fact that we can't do that work. And then also from a purely job--like jobs and man, woman--

Let me interrupt you right there. Could you explain how that works? This is new information, and I'd like to make sure we understand it. Yeah. I'm not sure I can repeat what you were saying, but it had to do with indoor air quality for schools and the lack of something that leads to the--is it the lack of planning?

The lack of agency capacity to do the planning, which includes the grant writing to know that the grants exist, to do the grant writing to actually be able to structure the projects for the grants that will allow them to successfully receive the funding, that kind of thing. Yeah.

At the schools, is what you're talking about?

At the school district level. Yes. Public agency level. Yeah. So there's that kind of concern. And then just from going back to what I was--my last point, is that from a jobs and man-power--and I'm going to say man, woman, and person power because we're trying to be very inclusive and bring more folks in--when we know ahead of time that these projects are funded and are keyed into the--and when we are keyed into the planning process and phasing for this work in partnership with our local governments and our local government agencies, we can also project for the training and apprenticeship capacity needs that need to happen to make sure that there are enough skilled and trained workers ready to actually construct these projects locally.

And, of course, to be able to bring more people from underrepresented and impacted communities into these really good career opportunities. So the good news is there's a lot of opportunity here. The bad news is there's a lot of challenges that are really about more capacity, both inside and outside of government that will allow us to actually successfully know about these funds, apply for the funds, and move the projects quickly, tamp down resident and community concerns regarding disruptions and some of the other challenges that exist, and allow us to build the housing and the infrastructure necessary to keep all of our neighborhoods in cities and regions successful and healthy.

Thank you very much for your testimony today. Very insightful, and I appreciate the comment that you made in regards to the lack of the modern infrastructure leading to the rise of the NIMBY movement and then putting us behind the eight ball, right, because we're telling them, 'local government do it,' and local government saying, 'yeah, but are not standing up in front of people at our council meeting.' So thank you for that insight. So I'm going to see if we have any questions of the panel from the Committee. Any questions?

I had a couple of questions.

What I heard you say, Ms. Kim, is that in regards to, for example, the indoor air quality for schools, if that grant had included technical assistance to help schools fill out an application, that that would have been helpful so that you don't end up, because we see this with rural communities that have limited resources in their budgets, and I have one community, one city in my district, that their budget is $750,000, and 400 of it goes for a contract with the sheriff to patrol every once in a while.

They don't have engineers on staff. As a matter of fact, they had very limited staffing to be able to find the grant, do a grant application, and then monitor it, which means answer any phone calls and be available. And so having that technical expertise as part of the grant proposal is really important. One of the reasons I've been asking for maps of how grants end up going out is so that we can get a better understanding of what communities are actually getting the grant funds.

And my observation in many of these grants is that they're the better resourced communities that get the grants and the lesser resourced communities don't get the grants. And so I appreciate that comment about the indoor air quality.

Yeah, it's a good example of the kind of thing that we see everywhere, and we do need more technical assistance. And we also, beyond that, the technical assistance from the outside is helpful. But as you noted, even having supports, somebody earlier mentioned catalyst grants and planning grants and those kinds of grants that will actually provide resources for internal staff that can actually do this work on behalf of those agencies will be really helpful, because it's not just the indoor air quality funding that's out there.

We're talking about all kinds of infrastructure funding that could be applied for and bought in and deployed successfully for communities that just, especially in small areas, as small cities, as you've noted, as well as other smaller public agencies, such as water districts, such as school districts, such as those types of areas, and public government entities, they just lack those resources.

Absolutely. Senator Blakespear.

Yes. Thank you. Thank you to this panel for speaking today. A lot of really interesting things, and it's great. Mr. Crandall, the connections you were making between the leadership experiences you've had in the past with your tribal experience and now as a county Board of Supervisor, I'm sure those insights happen all the time, and it'll be great to see what you're able to accomplish given those roles. I wanted to just also recognize Ms. Kim.

She's a bright light in our County of San Diego, and it's great to have her here at this panel. Thank you for coming. One of the things that she said that I think is really impactful is the reality that if we force lawsuits to drive what we spend General Fund money on, that it really upends all of the planning process and all of the prioritizing.

And it basically allows one particular crisis to drive all sorts of other decisions about the way that cities and counties spend money. You see this in the homelessness area particularly I think. So, trying to set up our state systems so that our local governments are better able to accomplish the goals, build the housing, build the infrastructure that they want to do and streamline that process is just so important.

And I think we might be seeing more and more of that litigation if we don't really try to get in front of that. So I appreciate you bringing that up, Ms. Kim.

Well, I want to agree with you. Where we've seen it play out in many regions of the state is in CEQA litigation, where communities spend years going through a CEQA analysis and then a CEQA lawsuit is filed that upends all of the planning that went on for years and forces local government to spend money and many times it's not really necessary. So, Senator Durazo, thank you.

Thank you, Madam Chair, just a question for Ms. Kim.

You mentioned with regards to the workforce and having sufficient workforce ready and available to carry on the work of building the infrastructure. And I've heard from folks that there is a quote unquote, shortage of skilled and trained construction workers in certain parts of the state, which, of course then becomes the reason why certain labor standards would not be included in those infrastructure projects. So how would you address that? How would you respond to that?

And also, how do we do the planning for the workforce that's going to be needed for all of these? What is worked? What can we do to make sure that we have the workforce and we plan for the workforce? How do we do that? Your opinion? Thank you.

Thank you for the question, Senator. So I would note that I don't think there's a shortage of skilled and trained workers as it is. I believe that they exist. There's just a shortage of skilled and trained workers who are willing to work for Low paying jobs, non prevailing wage jobs, jobs that don't include health care, et cetera.

So when contractors and developers often say and make the claims that there are just worker shortages everywhere, and that's why we need to water down the standards, it's actually not that. It's that there's worker shortages for people willing to work for what they're willing to pay. And so that's something that we're seeing in all industries everywhere, including restaurants and hospitality, et cetera. So this is something that it's a resurgence of workers, I think, understanding the value of their labor, et cetera.

But as to ensuring that more people have opportunity to training and meaningful training that will actually lead to portable credentials that will allow them to work as journeymen across the country and locally, et cetera, I think the fact that if we are able to again, project what kinds of projects, how many jobs, et cetera, what scopes they are, what trades we're going to need, we can actually really work closely, hand in glove with our local communities, our local government agencies, our state agencies, and each other to be able to bring in folks into our apprenticeship programs and get them trained up.

And the big thing that I think that we need to always remember is that apprenticeship starts with a job and it ends with the job. If you don't have a job to dispatch an apprentice to, and these have to be prevailing wage jobs, then.

You can't actually have an apprenticeship. So it's not just coursework, as you all know. So the fact is that we won't bring in people if we can't guarantee that we can educate them, train them, and journey them out of their apprenticeship programs in a timely manner, because our interests, of course, we represent the interests of those workers directly. Our apprenticeship programs do not exist just to qualify us for prevailing wage public works jobs and contracts.

We actually have those for the reason of making sure that we're training the next generation of skilled construction workers. And we want to ensure that those people have opportunities all the way through their apprenticeship and are able to complete their apprenticeship programs in a timely manner, so that if you start for a mechanical trade apprenticeship that says you're going to be finished in five years, you'll finish in five years.

If you start with an iron workers apprenticeship that says you're finished in four years, you'll be finished in four years, roofers in three and a half. Okay, three and a half years, laborers in two. Definitely two years.

But the whole point being that we don't want you to come into an apprenticeship program and stay like a fourth period apprentice for seven years and never actually move through it because there's not enough prevailing wage on the job training hours to be able to get you through the programming and graduated out. So all this to say, in terms of support.

One, we need to know what jobs are available, whether or not PLAs are a tremendous tool for that, because if we have programmatic PLAs in place with our various public agencies, then we can actually plan for the number of projects that are coming down the pipe and know how many workers will need to be, what opportunities we have to bring in new workers from impacted communities.

And the other component too is that the funding that's coming through the state currently for programs like HRCC grants, for instance, the high road construction career grants, those are incredibly valuable.

Here in San Diego, we have had a lot of success with our HRCC funded MC3 grants, and those are the multi craft core curriculum grants which allow us to, again, it's their apprenticeship readiness grants and they allow us to bring in folks, give them experience and exposure to the construction industry, introduce them to all the various trades and those things. So continuing the funding and resources for those types of programs are also a huge asset and really help us address those needs.

Thank you very much for those comments. I just want to say to Supervisor Crandall, you talked about rural set asides. I'm a big fan of rural set asides. If you see a grant program where you feel like there needs to be a set aside, particularly in that grant program, I would appreciate if you would contact the Committee.

And I say that because we have established, well, we have many, many grant programs, and although we have our favorites among ourselves in terms of which ones our local communities have been asking for, if you've got a need and you see that rural communities aren't getting their fair share, if you would let us know, that would be really terrifically important because then as part of our budget exercise, we can make sure that there is a rural carve out and help from the local level would be really great. If you're willing to do that.

I am, Madam Chair.

That'd be terrific. That would be great. And then for Ms. Lazanne, I found it interesting that I would say that the Sacramento regional area is, in terms of the Central Valley, is one of the better resourced MPOs and that they have done some really fantastic work over the past number of years. But I was intrigued by your statement that you find it really hard to get the first dollars as opposed to the last dollars.

And so have any of the new state programs been beneficial for that? Because that's one of the comments that I've heard from the local governments in my region.

Reap 2.0 is the first program for the infrastructure we're talking about, right? Like the water, the sewer, et cetera. That's the first program that has provided the flexibility to be first money in. And so that's what we're trying to demonstrate the value of that with it. We have had ongoing conversations with HCD hoping that other programs they have for infill can move towards first dollar in.

Okay, that's helpful because my experience with the IIG is that it mostly goes to the big cities. So we've been trying to figure out how to craft solutions that will provide the catalyst for getting the infrastructure in that we need to actually build the housing that we need. If that ends up working well, let us know so that it's obviously a Fund that we don't always have the resources to put infrastructure money out there, but when we can, it becomes really important.

So I'd appreciate it if you could stay in contact with us and let us know how that works in terms of the entire region.

Absolutely. Yes. If I may add one other, because we ask our local agencies every time an IIG call comes out, like if they're looking and what are the issues? And so in addition to that, first money, it's a chicken and egg situation. In addition to that, what we've also heard is that there's a 300 housing unit minimum, which is challenging in what are mostly our suburban and our smaller communities.

If they're trying to build in an area, 300 units basically says you have to have a pretty strong market already. And that's the challenge of the inland market and the smaller markets.

Well, and I appreciate that because in many of the smaller communities, they're looking at 10 to 20 units is what they'd like to get started. And as you know, that controls whether you get the grocery store or the pharmacy in your community. And so just getting that started becomes really important. And to have a 300 minimum, that means none of my smaller cities would actually be able to access those resources. So thank you for that.

And Mr. Sunt, I want to say thank you very much for your very elegant explanation of the different processes that the state has used and local government as well. That sometimes is difficult for people to understand, but you made it very understandable. And I guess the question I have, since you have the look nationwide, is, are more communities in terms of government agencies looking towards the different build models in terms of contracting? And is it something that the state ought to consider as well?

Yeah, the short answer is yes. So DBI has a national branch as well, and I sit in on those, and there's legislation we track across the country. Progressive design, build. The name progressive is sort of politically charged. It has nothing to do with anything other than it's a progression. And so that's a thing that we combat. It's unfortunate, but it is taking off because it allows that flexibility.

It really combines CM at risk, which is another form and design build to take the best of both worlds. And so, yes, we are seeing it nationwide. Even the Federal Government has started to look at versions of it. They always name it something else and have a whole totally different way of doing it. But they're even looking at because they have the same problems as far as the lead times and everything else. So providing that flexibility and going forward, the markets aren't changing.

In fact, it's probably going to get worse. So providing that flexibility to a project, to a source of money, I think is going to be critical.

That's great. Well, thank you for that and thank you for your testimony here today. And then lastly, Mr. Rodriguez, in terms of the state resources that are available, my question is, what's the greatest need that you see? The difficulty is you're being asked to do everything that the state wants as a priority, and you're just struggling to get your wastewater treatment facility up and running.

So if you had a magic wand and could make something happen, what would be the system or the program that you would like to be able to access resources from? And how can we be helpful to make that happen?

Thank you, chair. I think if you would have asked me this three months ago, I would have told you a hospital. If you would have asked me in January, I would have told you more funding for aging infrastructure specific to sewer lines. If you ask me today, I'm going to say drainage because of some of the storms that we're having. I think when I look at the state holistically, I would say one of the biggest challenges we're going to have is water, specifically in the Central Valley Sigma.

I think if there could potentially be funding to help develop and Fund wastewater treatment plans to get purple pipe in the ground, I think that solves a lot of problems, and I think it goes to the root of a lot of things. We're talking about building the economy, ensuring long term water supplies, being progressive when it comes to environmental protection, ensuring we have potable water for future generations.

I think that, to me, is probably the most important thing we can do as a state, ensuring our long term water supply. And I think having purple pipe throughout our communities solves a lot of potential issues that I see coming up.

Thank you for that. I appreciate the recitation because every month it seems to be another disaster on the radar screen that we're dealing with. And so I truly appreciate it. You're at the ground level. Well, thank you very much to this panel for your testimony here today. I think it's been really instructive. Now we're going to move on to public comment. So if you'd like to move that, please go ahead and do that.

Anyone who would like to make a comment on today's subject, I want to ask you to please come to the mic in room 2200. Yes, sir. And welcome. You could state your name and I'll give you a minute to make your comment.

Great. Chair Caballero, Vice Chair Seyarto, Senator Durazo, Bo Biller, on behalf of the Design Build Institute of America, thank you for hosting this hearing today. Very informative. Appreciate it. I also want to bring to note for everybody that's in the audience and those that have attended today, they may be Members of the League of Cities or CSAC, or in our case, the Design Build Institute of America. Thank you for taking on SB 706 to authorize progressive design build in the state.

All these groups stand ready to lend our support to you and hopefully add to the purpose of this hearing, and that is to make better alternative delivery methods. And we stand with you to bring that charge forward. Thank you.

Thank you very much. Appreciate it. If I could, sir, let me just make an announcement because I want to make sure that any Members of the public that are not here in the room also have an opportunity to participate. If you could please call in now. You'll dial this toll free number, 877-226-8163 and then when prompted, please use this access code, 694-8930 okay, we're ready for you, sir.

Thank you. Madam Chair and Members, my name is Aaron Avery. I'm speaking today both on behalf of my organization, the California Special Districts Association, as well as the California Municipal Utilities Association. I want to thank the Committee and the Committee staff for taking time out of your day to hear about these critical issues around infrastructure that are faced by local governments.

I also want to thank the Committee staff for working with CSDA and CMUA to allow one of our mutual Members, the Rancho California Water District, to participate as a panelist today. As Mr. Grantham said, we really view ourselves and local government as partners with the state and achieving the state's goals and streamlining and funding appropriately. Critical infrastructure is really a key to making that happen. So we look forward to continuing to work with the Committee to identify those efficiencies and opportunities for funding.

And thank you again for your time. Thank you.

Thank you very much. Is there anyone else that would like to give public testimony in room 2200? If not, we're going to move on to the teleconference line. Mr. Moderator. Our moderator. If you could please prompt individuals.

Ladies and gentlemen, if you have not already done so and you'd like to make a comment, press 10 on your phone's keypad. You'll be provided with your line number. When you hear your line number called, state your name and affiliation for the legislative record. We will go first to line number 12. Line 12, go ahead, please. Sorry about that. Line 12, standby. One moment. Sure. Okay. Your line is now open. Please go ahead.

Good afternoon, chair, Senators, and staff.

My name is David Fenn, senior planner with the City of West Hollywood. Thank you for your timely discussion on challenges with local infrastructure funding. We've identified a fairly simple opportunity to make Value Capture more feasible for local transit funding by aligning state law with newly generous federal tiffia loans that now allow a longer 75 year term for some projects.

As we work to develop a multibillion dollar local funding package for the northern extension of the Metro K line, which will one day be the highest capacity light rail line in the nation, we're pursuing legislation to allow state Value Capture tools like enhanced infrastructure financing districts to take advantage of this longer term. But we don't yet have an author.

We have shared our proposal with your Committee of staff and hope to partner with you all in bringing state law into alignment with this new federal loan provision. A longer term means lower payments for local governments and a longer time period for tax increment revenues from new transit oriented developments to build up after lengthy construction periods.

If you or any of your colleagues might be interested in sponsoring a Bill to make Value Capture and federal financing more feasible for local governments around our state, please reach out to us. Thank you again for your work in this area and appreciate the discussion today.

Thank you so much. Appreciate it.

Line 13, please go ahead.

Good morning. I'm a resident of Los Angeles County, and I've been listening all morning. I've been dealing with a future infrastructure project. Rather than get into details, it's now going out for proposals and all this talk of money and numbers. I'd like to remind everybody here this morning with all the talk of numbers and money. Those numbers mean people, if they build it, they will come. Many places you want to build already have communities that are not being included in these projects.

For instance, this project that they want to come to my neighborhood came a couple of years ago and now they're out looking for money and they've changed the project completely. Not even, the point is, please include community. That's what makes up the State of California. And if you're not going to include community, then what are you really building for? Thank you for your consideration.

Thank you very much for your testimony. I appreciate it very much.

We have no additional respondents in queue at this time.

Very good. I'm going to bring it back to the Committee. Are there any questions? Comments? Yes, Senator Seyarto.

I just have kind of a final comment kind of summarizing what I've heard today. You know, bottom line is infrastructure is really important. It is the key to jobs, answering the issues that we have to jobs, poverty, health, environment and sheltering people. And we need a substantial investment, probably substantially more than we're making today to be able to do that.

But in addition to that, we also need to work on the process because the process that we have created makes it difficult to build anything and let alone the infrastructure we need to build upon those things. So I hope going forward that we hear people loud and clear about the difficulties they are having out there on the ground, trying to get permits, trying to get things pushed through in a fiscally responsible manner for these local agencies and communities, because those are the things.

If we would work on those, there'd be a lot of other issues that we keep firing arrows at that are never going, they're going to go away if we would just take care of some of the base infrastructure needs, like water, flood, energy distribution, roads, things like that. I really appreciate everybody's input today and giving us an optics of what's going on the real ground.

And then I'd also encourage our other agencies, state agencies, et cetera, they talk about not operating in a silo, and I would encourage them to not operate in a silo because just because they've solved, met their goals doesn't mean anybody else is meeting theirs.

So thanks.

Senator Durazo.

Yeah. I want to thank you, Madam Chair, for picking this as one of the subjects for an oversight hearing. It's the first time I've heard these kinds of presentations from up on high state level to so many local levels. And it's really nice. It feels good to hear that, not in the context of here's a particular Bill. So I just want to thank you. Things are very good.

Thank you very much. I appreciate that comment.

First, let me thank the moderator for being on the line and helping us. And then I want to thank the panelists. Thank you very much for your testimony today. It's been really helpful, and I appreciate you taking the time to come and to speak at the hearing and to share your stories.

As Senator Durazo said, it is real nice to hear it not in the context of a Bill, but to hear about things that we can make the state more efficient and help you be more efficient as well. If you weren't able to testify via the teleconference service, please submit your comments or suggestions in writing to the Senate governance and finance Committee or visit our website. Your comments and suggestions are important to us. We want to include your testimony in the official hearing records.

A big thank you, and we appreciate your participation. Again, thanks, everybody, for the patience and cooperation we have included. The agenda the Senate Governance and Finance Committee is adjourned. Thank you.