As election day approaches, NorthBay biz talks to proponents and opponents of some of propositions that could affect the state’s business communities.
As we go down the ballot list, we can make our assessment the easy way, by following the typical “taxes vs. jobs” party lines. We can scan the lists of supporters or opponents, find our friends and side with them. Or, as we’ll attempt to do here, we can seek out the careful thinkers on both sides of each proposition and try to get beyond the code words to see what’s really in our best interests.
Let’s start with water
Proposition 18, called by its supporters the “Safe, Clean and Reliable Drinking Water Supply Act of 2010,” asks voters to let the state of California borrow $11.1 billion to spend on such improvements as drought relief, small community wastewater treatment, integrated regional water management projects, support for Delta sustainability options, water storage, ecosystem and watershed protection and restoration, groundwater protection and cleanup, and water recycling and treatment projects. Sound good?
Republican gubernatorial candidate Meg Whitman thinks so, along with the Silicon Valley Leadership Group, the Bay Area Council, the California Chamber of Commerce and others—including Audubon California, American Farmland Trust, American Society of Civil Engineers and Associated General Contractors of California.
However, critics point out that the $11.1 billion proposal is way too costly, poorly thought out, not in the interests of the North Coast, and includes about $2 billion in pork. In a time of recession and job insecurity, opponents—the Sierra Club, Food and Water Watch, Clean Water Action, Planning and Conservation League, California Water Impact Network, Salmon Water Now, Small Boat Commercial Salmon Fishermen’s Association, Restore the Delta, United Farmworkers and many more, including a mix of Republican and Democratic representatives—have a problem with that.
Wrong time, wrong bill?
“I’ve been working to oppose it, on the environmental side,” says Huey D. Johnson, founder and president of Resource Renewal Institute and author of Green Plans: A Blueprint for Sustainable Development. “I’d like to kill it, rather than postpone it and give the agricultural industry another two years to try to get it passed.”
Johnson says the Planning and Conservation League has a better, cheaper solution. The league argues, in “Eight Affordable Water Solutions for California,” that there’s already $3 billion available for water projects from currently approved bonds. It advocates a comprehensive, sustainable approach including recycling, development of flow standards for the Delta and major rivers, requiring water-neutral development, converting unfarmable land to solar power production, protecting California’s major water sources and, finally, considering a smaller water bond when the economy improves.
“I’ve fought this thing from many angles,” says Johnson, explaining that it doesn’t work to approach environmental problems piecemeal. “You have to take a comprehensive approach,” he says, “and business and government have to work together with environmentalists to create a sustainable solution that benefits all.”
He’s seen this approach work. “I’ve seen other countries with tough environmental problems succeed by taking this approach– the Netherlands, New Zealand, Singapore—and, in my view, it’s the only way to go about managing the natural resources we need to survive.”
Steve Wright, communications vice president of the Silicon Valley Leadership Group, a public policy organization working on behalf of 300-plus local member companies on environment, energy, transportation and education issues, says his group wants to see it passed. “We’re working for the quality of life in Silicon Valley,” says Wright. According to him, at least at this time, this water bill seems to be a solution, though he admits the timing may be wrong. “Because we’re coming out of a recession, putting it before voters at this time could doom it.” He also acknowledges that the water issues in the Delta are complex and have been an ongoing problem. “The government, water users and environmentalists haven’t been successful in dealing with this issue.”
Assemblymember Jared Huffman, (D-Sixth District) agrees that this bond, as written, would have problems passing. “I think the reality may be sinking in now, that maybe it should be smaller, maybe tightened up a bit to give it a better chance of success.” Postponing it doesn’t mean the water problem goes away, however.
“I think what North Bay voters need to know is that whether it’s this bond or a future one that may be written in some better way, we’re gong to need some major investments in water management in the state of California,” says Huffman. “That’s not just to maintain reliable supplies but to save North Coast salmon fisheries and invest in watersheds and flood management. So whether it’s this fall or some future time, I think we’re going to have to try to get those investments funded.”
Scott Kirk, chairman of the Sonoma County Business Environmental Alliance, takes a longer perspective. “The state shouldn’t be asking the taxpayer to pay interest on bonds so the price of water remains unrealistically cheap.”
What is needed, he argues, is a whole change of mindset in how we think about water, even before we call in the U.S. Army Corps of Engineers to start rearranging the infrastructure. “You have biological requirements. You have conservation issues. You have a situation where the population growth of the western United States has outstripped its water supply,” he says. “So all of this has to be considered—unless you don’t acknowledge the importance to the natural environment.” But, he acknowledges, that’s really impossible. “We can’t ignore the importance of our natural environment because, if nothing else, a good part of our economy relies upon it. If we don’t maintain the flows in the Delta, then all the people who rely on the fishing industry and the tourist industry and all those areas of the economy will be destroyed. So it’s a give-and-take all the way around, and nobody seems to be able to really address those complex issues.”
Why is it so difficult?
“The bottom line to all,” says Kirk, “is that we have to establish the real cost of water.” No longer can we claim the right to an unlimited supply of clean water. “We now face a fundamental change,” he says, “not just in California, but throughout the world. And Californians should lead the world in figuring out how to manage this finite resource.”
Not so fast
In mid-August, as we were going to press with this issue, the California State Legislature voted to remove Prop 18 from the upcoming ballot; it will likely be reintroduced for the November 2012 election (though it could also undergo a significant reshaping before then).
Regardless of what happens with Proposition 18, voters need to pay close attention, says Jonathan Coe, president of the Santa Rosa Chamber of Commerce. “Water issues are critical to our community and the entire Bay Area. So it’s important that we track this initiative and others like it in the future, because of its long-tem consequences.”
Next up: global warming
Those who oppose Proposition 23 say California is already leading the world in green technology, clean energy and energy efficiency, and this proposition, which would repeal our previously passed clean energy bill AB32, would plough under billions of dollars of investment, education and productivity, and send California back into the bad old days of dirty industry—which, they point out, is getting more and more expensive.
Proponents of the proposition, however, call Prop 23 the “California Jobs Initiative.” They claim the global warming act is “killing jobs” and they want to “freeze” the provisions AB32 until California’s unemployment drops to 5.5 percent.
Opponents say this is verbal trickery: California hasn’t seen 5.5 percent unemployment for 30 years, and even then, only for brief times—and, by the way, how is AB32 “killing jobs?”
Gregory Brockbank, owner of Marin Law Center, San Rafael City Councilman and self-confessed “political junkie,” ponders the question. “I have a hard time articulating how the proponents of this measure claim AB32 would kill jobs,” he says. “I suppose they claim the additional environmental safeguards that require reduction of greenhouse gasses will mean more expense for companies and, therefore, they’ll hire less people, so there’ll be fewer jobs, because they’ll be spending their money reducing greenhouse gasses by putting in scrubbers, whatever. But I haven’t seen a compelling argument that that’s true.” More to the point, for him, is that, “the key to our recovery from this recession is green jobs, which are already growing fast and can grow a lot faster.”
So, who in the world would want to undo California’s pioneering efforts to mitigate greenhouse gasses and lead the country in clean energy industries and technology?
A few out-of-state oil companies, among others. In March, the Sacramento Bee listed the primary funders of the Proposition 23. They include Texas-based Valero Oil Company ($500,000), Los Angeles-based Occidental Petroleum ($300,000), Texas-based Tesoro Companies ($300,000), Washington, D.C.-based National Petrochemical and Refiners Association ($100,000), Texas-based World Oil Corp. ($100,000) and Southern California-based Southern Counties Oil ($50,000).
In addition to these companies, contributing proponents of scrapping AB32 include Missouri-based Adam Smith Foundation ($498,000), Sacramento-based Howard Jarvis Taxpayers Association ($100,000), California Trucking Association ($50,000), Modesto-based Boyett Petroleum ($25,000) and Virginia-based American Coalition for Clean Coal Electricity ($5,000). (These numbers were taken from www.Ballotpedia.org) Proponents also include the Republican Party, various—though not all—Republican politicians, the California Manufacturers and Technology Association, and others who claim AB32 will cost California jobs.
Opponents of the measure, those in favor of clean energy, claim that Proposition 23 will also cost jobs. So the question seems to be, what jobs?
Winners and losers
Governor Arnold Schwarzenegger, former Republican Secretary of State George Schultz, California Teamsters, the Courage Campaign, CREDO Action, TechNet, Livable Streets Movement and others say Prop 23, by killing the clean energy bill, will kill the clean-tech industry they say is now powering California’s future. Numerous business organizations and investors throughout the state and the nation agree.
Emily Baker, director of federal policy and political advocacy at the National Venture Capital Association, is concerned. “As California goes, so goes the nation,” she says, “and to see this strong legislation that Governor Schwarzenegger put into law and that’s been so successful in spurring investment in California, rolled back now would be devastating.”
To her, the argument that AB32 costs jobs is getting the facts backward. “It’s a false argument to say jobs will be lost. Jobs will be created—and are being created right now. All of the venture capital money that’s being invested in California and across the nation are, by definition, creating jobs, and those jobs will continue to grow and thrive if we have a political environment that’s conducive to spurring those kinds of innovations.”
“I think there are legitimate fears,” says John Arensmeyer, founder and CEO of Small Business Majority, an advocacy organization focusing on critical small business policy issues with offices in New York, Washington, D.C., and Sausalito. “AB32 is a net positive for just about every business in the state,” he says, “because every business is going to have to be competitive in this global economy—and that’s going to be very much grounded in clean energy.”
He says he sees government as a constructive partner, not only to provide leverage but also incentives to help companies transform. “There are individual businesses that are still dependent on the oil economy, and we’re not saying they need to go away. We’re saying they need to transform.” For him, this is because they ultimately won’t be able to compete in a changing global marketplace. Government isn’t the enemy; government needs to help. “So it’s not enough to just have AB32; we need incentives.”
Scott Hauge, president of Small Business California, whose group opposes Proposition 23, acknowledges there are problems with government regulations in the business environment, and that the California Air Regulations Board (CARB) is difficult to work with. “People are scared to death of the California Air Resources Board. It really is a hardship for a lot of businesses.” He complains CARB is inflexible and has to do a better job of reaching out to small businesses.
Still, his group supports AB32 and opposes the effort of Proposition 23 to kill it. “We came to the conclusion this way: “First of all, we realize we have a problem—greenhouse gasses and all that stuff. It’s our opinion that if you have a problem, it’s better to plan for it than to wait for a crisis.” He thinks the cost of energy efficiency will be offset by the energy savings. Plus, “we’re talking about research and development and job creation—that’s all small business. There’s tremendous development opportunities, and the fact that venture capital is coming into the state like this is an indication that there’s stability there and they’re willing to invest money.”
Dan Jacobson, legislative director for Environment California, agrees. “The reason clean energy works in California is there’s investment for it, and the whole state is moving forward—and that counts.” Part of the reason that’s happening, he says, is that the state, through its legislation, has sent a clear message to the business community that it supports clean energy. And it’s not just investors who are building momentum. “You can look all over the state, and you’ll find that community colleges and trade schools and tech schools have revamped their curricula to include the clean energy technologies.”
It’s a personal decision
Of all the initiatives, Proposition 23, depending on which way it goes, will affect every man, woman and child in California. “When you see the American Lung Association saying, Vote NO on this; when you see the League of Women Voters saying, Vote NO on this; when you see obviously a host of environmental groups, but also a host of business groups, mayors and cities up and down the state saying, Vote NO,” says Jacobson, “you know this isn’t the way for California to go.” Clean air affects everybody. Clean energy means clean air.
“The seeds of a clean energy economy are taking root in California, and then here come these oil companies that want to run that over,” says Jacobson. So, is there a really good argument in their favor? Jacobson says, no. “All the oil companies will ever have is great ads.”
Finally: Who needs a break?
“We call it The Tax Fairness Act,” says Richard Stapler from Yes on 24. His group worked to get this proposition on the ballot to let voters have their say about tax breaks for big corporations that come at the expense, as they see it, of all the rest of the citizenry. The tax breaks were approved by Gov. Schwarzenegger as part of the budget agreements in late 2008, when the legislature was in stalemate, and are slated to go into effect in 2010 and 2012. The initiative would prevent eligible corporations from receiving the breaks, which would cost the state about $1.3 billion in revenue lost per year. The breaks would affect about 120,000 businesses and are structured around: “the single sales factor,” or letting multi-state corporations choose how to apportion their tax base; “loss carry-backs,” which would let corporations experiencing losses get refunds for taxes paid up to two years prior; and “tax credit-sharing,” which lets companies share their tax credits with affiliates. “We collected signatures and asked voters to put this on the ballot basically to ask big corporations to pay their fair share of state taxes,” he says.
How would repealing the breaks to a few large corporations help the Bay Area, or California as a whole? “These tax breaks are focused on a very limited number of large corporations,” he says, “and our hope is to bring some badly need revenue back into the state to pay for education, keep class sizes smaller and to keep teachers from being laid off.” At a time when the state is faced with nearly $20 billion shortfall, he says, it’s wrong to give this gift to large, multi-state corporations at the expense of vital services. He also disagrees that rescinding the business tax breaks would “kill jobs.”
“We strenuously disagree with this characterization,” he says. “There was no job creation or retention attached to the passage of these tax breaks. This is about letting large, multi-state corporations pick and choose which tax rate they’d be charged in the state of California. Other than Missouri, we’d be the only state in the nation that would let corporations do that.”
The recession as a lever works for the opposite side as well. “At a time when unemployment is persistently high,” says Nick DeLuca, spokesman for No on Prop 24, “we think that, when the legislature and the Governor put these measures in place, it makes sense to keep them.” He says rescinding these breaks would cost jobs, based on a study of the effects of single sales factor in other states and the LAO’s findings that, “conformity with other states would prevent California firms from being placed at a competitive disadvantage.”
“It would cost jobs, because a Yes vote on the proposition is a No vote on these reforms,” says DeLuca, who then cites as evidence a report by Charles Swenson, a professor at University of California’s Marshall School of Business, who writes that undoing these reforms would cost the state 144,000 jobs and result in annual net revenue loss of $411 million “in the long run.”
Again, which jobs would these be? “These jobs,” said DeLuca, “would be jobs projected to be created as a result of the tax breaks, based on the results in other states that have made a move to single sales factor.” So they aren’t “jobs actually lost” but “jobs projected to be created, which would likely not be.”
“The reason it’s projected to have that effect here is, it shifts how companies that do business in more than one state are taxed from a formula that includes sales in California and taxes on facilities and payroll in California,” says DeLuca.
Stapler believes the repeal of these tax breaks would bring in $1.3 billion in revenue for the state of California. “So I think, stepping back, ask yourself: Is it fair that a small number of corporations—2 percent of businesses in California—get these very specialized tax breaks?”
The beauty or the curse of the initiatives process is that the decision—on these propositions and all the rest—is now yours.
