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California Infrastructure Inches Toward 全mart Growth'

The California Infrastructure and Economic Development Bank has loaned nearly $180 million to local governments since June 2000, but whether the loans are promoting the type of "smart growth" that backers touted a few years ago is uncertain. Thus far, no applicant has been rejected based on land use deficiencies of a project. Rather, the money has been available for a variety of standard public works projects suburban water and sewer lines and treatment plants, storm drainage for new business parks, streets in redevelopment zones. The biggest cheerleader of the smart growth approach to infrastructure funding, state Treasurer Phil Angelides, conceded the program is not perfect. But he contended it is having the intended effect. "We are seeing a lot of projects that are in the urban context, projects in existing neighborhoods," Angelides continued. "I think it's markedly different from the old concept of infrastructure being a two-lane road widened to a four-lane road to serve a factory no matter where it is." Legislation approved in 1994 created the Infrastructure and Economic Development Bank, commonly called the I-Bank. Since its inception, the I-Bank has issued $8.2 billion worth of revenue bonds, mostly for manufacturers and nonprofit corporations that use the money for job growth. The businesses and nonprofits are responsible for paying off the bonds. However, the Infrastructure State Revolving Fund (ISRF) Program, which provides local governments with loans for public facilities, stalled for lack of money under the Wilson administration. The program got rolling in 1999, and as of September the ISRF program had made 35 loans totaling $179 million. Two years ago, the program had $475 million to loan, but the Davis administration took back $277 million because of the budget deficit. With money starting to run short, I-Bank officials plan to raise funds by issuing bonds secured by loan repayments. At the urging of Angelides (one of three members of the ISRF board), the I-Bank adopted criteria that include renewing and maintaining existing developed areas, developing infill sites, and protecting the environment and natural resources. Applicants also earn points for having a certified housing element. However, a project's economic impact, especially in a distressed area, can trump any land use considerations. Late last year, the State Auditor dinged the Technology, Trade and Commerce Agency, which runs the I-Bank, for not adequately quantifying new jobs that resulted from state programs such as the ISRF. There has been no official study of whether the ISRF is successfully promoting smart growth. I-Bank Executive Director Stan Hazelroth said the agency is working on better ways to measure program effectiveness. "We're working on an update of the strategic plan," Hazelroth said. The difficulty, he added, is that the agency "has all these things that are not necessarily related, other than they are all infrastructure projects." Indeed, the projects funded by the ISRF program run the gamut, so comparing one with another is difficult. Most local governments that have received ISRF loans use the money as only one part of a multifaceted financing package, which is what I-Bank officials want. For example, in the City of Brawley, near the Mexican border, officials used a federal grant, city funds and a $2 million ISRF loan to pay for a $13 million expansion of the city's sewer plant. "That was the only way we could afford it," Brawley City Manager Jerry Santillan said. "In an impoverished community, we can't afford to raise our rates." The city pursued the larger sewer plant, and an earlier project to expand water treatment facilities, to serve a large new meat packing plant and spin-off businesses. Since the packing plant opened, unemployment has dropped from nearly 25% to about 14%, according to the city manager. Santillan said I-Bank officials quickly approved the city's loan application, but they were slow to put together loan documents and complete the process. For Brawley, the ISRF loan was strictly about economic growth. Angelides said smart growth criteria has been worked into a number of state funding programs. In highly competitive cases, such as the Low-Income Housing Tax Credit program, there has been a "fundamental change" in the types of projects proposed, he said. That change has been slower to appear in programs like the ISRF program, where administrators work hard to drum up interest from local governments. "Changing priorities is a lengthy process that takes time because it goes to the way people think," Angelides said. Contacts: State Treasurer Phil Angelides, (916) 653-2995. Stan Hazelroth, Infrastructure and Economic Development Bank, (916) 322-1399. Jerry Santillan, City of Brawley, (760) 344-9111. State Technology, Trade & Commerce Agency website: www.commerce.ca.gov
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