A California agency voted Wednesday to reserve some of the state’s limited private activity bonds for non-residential use, giving projects like a private-equity-backed train to Las Vegas and a controversial desalination plant an opportunity to seek the coveted funding.
At its meeting, the California Debt Limit Allocation Committee, in a split vote, approved the allocation of its $4.3 billion in borrowing capacity, an amount determined under federal population-based guidelines, primarily to projects that promote affordable housing.
Of that, $510.4 million will go to qualifying non-residential projects, such as the electric railroad being proposed by a company backed by Fortress Investment Group, and Poseidon Water’s seawater facility in Huntington Beach, which is building the Zorn attracted by environmental groups.
Tony Sertich, who represents state controller Betty Yee on the three-member board, supported providing the entire state allocation for housing because such projects require additional federal subsidies. Many people, particularly opponents of the desalination plant, also urged the committee to do so, citing the state’s rising homelessness and housing affordability crisis.
Homebuilders are expected to need about $9 billion worth of bonds this year, far more than what’s available.
Still, Gov. Gavin Newsom’s representative, Gayle Miller, said California had different needs and that no other governor had invested more in housing. She also pointed out that railroad projects that have been awarded bonds also attract significant federal leverage.
“Without infrastructure, we can’t build more housing,” said State Treasurer Fiona Ma, chairman of the board. She originally proposed setting aside $600 million of the state’s allotment for non-housing projects, but agreed with the Newsom administration’s desire to cut $89.6 million from that amount for a veterans’ housing program.
Sertich cast the only vote against the measure to reserve bonds for non-residential use.
The committee had previously committed 15% of its annual bond allotment to developer Brightline Holdings’ Las Vegas train project. However, the company failed to attract investors to its September 2020 debt offering. Then last year, it withdrew an application with intentions to reapply in 2022 while it worked to build a station closer to Los Angeles that would make the project more palatable to potential investors.
Meanwhile, Poseidon Water, which already operates a desalination plant in Carlsbad, is working on another facility to produce 50 million gallons of water a day. It previously announced it would apply for $1.1 billion in government bonds for private operations.
“We are encouraged that California continues to allocate a portion of these limited resources to its Exempt Facilities Program, which benefits projects like the Huntington Beach Desalination Facility to help provide safe, reliable, and climate-resilient water supplies to all Californians,” the spokesman said by Poseidon Water Jessica Jones said in an email statement.
Brightline spokesman Ben Porritt did not respond to requests for comment.
Since the end of 2019, the demand for the bonds has exceeded what the state can issue. This year, the committee expects applications totaling $13.2 billion, the majority from developers.
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