Daily Report: Money and Politics

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Critics of the practice in which financial firms help pass school bonds that they profit from are continuing to push for reforms, but so far have faced resistance and failure.

In California, underwriting companies hired by school districts to sell bonds often make campaign contributions to help convince voters to pass the bond measures. A California Watch investigation found that leading underwriters gave $1.8 million over the last five years to successful bond measures, and in almost every case school districts gave underwriting contracts to those same firms.

Underwriters are essentially middlemen, buying bonds from districts and selling them to investors at a higher price. Underwriters say they generally only give campaign contributions after getting hired; school districts argue the money has no influence. But critics call it a “pay to play” system that potentially costs taxpayers more than a strictly competitive process would...

Dewet/Wikicommons The Napa Valley Wine Train flood-control project is costing about $79 million. 

No-bid contracts cost taxpayers big money, and that’s one reason the $79 million Napa Valley Wine Train flood-control project has become a “tax dollar sinkhole,” two U.S. senators say.

In a statement issued yesterday in response to a California Watch report, Sens. John McCain, R-Ariz., and Tom Coburn, R-Okla., faulted the U.S. Army Corps of Engineers for not seeking competitive bids on the Wine Train job.

The project involves relocating a rail bridge for the Wine Train tourist attraction as part of construction to stop serious winter flooding on the Napa River.

“Taxpayers ultimately lose when contracts aren’t competitively bid,” the senators said. “The Wine Train project is truly a gravy train of government waste.”

As California Watch reported last week, the Corps of Engineers, in an apparent rush to get work under way, steered the $64 million Wine Train contract to a small Alaska construction company called Suulutaaq in 2008. Competitive bids weren’t solicited because the company was eligible for sole-source federal contracts under a program to assist Alaska...

Tsuji/istockphoto.com

The Legislative Analyst's Office is urging lawmakers to continue an overhaul of the state's accounting systems despite ballooning costs that have plagued the effort.

Called the Financial Information System for California, or FI$Cal, the project seeks to build a single statewide system for all of the state’s accounting, budget and cash management programs, many of which are scattered across multiple, aging computer systems.

Since planning began in 2007, cost estimates for the new system have increased from $1.3 billion to $1.6 billion – prompting some to question whether the state can afford the improvements. But in a report released this week, the nonpartisan analyst's office concluded the benefits of a state-of-the-art statewide system outweigh the concerns over its price tag. The report states:

We believe that the proposed system has significant benefits for the state, including: automating highly manual processes, minimizing manual reconciliations among control agencies and various separate financial systems, making information more readily available to the public and the state's business partners, generally improving...

California High-Speed Rail Authority

A report that warned of huge operating deficits for California’s bullet train was based on “the wrong numbers,” an official of the state High-Speed Rail Authority claims.

Rail board member Mike Rossi told a legislative hearing this week that incorrect data undergirds a downbeat analysis of the bullet train’s finances published recently by four Peninsula-based financial experts.

Their report, which predicts that if built, the bullet train will need multimillion-dollar subsidies “forever,” was the subject of a story earlier this week by California Watch.

Rossi, a former Bank of America executive and an adviser to Gov. Jerry Brown, contended that the experts’ analysis was flawed because it had relied on incorrect data published by a foundation associated with the Spanish banking group BBVA.

The errors concerned operating costs for European bullet trains, Rossi contended.

“The problem is, they picked up the wrong numbers,” Rossi told members of the Assembly Transportation Committee.

“The numbers they are showing for operating expenses are actually...

Simon Pielow/Flickr

By hitting the reset button, Gov. Jerry Brown bought some time for the embattled California high-speed rail plan.

In recent months, the CEO of the controversial project resigned. Brown installed Dan Richard, an official with political and transportation industry connections, as new board chairman.

More importantly, the California High-Speed Rail Authority dramatically revamped its business plan, slashing as much as $30 billion from the price tag for building the San Francisco-to-Los Angeles system – from $98 billion to as little as $68 billion.

But none of those changes addressed what a panel of outside financial experts has styled “the elephant in the room” for California’s proposed high-speed rail system – its extraordinarily low projected operating costs.

If the bullet train project is to pencil out, it must operate far more economically than any high-speed rail system in the world, according to the experts, who include former World Bank executive William Grindley...

Kheel Center/Flickr In one of California's most famous presidential primaries, Democrat Robert F. Kennedy (left) was assassinated after his victory speech in 1968.

When Rick Santorum folded his campaign for the Republican presidential nomination earlier this month, he also doomed the California presidential primary to irrelevance – for the ninth election and 36th year in a row.

California’s Republican primary hasn’t made a difference in presidential politics since June 1976, when favorite son and future President Ronald Reagan beat then-President Gerald Ford.

Reagan rode the momentum of his primary victory into the GOP convention in Kansas City, Mo., but he failed to win the nomination; Ford, roughed up by the bruising campaign, went on to lose the election to Democrat Jimmy Carter.

On the Democratic side, the last California primary that really mattered was in 1972, when the peace candidate, George McGovern, beat former Vice President Hubert Humphrey in a contest dominated by debate over the Vietnam War.

With his win in California, McGovern clinched the nomination, but lost to Republican President Richard Nixon,...

Kativ/istockphoto.com

After recent court rulings struck down significant campaign finance limits, the next frontier in the debate over money in politics appears to be public disclosure – whether there should be more or less of it.

That sticky question formed the main source of argument among election law experts at a symposium on campaign finance reform yesterday in Sacramento.

"The landscape has changed," said Elizabeth Garrett, a commissioner of the California Fair Political Practices Commission, which co-hosted the symposium. "Now that the groups who did not like regulation in the first place have won on so much else, I think they’re going to turn some of their guns to disclosure."

Supporters of regulation still are reeling from the 2010 U.S. Supreme Court decision in Citizens United v. Federal Election Commission, which allowed unlimited contributions from corporations and unions to attack or support politicians. That and a subsequent court ruling allowing unlimited contributions from individuals helped give rise to the super political action committees that already have spent tens of millions of dollars on attack ads and are sure to continue their outsized influence in this year's elections...

MCCAIG/istockphoto.com Riverside's redevelopment budget is among about two dozen challenged by the state so far.

In the flurry surrounding the end of redevelopment, 60 state Department of Finance officials are scouring local redevelopment budgets to determine whether their claims about existing debts and obligations are legal.

Cities and other local entities that are overseeing the shutdown of redevelopment agencies were required to submit a list of their ongoing financial commitments by April 15. Now, the department has a three-day window to raise objections. Of the budgets it has reviewed so far, the department has challenged almost two dozen, including budgets from the cities of Riverside, Orange and San Leandro.

The department’s review could have serious effects on the state budget and local agencies, including school districts and counties.

Gov. Jerry Brown estimated that $3.6 billion would be distributed to local agencies over two years as a result of dissolving...

nico_blue/istockphoto.com

The U.S. attorney’s office in Los Angeles is less likely to prosecute criminal cases referred by the Internal Revenue Service than its counterparts in the rest of the state, according to a California Watch analysis of five years of data.

The Eastern District, which includes Sacramento and Fresno, was the most likely to prosecute IRS referrals, the data shows. But the U.S. attorney in Los Angeles was the only office in the state that fell slightly below the national average of prosecuting criminal IRS cases.

Each U.S. attorney has broad discretion over the priorities for his or her district. They determine which criminal cases referred to them by other law enforcement agencies they want to pursue and which cases to close without prosecuting.

It is difficult to determine why the Los Angeles office lagged behind its peers. 

“It’s definitely puzzling,” said Terree Bowers, a former U.S. attorney. Since leaving the Los Angeles office, Bowers said he brought a fraud case to the office’s attention and was surprised that it didn’t act on the case...