LOS ANGELES—Three decades is a long time to wait for a train. So Los Angeles is asking the federal government for help in borrowing $9 billion to speed construction of 12 new mass-transit rail lines.
Los Angeles Mayor Antonio Villaraigosa rides a new rail line in October. He wants to speed work on 12 lines.
With Washington's backing, city officials say they could make a dramatic improvement to public transportation in just 10 years—including a dreamy-sounding Subway to the Sea—after decades of stalled attempts to equip the sprawling metro area with a comprehensive public-transportation system.
If the plan succeeds, it could create a novel way to accelerate big locally funded projects around the country.
Los Angeles Mayor Antonio Villaraigosa insists the deal presents little risk for the federal government. The reason: Los Angeles County voters in 2008 passed a half-cent sales tax to fund the rail project over 30 years. But Los Angeles leaders say it can be done in 10 if they get the money up front. The city would pay back the loans over 30 years using the sales tax.
The proposal comes at an unusual political moment. The city of Los Angeles is trying to close a massive budget shortfall at the same time that Washington is struggling to corral its own runaway deficit. But the plan has some support in Washington. The federal government could take some credit for spurring economic growth in a major metro area without necessarily spending too much money itself.
Los Angeles basically wants the federal government to help the city get the money up front, either through guaranteeing bank loans, helping to pay interest on bonds, lending the money to the city itself, or some combination of those moves. The city can't issue bonds on its own to fund the project, officials say, because it can't guarantee lenders the amount of revenue that the sales tax will generate.
Los Angeles officials say getting the project done sooner rather than later would create 165,000 construction jobs over 10 years, rather than spreading the employment gain out over 30 years. It would also save the city money by getting the work done now, and not paying what are likely to be higher labor and material costs in the future; any interest costs on a loan, officials hope, would be eased by the federal help.
"We're not asking for special treatment for L.A., we're asking for L.A. to be a positive example for the country," said Los Angeles Chief Deputy Mayor Jay Carson.
After weeks of lobbying for what he calls the "30/10" proposal in Washington, Mr. Villaraigosa will make his pitch in public Thursday, at a hearing of California Democratic Sen. Barbara Boxer's Committee on Environment and Public Works.
City officials say they have already explored the idea with several big banks, which have laid out plans for how the loan could be structured, depending on the type and level of federal support.
While Sen. Boxer and Minnesota Rep. Jim Oberstar, a Democrat who heads the House Committee on Transportation and Infrastructure, have voiced support for the mayor's plan, obstacles remain. Right now, there is no mechanism in place to supply the type of up-front funding Los Angeles wants.
The plan "will create jobs and accelerate transportation benefits that we need in L.A. now," Ms. Boxer said.
While Mr. Oberstar also supports the idea, "there is no program, no mechanism to make the type of loan and the size of the loan Los Angeles is asking for," said Jim Berard, a spokesman for Mr. Oberstar's committee. But, he added, "that doesn't mean there is nothing that can be done."
One way to fund the rail project might be through the creation of a so-called national infrastructure bank—which would offer low-cost loans directly from the federal government to local governments. But longstanding plans to create such a bank remain stalled.
Another solution could be a combination of private and federal loans and loan guarantees. That plan relies on extending the "Build America Bonds" program, begun in 2009 to spur job growth, beyond its scheduled expiration at the end of this year.
The bonds generally carry higher-than-normal rates, but Washington picks up 35% of the interest. The Obama administration has proposed making the bonds permanent, but reducing the subsidy to 28%. Los Angeles, however, is seeking a much higher interest-rate subsidy of 70%.
Los Angeles's request might also be accomplished with administrative tweaks to existing loan programs.
On the other hand, Los Angeles's plan might have to wait for the more sweeping changes envisioned in a massive federal transportation bill that is currently stalled over a $125 billion funding gap. "Until we move that bill, and there are funding problems involved with that, we really can't do anything for Los Angeles," Mr. Berard said.
This article is a good example of a public project that is only doable with funding from the feds. "The city of Los Angeles is trying to close a massive budget shortfall at the same time that Washington is struggling to corral its own runaway deficit". Is it wise to adding additional projects at this moment? Isn't this similar to Valajo's issues with funding?
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