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Borrowing for State Highway Projects OKd : Finances: Officials approve short-term notes to continue essential work but concede that indebtedness may cause more delays later on.


SACRAMENTO — Faced with growing public disgruntlement over delays in state highway construction, the Wilson Administration embarked Wednesday on a $750-million borrowing program to give it the cash to continue the most critical projects.

But even as the California Transportation Commission gave its approval for the Administration to float short-term notes, officials admitted that borrowing against gasoline tax revenues could cause even more projects to be stalled in the future.

"There's no question there may be some projects that are subject to delay (in the future) . . . but we felt this was the best alternative that existed for us in view of this empty cupboard that we're looking at right now," said Business, Transportation and Housing Agency Secretary Dean Dunphy.

The decision to resort to short-term indebtedness comes after voters defeated in June a proposed $2-billion bond issue that would have provided enough cash for many of the projects. And it contradicts Gov. Pete Wilson's interpretation of the election results, which he characterized as a clear message from voters that they were reluctant to finance any more government services through borrowing.

In recent years, state government has depended increasingly on borrowing to make up for revenue shortages and to resolve financial crises. The state budget enacted in July relies on more than $7 billion in borrowing over the next two years--at a cost to taxpayers of more than $500 million in interest.

The state's credit rating is so weak that the government had to pay $30 million to a consortium of banks to act as co-signers on those notes, agreeing to repay borrowers if the state defaults.

State officials said they do not know yet how much the notes approved Wednesday will cost California taxpayers but they said they expect to repay the last of them by 2000.

The borrowing for transportation will permit a series of important projects--mostly outside Los Angeles County--to proceed. They had been temporarily frozen when the state ran short of cash. The delays had begun to generate criticism and negative newspaper editorials, many directed at the Wilson Administration.

With the new cash, the state will begin construction of critical interchanges at Interstate 680 and California 24 in San Francisco's East Bay and on California 99 at Livingston in the San Joaquin Valley. In Los Angeles and Ventura counties, the borrowing will make available $11.8 million for the construction of car-pool lanes on the Simi Valley Freeway.

The financial crisis in the state's transportation program has been looming for years as costs for a seismic strengthening program for bridges have soared and gasoline tax revenues, which finance the program, have slumped below estimates.

Exacerbating the situation were the failures of two bond issues--the $2-billion one in June and an earlier $1-billion proposal to pay for mass transit.

The plan approved Wednesday got mixed reactions from legislators who have been urging Wilson to come up with new ways to finance transportation after the June bond failure.

Assembly Transportation Committee Chairman Richard Katz (D-Sylmar), who authored the legislation permitting the short-term borrowing, said the governor's plan made sense but did not go far enough.

"I'm supportive but he's only dealt with half the problem," Katz said. "I do think you're being less than completely honest with the public if you create the impression that this borrowing solves all the problems."

He said it is essential for the state to devise new sources of revenue for transportation improvements, and said they undoubtedly will involve some form of tax increase.

"The governor may not want to support a tax now but he is creating the inevitability of a tax or some other way of financing because this short-term borrowing will only make the deficit bigger," Katz said.

Katz and Senate Transportation Committee Chairman Quentin L. Kopp (I-San Francisco) accused the Administration of using short-term borrowing as a way to avoid confronting the financial crisis in the transportation program until after the November election.

"This plan isn't free and it's unnecessarily costly," Kopp said. "It's adding another expense which must be subtracted from the state highway account. It's election year stuff to assuage the people until we get past November."

Dunphy said the governor plans to appoint a task force to study transportation finances and report next spring with proposals for solving the problem. He said a tax increase is likely to be studied, along with proposals to decrease funding for administration of the program.

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