California’s 90 billionaires (according to Forbes Magazine) and 662,735 millionaires got rich in a lot of
different ways. But, there are those billionaires that thirst for more,
apparently, the Golden State’s record-breaking $2 trillion in gross annual
production (GDP), in 2010, which makes the state the Eighth most productive
economy in the world wasn’t quite enough. But let’s not forget California’s GDP
is said to represent 13 percent of the USA’s GDP.
California’s land rich billionaires – whose wealth, ultimately,
depends on water - have had a significant role in using the “system” (tax-base
revenue, credit rating, and natural resources) to promote and support issuances
of tens of billions of dollars of General Obligation (GO) bonds to fund vested
interest public works projects, particularly water and water-related grant
programs which considerably enhance the value of their land. And the grant
money, often used to build local water district infrastructure and help fund
developers, is free. At the same time, the billionaires have the public pay to
increase their water supply reliability, and are selling this water back to the
public at astronomically high prices.
A government grant-funded study, conducted at the Donald Bren School of Environmental Science and
Management, University of California, Santa Barbara, indicates that
from 1987 through 2008, and estimated $3.9 billion in water water-transfer
sales/profits were made by some of the state’s richest billionaires. As the
saying goes, in California water runs uphill and toward money.
These GO bonds fund a myriad of state programs and finance massive
public works projects that directly aid the landed gentry. These include
billionaires like Orange County real estate king Donald Bren, who reportedly
owns 110,000 acres, and has a “Master Plan” to develop significant portions
of land (http://www.goodplanning.org/Master-Plan/default.aspx).
Bren, reportedly, is a close friend of former Gov. Pete Wilson, an
employee of Bren’s before and after serving as governor.There is also Beverly
Hills resident Stewart
Resnick (now the biggest “farmer” in California with 200,000 acres
in Kern and Kings counties) and there are the heirs of cotton king J.G. Boswell.The Boswell family owns 200,000
acres of farmland in the Tulare Basin and want to build a city of 30,000 on
land they own in the Tulare County foothills. They profit directly when
California’s voters fund multi-billion bond projects to export Northern
California water south to industrial farm fields in the western San Joaquin
Valley or to the never-ending desert subdivisions in the Southland.
Furthermore, the majority of them are also involved in profiting from water
sales and marketing.
Tejon Ranch, now owned by Cattelus (another billionaire outfit which
morphed from the railroads), owns 270,000 acres straddling the “Grapevine”
Interstate 5 route over the Tehachapis. It is the largest block of private land
in California. The combined acreage for just these four companies (Bren,
Resnick, Boswell, Catellus) exceeds 780,000 acres.And all four of these Big
Money players already are engaged in filling their unquenchable thirst for a
more “reliable” source of water from the north, and have received windfall
profits from the GO bonds. And, of course, this year, voters will be asked to
fund yet another $11 billion water bond measure (which will take $22 billion to
pay off) to move yet more water south.
You can count on Team Billionaire - which includes the
billionaires, major landholders, chambers of commerce, local water districts
(most of which are members of the Association of California Water Agencies),
banks, investment firms, and all manner of Southern California real estate and
development interests - to spend huge amounts of money to convince voters to
approve water-related GO bond measures.
According to the state’s
Department of Finance’s (DOF) website, there are currently a total of $150 billion in GO bonds which have been
approved by the voters in the past few decades, of which a total of $79.6
billion has been issued and is being repaid from the General Fund.
To put the $79.6 billion debt in
perspective, in Governor Jerry Brown’s recently approved 2011-2012 state budget totaled $129 billion,
Approximately $86 billion came from General Fund revenues, the remaining amount
come from special funds and other bonds. The principal and interest payment on
the outstanding G.O. bond debt is in excess of $136 billion;
includes fixed and variable rate estimates on bonds.
Of the $79.6 billion of GO bond
debt (principal), an estimated $19.4 billion was authorized primarily for water
programs, including buying water for fish; mitigation, wildlife conservation
easements, studies, drought relief, local irrigation, flood protection, and
municipal water district infrastructure projects. Add at least another $13
billion in interest to pay off the $19.4 billion in water bonds and you have a
total water-related public debt of at least $32.4 billion; comparatively
speaking, it represents about 40 percent of the cost to run the state General
Fund programs.
State Treasurer Bill Lockyer says payment of the interest and
principal on all GO bonds is a crushing $10
billion a year –amounting to nearly a tenth of the state’s General Fund
– and is expected to keep rising each year. This addiction to bonds is a
principal reason for the draconian state budget cuts in education, police and
fire services, and programs for the elderly and disabled that occurred in
recent years. Indeed, to meet those bond obligations, California has cut $115.7
billion from the state budget in the last three fiscal years.
During the governorship of Arnold
Schwarzenegger, the state’s bond debt doubled as the “no more taxes” crowd
simply turned to bonds to get the public to foot the bill for water projects,
programs and other infrastructure financing to sustain and expand their
publicly subsidized business ventures, most for agribusiness, new Southern
California subdivisions on the desert, and increased reliable supplies for them
to have more water to sell back to the public.
What the billionaires know, of
course, is that GO bonds are still being used to pay off the $1.75 billion
State Water Project (SWP) which former Governor Edmund G. “Pat” Brown sold to
the public back in 1960 as a project that would “pay for itself.”It has never
come close to paying for itself and it could take an additional $63 billion,
according to the California Department of Water Resources, to make real the
water which Brown, Sr. purportedly promised a half century ago. In fact, SWP
contractors, many of who supported the original GO bond debt, have vehemently
refused to take responsibility for bearing the burden of the $32.4 billion in
water-related debt; as SWP beneficiaries, by law, they are required to pay
certain costs. Instead, they have passed it on to the unsuspecting public with
the help of their campaign-supported (s)elected officials.
In addition, water bonds promoted
under the fear tactic of “safe, clean, reliable” water have been issued for
water projects that directly benefit SWP urban and agribusiness contractors.
Such bonds are much easier to sell to unwitting voters than raising taxes first
to pay for things society needs, which is always a tough sell for politicians.
A bond, it turns out, is a tax but a hidden one. The water-guzzling land
billionaires are hoping they can float one more bond by the voters next year.
Their success is dependent upon a vote of the people.
Editor’s Note:In Part Two, Porgans and Carter discuss how the
water bond phenomena was pioneered by Gov. Edmund G. “Pat” Brown, Sr. and now
plays a key role in the lives of his son, current Gov. Jerry Brown, Jerry’s
sister, Kathleen Brown and the investment firm Goldman Sachs.
Re-Posted
by Patrick Porgans
