Joseph Krist

Publisher

CALIFORNIA BALLOT ISSUES

Last month, a ballot initiative was qualified for the November ballot in Richmond, CA. (MCN 7.29.24) In the wake of that announcement, Chevron announced that it was moving its headquarters from California to Texas citing the regulatory environment. The initiative is also being challenged in the courts. Initial hearings in the case indicate that at least some of the ballot challenge might not meet legal requirements.

While all of this plays out, the City and Chevron continue to talk. Those talks have yielded a proposed agreement which would see Chevron make annual payments to the City. If the agreement is approved, Chevron would pay $50 million annually to the general fund for the first five years, followed by $60 million annually the last five. The city would retain its right to impose new taxes on Chevron and other businesses, but the settlement payments would be credited toward what the refinery would owe.

The refinery tax ballot measure was estimated to have cost Chevron between $60 million and $90 million annually, depending on the amount of raw materials the plant processed. The council on Wednesday could accept the agreement, pull the measure from the ballot, or opt to keep the measure on the ballot for voters to decide. Another option would be to direct staff to continue negotiating with Chevron.

Another ballot initiative to deal with housing in the Bay Area was announced in July. Regional Measure 4 would “address housing affordability and reduce homelessness by: providing an estimated 70,000 affordable apartments/homes; creating homes near transit, jobs, and stores; converting vacant lots/ blighted properties into affordable housing; and providing first-time homebuyer assistance.

The proposal calls for the issuance of $20 billion in debt, supported by an estimated tax of $18.98 per $100,000 of a property’s assessed value to pay for the bond. A two-thirds (66.67%) vote is required for the approval of Regional Measure 4. The initiative has already faced challenges. It has had to be reworded as a result.

None of that seems to be helping. Currently, polling shows that 55% of voters support the measure. Now, the Bay Area Housing Finance Authority has decided to remove the bond measure in response and attempt another vote in the future.

WISCONSIN

This was primary week in Wisconsin which also allowed voters to decide on two ballot initiatives designed to limit the ability of the Governor to spend certain state revenues. One measure would have prevented the state Legislature from delegating its authority to appropriate funds which is permitted under existing law. The second would have prohibited the governor from spending federal funding that has not been earmarked for a specific purpose without legislative approval. 

The initiatives had to be viewed through the prism of the state’s highly and ever more partisan environment. The Legislature is Republican and the Governor is a Democrat. The Governor has been reelected once. The initiative’s reflected disputes between the Governor and the Legislature over how federal COVID-related funds were spent.

The limits on spending federal dollars were a concern. Supporters of the status quo framed it as something which could hobble the ability to use federal disaster monies. The need to go through the formal legislative process was seen as an impediment to assistance and recovery.

PORTS

Last summer, the Port of Los Angeles was facing labor problems and impacts on operations which lowered throughput at the Port. During the period before negotiations on a new contract were concluded in September, shippers began diverting cargo to east coast ports. There was concern that some of the movement might be permanent.

Those concerns have not been borne out one year later. The Port of Los Angeles handled a record-breaking 939,600 Twenty-Foot Equivalent Units (TEUs) in July, a 37% increase over the previous year. It was the best July in the Port’s 116-year history and the busiest month in more than two years. Seven months into 2024, the Port of Los Angeles is 18% ahead of its 2023 pace. July 2024 loaded imports landed at 501,281 TEUs, a 38% spike compared to the previous year. Loaded exports came in at 114,889 TEUs, an increase of 4% compared to last year. It was the 14th consecutive month of year-over-year export gains in Los Angeles.

Now the shoe is on the other foot. Some of the increase in tonnage at the Port of Los Angeles reflected early arriving holiday related cargo. That occurred in anticipation of potential labor actions at east coast ports. Union negotiations covering longshore workers on the East and Gulf Coasts have been stalled since June 10, bringing the union closer to a potential strike at the September 30 contract expiration. 

The five major ports facing a strike potential are New York/New Jersey, Savannah, Houston, Virginia, and Charleston. The last East-Coast-wide strike was in 1977, lasting seven weeks. 

WIND

The federal Bureau of Safety and Environmental Enforcement (BSEE) updated its suspension order for Vineyard Wind, allowing it to resume the installation of turbine towers and nacelles. The company is still prohibited from installing additional blades – all of which are in the process of being reinspected – or power production from the 24 turbines that have been completed since last October.

This incident has not diminished activity by potential providers to develop new wind generation. This week, the Department of the Interior held an offshore wind auction in the Central Atlantic for two lease areas; one 26 nautical miles from the mouth of Delaware Bay (Delaware and Maryland) and the other 35 nautical miles from the mouth of Chesapeake Bay (Virginia). Wind turbines off the coast of Delaware, Maryland, and Virginia could generate up to 6.3 GW of clean, renewable energy and provide power for up to 2.2 million homes.

ERNESTO

Once again, Puerto Rico and the US Virgin Islands had to contend with a hurricane. This one, Ernesto, left half of Puerto Rico without power. Luma Energy, which transmits and distributes electricity in the territory, was reporting that more than 718,000 customers were still without power there as of Wednesday. The emergency management director for the U.S. Virgin Islands said that as of Wednesday morning that the power was out across the entirety of St. John and St. Croix. There was some power being generated in St. Thomas.

This all served to remind people that the electric systems in both Puerto Rico and the USVI are embarrassingly unreliable. At the same time, the operations of the VI Water and Power Authority have been impacted by the replacement of the CEO by a more politically connected individual. The agency still faces all of its long standing issues as well as the cleanup from this storm.

As over half a million people went without power, the parties in the PREPA bankruptcy proceedings were reduced to arguing essentially over the meaning of words. The bondholders have been fighting efforts by the Oversight Board to restrict their rights to revenues only to those collected. The contention is that any future revenues are receivables not revenues and that the bondholders should only get revenues. It’s all over the meaning of the word account.

FIRES AND INSURANCE

With every new wildfire igniting in California, you can almost hear one more commercial insurance carrier withdraw from the fire insurance market. With fires becoming larger, more frequent and location repetitive, the cost of available coverage rises and the number of providers shrinks. This parallels the issue of insurance in the southeastern US against damage from hurricanes. So do some of the responses/solutions undertaken by impacted states.

In California, the theory is the same as in the case of hurricane coverage.

The FAIR Plan was established more than 50 years ago as the state’s insurer of last resort. It was designed to serve as a source of insurance primarily to meet mortgage requirements. Considering the amount of growth as well as the expanded footprint resulting from that growth, one can see how much the demand for insurance has increased. Unfortunately, it paralleled the growth in the absolute risk of fire.

In the midst of one of the largest wildfires in the state’s history, California has adopted a plan to address near term shortfalls in the availability of fire insurance. The commercial insurers have sought more flexibility in their underwriting process and higher rates. In return, companies will be required to offer policies to 85% of homeowners in places categorized as wildfire-distressed areas. In those areas, localities would be encouraged to employ mitigation policies like clearance requirements for vegetation.

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