Non-housing projects get state bond access

Cheap financing can be sought for train and desalination efforts.

A California agency voted Wednesday to reserve some of the state’s limited privateactivity bonds for non-housing uses, providing an opportunity for projects such as a private-equity-backed train to Las Vegas and a controversial desalination plant to apply for the coveted financing.

At its meeting, the California Debt Limit Allocation Committee in a split vote approved divvying up $4.3 billion of its bond capacity, an amount determined under population-based federal guidelines, mostly among projects that boost affordable housing.

Of that, $510.4 million will go toward qualifying nonhousing projects such as the electric railway proposed by a company backed by Fortress Investment Group and Poseidon Water’s seawater facility in Huntington Beach that has drawn the ire of environmental groups.

Tony Sertich, representing state Controller Betty Yee on the three-member board, supported giving all of the state’s allocation to housing because such projects draw additional federal subsidies. Many people, particularly foes of the desalination plant, also pressed the committee for the same, citing the state’s deepening homelessness and housing affordability crises.

Housing developers are expected to need about $9 billion of bonds this year, far more than what’s available.

Still, Gayle Miller, representing Gov. Gavin Newsom, said that California has other needs and that no other governor has invested more in housing. She also noted that rail projects that are awarded bonds draw significant federal leverage as well.

“Without infrastructure, we can’t build more housing,” said state Treasurer Fiona Ma, chair of the board.

Sertich cast the only vote against reserving bonds for non-housing uses.

The committee had previously awarded 15% of its annual bond allotment to the Las Vegas train project from developer Brightline Holdings. But the company failed to entice investors for its September 2020 debt offering. It’s working to establish a station closer to Los Angeles, which would make the project more palatable to potential investors.

Meanwhile, Poseidon Water, which already operates a desalination plant in Carlsbad, wants to build one in Huntington Beach to produce 50 million gallons of water daily. It had previously said it would apply for $1.1 billion of the state’s private-activity bonds.

“We are encouraged that California continues to allocate a portion of this limited resource to its Exempt Facilities Program that benefits projects like the Huntington Beach Desalination Facility to help deliver a safe, reliable, climate-resilient water supply to all Californians,” Poseidon Water spokesperson Jessica Jones said in a statement.

A spokesperson for Brightline didn’t respond to requests for comment.