Assemblyman Holden Addresses Economic Impact of COVID-19 Pandemic

In a virtual South Pasadena City Council meeting Wednesday, May 27, Assemblyman Chris Holden gave a legislative update on local, state and national efforts to ameliorate the economic havoc wrought by the COVID-19 pandemic.
Via Zoom, Holden told the group that as a result of the pandemic, in four months the state has gone from a “continued healthy” budget reserve to a $54.3 billion “budget problem.” The good news, he said, “is that we don’t have to solve the deficit in one year.”
But Gov. Gavin Newsom’s proposed cuts in the May revision budget include a $3.5 billion annual decrease in Proposition 98 funding for K-12 education, $11 billion less for schools and community colleges, and suspension of the 2.3% statutory cost of living adjustment.
The governor has also proposed $4.4 billion in discretionary, one-time federal funds for COVID-19 impacts on schools and student learning. Holden added there’s a “payback schedule” for the Prop 98 funding. The governor has also built $14 billion in federal funds into the budget that Holden admitted is “subject to some challenges” from the legislature.
Holden added that the state has allocated $8.6 billion in direct COVID-19 response to education, public health and homelessness. The state obtained a disaster declaration making it eligible for federal reimbursement of up to 75% of upfront costs, meaning the net cost to the state would be $2.1 billion. A more accurate assessment of the state’s financial situation will come on July 15, when figures for personal and corporate income taxes are due.
The governor’s revised budget also proposes $750 million in federal funds to Project Room Key to purchase hotels and motels to be owned and operated by local governments and nonprofits. This provision allows the state’s portion of CARES Act funding for local governments, including $450 million to cities that didn’t receive a direct allocation and $1.3 billion for counties to address mental and physical health.
“But that’s not enough,” Holden said.
The assemblyman said he wants to use the Federal Reserve’s Municipal Liquidity Facility to help cities with COVID-19 cash-flow pressures. The Fed authorized $500 billion in short-term notes from all 50 states, but initially allowed direct applications only from counties with at least 2 million residents and cities with at least 1 million. On April 27, the Fed lowered the direct application threshold to counties with at least 500,000 and cities of at least 250,000.
Holden said there are no cities that large in his district, so he introduced AB 2707 requiring the state treasurer to establish a credit facility to support cash flow borrowing by local governments facing COVID-19 financial challenges that would make MLF funds available to smaller cities and counties.
“Let’s be clear: MLF is a loan program,” Holden said, adding that his office has been in touch with Federal Reserve banks in New York and San Francisco “In order for the bill to work, the state would have to assume the collective bond debt of those cities and counties that are not eligible under the MLF criteria and submit their applications to the MLF.”
Holden admitted there are challenges to the proposal — “It will affect the state’s credit rating,” he said — and added that he believes early conversations will produce favorable outcomes for state and local governments.
Introduced by Mayor Bob Joe as “a friend of South Pasadena,” Holden was praised for his work on the Assembly Committee on Utilities and Energy in helping the city resolve its 60-year battle against the 710 freeway.
“Officially removing the proposed SR710 North project from the state highway system began a new era for South Pasadena and surrounding cities,” Joe said.
Addressing the lingering freeway issue, Holden said he “knows how important it is” to get vacant homes purchased by Caltrans for the proposed freeway back on the city tax rolls. He’s working with Caltrans to process applications filed by the city under the Affordable Sales Program. As applications are being reviewed, Holden said he established the city as a direct point of contact with the agency.
Holden said he received complaints about the homes from South Pasadena residents after some were occupied and one was broken into.
“After weeks of aggressive follow-up,” Holden said, his office was able to work with Caltrans to get the homes boarded up. “In Caltrans time, four weeks is pretty quick.”
Councilman Richard Schneider thanked Holden for running interference with Caltrans.
The vacant homes “are a major problem in our city,” Schneider said, “and we’d certainly like to get this resolved considering how serious the housing crisis is in California. And of course, the renters are having a lot of problems, and we don’t want to see any more homelessness on our streets. We’d like to get these homes sold and back to the community.”
Holden said he believes that once a budget is in place, the Newsom administration will move on the city’s proposals.
“And they deserve a quick response,” he added. “Caltrans can’t wait to get out of the business of managing homes. They’d really prefer not to have to deal with this.”
The Caltrans legal department is the hold up, Holden claimed.
“We’re probably going to have to go to the governor’s office to get them to internally move things along,” he said.
District 4 Councilman Michael Cacciotti agreed, adding as a 10-year veteran of Caltrans legal department that he knows “they move slow and deliberate, trying to protect the state’s interests.”
“They will dig in their heels and fight no matter what,” Cacciotti said. “The bureaucracy is immovable.”