California Coast & Ocean

Even as President-elect Barack Obama was preparing a giant financial aid package meant to provide green jobs and steer the nation toward a sustainable economy, a sledgehammer blow paralyzed a healthy sector of the growing green economy in California.

It happened on December 18, 2008. The State of California was in an unprecedented financial crisis, no longer able to borrow, which it does routinely to smooth out cash flow. The Legislature was in the sixth month of an impasse, unable to adopt a budget that would cover obligations. The Legislative Analyst predicted that the State would run out of cash in February unless the stalemate was resolved. Voter-approved bonds were not selling.

Faced with this unprecedented emergency, the Pooled Money Investment Board, which consists of the State director of finance, controller, and treasurer, decided to put an immediate stop to all spending of voter-approved bond funds--a total of over $3.8 billion committed to some 2,000 projects statewide. These were projects to improve schools, transportation, and environmental infrastructures. Agencies receiving bond money were notified that no invoices would be paid for work done after December 18.

Abruptly, millions of dollars’ worth of “green” work was suspended, indefinitely. Many of the projects stopped along the coast and in the nine San Francisco Bay counties were funded by Coastal Conservancy grants to local governments and nonprofit organizations.

These funds had created jobs in local communities for restoring wetlands, streams, and wildlife habitat, protecting coastal farming and fisheries, improving water quality in streams and nearshore waters, reducing flood hazards and carbon emissions, building trails, and encouraging commuting by bicycle rather than by automobile. The funds also supported the purchase of scenic lands for public enjoyment, restoration of historic buildings for public use, and many other projects that were stimulating green economic benefits.

Among those idled were engineers, construction workers, equipment suppliers, hydrologists, and wildlife biologists. The ripple effects of the freeze jolted businesses already struggling in the national financial meltdown and jeopardized the survival of small nonprofit groups. The effects were felt with special intensity along the North Coast and in other areas with abundant natural resources but high unemployment.

When the stop-work order arrived at the Coastal Conservancy on December 18, the holiday party was about to start. It was immediately canceled and project managers spent the afternoon conveying the bad news to more than 200 contractors and grantees, to whom the Conservancy had committed $143 million for projects under contract and owed $11 million more for completed projects. Invoices that had been signed and approved by December 18 would be paid first, while payment for others would have to wait indefinitely. More than 90 percent of the Conservancy’s projects are bond-funded.

One of the Conservancy’s partners is the Santa Cruz County Resource Conservation District (RCD), which has been working with landowners, public agencies, and other organizations to restore fish habitat in coastal streams. “We sent out 26 stop-work orders December 18--to all the little guys,” said Karen Christensen, executive director of the RCD, which had contracted with small construction firms to remove impediments to fish passage and to restore eroded banks. Suddenly there was no money to pay contractors. “We have submitted $1.1 million in invoices [to the Conservancy] for work completed last fall, and have $950,000 more not yet submitted,” Christensen said.

The freeze stopped 41 of the RCD’s projects in a critical period. On some creeks, restoration work had exposed banks to the hazards of erosion and failure if revegetation was not completed before heavy rains hit.

Good relationships that had taken much effort to build were seriously damaged.

In Shasta and Scott Valleys in Siskiyou County, some landowners who had signed on to remove flashboard dams for the sake of coho salmon now stand to lose their irrigation water, said Karen Gaffney, executive officer of West Coast Watershed. The dams are gone, but the fish-friendlier irrigation systems were not yet in place when work was stopped. “Can you imagine the catastrophe,” Gaffney said, “not only for them personally, but for the long-term viability of the program, which is based on trust?”

On Clear Creek, southwest of Redding, the Western Shasta RCD was about to start replanting creek banks. “We have 3,500 tree cuttings in cold storage, 6,000 plants in our nursery, and 600 plants stored off site,” project manager Jack Bramhall reported shortly after the order came. “The cuttings will mold and become useless unless we get them in the ground soon.” The RCD could not afford to hire the people needed to do the job. Eventually, it gave the plants away.

In Los Angeles, Larry Smith of North East Trees wrote on a Stop Work Impact blog that soon materialized, “We have $3.5 million worth of projects affected. We employ up to 35 mostly full-time staff when our Youth Environmental Stewards program is fully operational.”

In San Mateo County, the Peninsula Open Space Trust, with almost $3 million from the Conservancy, had completed a three-mile segment of Coastal Trail on the bluffs south of Half Moon Bay. It was to have opened in July, after three bridges, on order from a contractor, were installed. The stop-work order not only postponed the trail opening indefinitely, it also blasted a hole in the budgets of contractors.

“The worst is the uncertainty,” said Judy Kelly, director of the San Francisco Estuary Project. To her, the “poster child” for the cascading effects of the freeze is the Invasive Spartina Project (ISP), because it illustrates how interrupting work on a long-range project can undermine many years of successful effort.

Over the past ten years, $12 million has been expended on an attempt to stop invasive Spartina cordgrass from spreading along the edges of San Francisco Bay. The plant is considered a greater menace to the estuary than anything apart from development. It outcompetes native cordgrass, obliterates mudflats, and destroys endangered-species habitat. In Oregon it spread throughout Willapa Bay, but here the Conservancy started an eradication effort early. Whereas in 2004 the weed covered 3,000 acres, now only 300 acres remain. Because it grows explosively, however, it could quickly come back to cleared areas, invade newly restored tidal wetlands, and keep on spreading.

Peggy Olofson left a secure job as water quality engineer at the San Francisco Regional Water Quality Control Board to direct the ISP as a private contractor to the Conservancy. “It was quite a risk, but it was exciting,” she said. “Now I’m having to lay off 10 employees, and I personally have used up all my cushion money. I have no money for next month’s mortgage, will have to cancel my health insurance--it’s $800 a month--and I’m not servicing my car. My daughter, who’s in community college and was hoping to go to a four-year university next year, won’t be able to without her mother’s income.”

There was also no more rent money for the office, and the landlord is under pressure. “His place is emptying out,” Olofson said. Some funds were patched together to keep at least some of the Spartina Project going, but it’s not enough to prevent damage to the eradication effort.

How did this disaster happen? The Conservancy’s executive officer, Sam Schuchat, sighs and explains: Every three months, agencies tell the controller how much bond money they will need for the next three months, based on bills and commitments. The controller tells the treasurer, who goes to New York institutions that buy bonds. “They stopped buying them in September,” said Schuchat. “The entire financial system was seizing up, the economy was in freefall. The institutions looked at California [at the budget impasse] and thought, they’re not fixing this.”

New York State had raised some taxes and wasn’t in this quagmire, Schuchat said, but “in this state the desire for public services outstrips the willingness to pay. It’s an adolescent view of public financing--that it should be done by someone else. Well, there’s nobody but us.”

If the freeze goes on for a long time, it will be hard to put back together what was carefully crafted over many years and suddenly blown apart. The only bright sign, Schuchat said, is that grantees and nonprofits have been forced to organize. “This is their moment to shine.”

The scramble for federal stimulus money is now underway. But unless the State provides some matching funds, and unless projects are “shovel ready,” opportunities to tap that source could be lost. If the bond freeze is not lifted soon, the delay will keep adding to project costs, and the fallout will continue to cascade.