January 5, 2006

Calif. gov. proposes $68 bln in infrastructure debt

SACRAMENTO, California (Reuters) - California Gov. Arnold
Schwarzenegger proposed on Thursday a $222.6 billion
infrastructure investment plan that would require the state to
issue $68 billion in general obligation bonds over 10 years.

The plan, outlined in his "State of the State" address to
lawmakers, would require one-time legislative approval to be
followed by voter backing on five separate areas of spending in
five elections through 2014.

The first vote on $25.2 billion in new general obligation
debt could come as early as June if approved by the state's
Democrat-dominated legislature, aides said.

Schwarzenegger proposed $38 billion in bonds over 10 years
to fund school and university projects; $12 billion in debt for
road and air quality projects; $9 billion for flood control and
other water resources projects; $6.8 billion for jails and
other public safety improvements and $2.2 billion for courts
and other public buildings.

Additionally, the Republican governor proposed a
constitutional amendment to cap California's debt-service ratio
at 6 percent of state general fund revenues.

Under his debt plan to expand California's infrastructure
to relieve traffic, improve the movement of goods through ports
and on highways and prepare for further growth, the state's
debt-service ratio would climb to a peak of 5.91 percent in the
state's 2014-15 year, compared with 4.60 percent in 2004-05,
and decline to 3.81 percent in 2025-26.

Lawmakers in the days ahead will take up the plan in a
conference committee along with other infrastructure bond
plans, including a proposal by state Senate President Don
Perata for the state to issue $10.3 billion in general
obligation debt for various projects.

Schwarzenegger and top lawmakers had agreed last year after
wrangling over transportation funding and in the wake of
Hurricane Katrina to make California's infrastructure needs a
top priority in 2006.

The flooding of New Orleans focused their attention on
California's aging levee system in the state's delta region
between the state capital of Sacramento and San Francisco.