BILL ANALYSIS Ó
AJR 4
Page 1
Date of Hearing: March 5, 2013
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
AJR 4 (Hueso and V. Manuel Pérez) - As Amended: February 27, 2013
SUBJECT : Border Infrastructure
SUMMARY : Memorializes the California Legislature's desire to have
the federal government fund improvements at the San Ysidro, Otay Mesa,
and Calexico Ports of Entry (POE). Specifically, this bill :
1)Makes, among other declarations, that:
a) The U.S, Canada, and Mexico signed the North American Free
Trade Agreement (NAFTA) in 1993 to foster trade among the three
countries and improve the region's global competitiveness. Since
its enactment, trade between the U.S. and Mexico has quintupled,
totaling $500 billion in 2011;
b) Mexico continues to be California's number one export market
with $25.8 billion in goods being exported to Mexico in 2011 and
accounting for 16% of all California exports;
c) Ninety-nine percent of trade between California and Mexico is
transported by trucks. Border traffic congestion and delays
along the San Diego and Imperial Counties cost the U.S. and
Mexican economies an estimated $8.63 billion in gross output and
more than 73,900 jobs in 2007;
d) New land POEs and improvement projects are under federal
jurisdiction and that border improvements are underway or planned
for the POE facilities at San Ysidro-Puerta Mexico, Otay
Mesa-Mesa de Otay, Calexico West;
e) The General Accountability Office and the Department of
Homeland Security estimate that $6 billion in border
infrastructure is needed to fulfill their mission of preventing
unlawful entry and smuggling while facilitating legitimate trade
and tourism; and
f) Since February 2009, the federal government has not funded
border infrastructure projects.
2)Resolves that the Assembly and the Senate of the State of California
AJR 4
Page 2
urge the federal government, including the Department of Homeland
Security and the General Services Administration (GSA), to fund
necessary improvements at the San Ysidro, Otay Mesa, and Calexico
POE.
FISCAL EFFECT : None
COMMENTS :
1)Author's Comment : "Since the implementation of the North American
Free Trade Agreement (NAFTA), 99% of trade between California and
México is carried by trucks through regional land ports of entry.
The San Diego Association of Governments (SANDAG) released a study
which projects that the nearly two million trucks that crossed the
California-Mexico border in 2007 will increase to nearly five
million trucks in 2050. It also estimated that in 2007, border
traffic congestion and delays in San Diego and Imperial Counties
cost the U.S. and Mexican economies about $8.63 billion in gross
output and over 73,900 jobs. Recognizing the need for improvement,
the GSA has already developed expansion projects for San Ysidro,
Calexico, and Otay Mesa Land Ports of Entry. However, contingent
federal funding has delayed project completion, resulting in
backlogs and lost revenue potential.
AJR 4 recognizes the critical importance of our border crossings to
the economy and urges the federal government, including the
Department of Homeland Security and the GSA, to prioritize border
infrastructure and fund the necessary improvement. Border
improvements are needed to reduce wait times and increase the
economic benefits of tourism, trade and commerce produced by secure
and efficient cross-border travel."
2)Central Policy Question : This resolution seeks legislative support
for federal advocacy on behalf of three POE projects along the
California border with Mexico. While it is the federal government's
responsibility to maintain the nation's borders, without
intervention, there is a concern that badly needed upgrades will be
delayed or illuminated due to broader federal budget discussions.
In making the case for full legislative support, the authors cite
the importance of trade to the California economy, the inability for
existing facilities to keep up with the demand resulting from NAFTA,
and the documented security issues with the existing POE facilities.
Each of these issues in discussed in greater detail below.
AJR 4
Page 3
3)California's Trade Economy : California's $1.9 trillion economy
naturally functions as an independent economic power within the
global economy. In fact, compared to other nations, California has
one of the 10 largest economies in the world, due to it being a
top-tier trade partner, a best-in-class investment location, a high
quality producer of goods and services, and the home and key access
point for a massive consumer-base. In 2011, California exported
$159 billion in products to over 220 foreign countries. While
California has been significantly impacted by the recession, exports
continued to increase in almost every quarter from 2010 through
2012.
In 2011, cross-border trade between California and Mexico, including
imports and exports, was valued at more than $190 billion, making
Mexico the state's most important trade partner. Total California
exports to Mexico were greater than $26 billion in 2011 and
included: Computer and Electronic Products ($9.2 billion);
Transportation Equipment ($2 billion); Machinery, except Electrical
($1.8 billion); Chemicals ($1.3 billion); and Food Manufactures
($1.3 billion).
4)Ongoing Legislative Focus on Border Infrastructure : The finance and
development of infrastructure as an economic recovery tool was the
subject of no less than seven policy and research committee hearings
during the 2011-12 Session. Both the Assembly Committee on Jobs,
Economic Development, and the Economy (JEDE) and the Assembly Select
Committee on California/Mexico Bi-National Affairs (CMB-NA) focused
on financing options and the impediments that the current border
crossings had on the movement on goods, business development and
employment. The authors of AJR 4 were the chairs of JEDE and the
CMB-NA committees during the 2011-12 Session.
Three of the hearings were held in California border communities,
which allowed Members to tour and hear updates on the projects
referenced in AJR 4, as well as learn about the economic and
security challenges posed by the current facilities. Outcomes from
these hearings included legislation (described below) to encourage
public/private partnerships, develop innovative bi-national
financing products, and to leverage technology as a means to
expedite border crossings.
5)Infrastructure: A Major Challenge to California's Competitiveness :
World class infrastructure plays a key role in business attraction,
as multinational companies consistently rank the quality of
infrastructure among their top four criteria in making investment
AJR 4
Page 4
decisions. Research shows that as U.S. infrastructure has been in
decline, infrastructure in other countries is rapidly increasing.
The 2010-11 Global Competitiveness Report by the World Economic
Forum places U.S. infrastructure 23rd in the world, a drop from its
rank of 7th in 2000.
California's infrastructure is in a similar state, according to the
American Society of Civil Engineers, California Infrastructure
Report Card 2012, with an estimated $65 billion a year investment
gap. The impact of this underinvestment is compounded by the
substantial new investments made in other states and nations,
including the expansion of the Panama Canal. With the logistics
sector employing over 73,000 workers and intricately related to the
state's manufacturing sector, failing to remain competitive impacts
many California jobs.
6)Goods Movement Infrastructure : Goods movement supports employment,
business profit, and state and local tax revenue. California
businesses rely heavily on the state's ports and their related
transportation systems to move manufactured goods. Firms rely on
fast, flexible, and reliable shipping to link national and global
supply chains and bring products to the retail market.
Transportation breakdowns and congestion can idle entire global
production networks. As a result, the capacity and efficiency of
land ports, seaports, and airports have become critical factors in
global trade.
Changes in U.S. and global trade patterns since the enactment of
NAFTA have placed increased challenges on California's goods
movement system. For California's border region, the increased
tourism, as well as the expanded supply chains for manufacturing and
product distribution have resulted in significant delays at border
crossings, decreased regional air quality, and border crossings that
are difficult to secure.
U.S. firms with significant business passing through the Imperial
and San Diego County POEs report that their logistics-supply chains
are highly time sensitive. Long wait times at border crossings
result in delays in receiving intermediary goods and ultimately lead
to problems in the manufacturing chain. Long wait times (as high as
three to four hours) between Mexico and the U.S. along the Imperial
County - Baja California border accounted for an estimated output
loss of $1.4 billion and 11,600 lost jobs nationally in 2007. In
California losses were estimated at $436 million and 5,639 jobs for
2007. By 2011, the negative economic impact on California grew to
AJR 4
Page 5
$620 million, according to the Southern California Association of
Governments.
7)Port of Entry Enhancement : There are six land crossings referred to
as Points of Entry (POEs) along the California and Mexico border.
The San Diego County-Tijuana/Tecate region is home to the San
Ysidro-Puerta México, the Otay Mesa-Mesa de Otay, and the
Tecate-Tecate POEs while the Imperial County-Mexicali region hosts
the Calexico-Mexicali, Calexico East-Mexicali II, and Andrade-Los
Algodones POEs. This resolution seeks to obtain federal funding
for three of these crossings: Calexico, Otay Mesa, and San Ysidro.
San Ysidro is the largest POE in the Western Hemisphere,
currently processing an average of 50,000 northbound vehicles and
25,000 southbound vehicles per day. The San Diego Association of
Governments estimates an 87% increase in vehicle traffic by 2030.
The San Ysidro POE is currently undergoing construction of Phase
I of III and has a funding gap of $285 million.
The Calexico POE serves over 16,000 privately owned vehicles
on an average day. The U.S. GSA has stated that the existing
facilities are undersized relative to existing traffic loads and
that the facility is obsolete in terms of inspection officer
safety and border security. This GSA designed project will
require the reconfiguration, as well as the expansion of the POE.
The project has an unfunded construction cost of $318 million.
Otay Mesa is the busiest commercial POE in California handling
more than 1.4 million trucks and $31 billion worth of goods in
2009, according to the Otay Mesa Chamber of Commerce. U.S.
Customs and Border Protection estimate that commercial truck
traffic will double by 2025. The Otay Mesa POE improvements
include the reconfiguration and modernization of the existing
facilities and the development of a new East Otay Mesa POE, which
will be developed under a public/private venture. The unfunded
public portion of the existing Otay Mesa POE is $161 million,
according to the terms of the resolution.
In January, Assemblymember Hueso, one of the authors of the
resolution, sent a letter to President Barack Obama regarding the
need to complete the POE projects and the introduction of AJR 4.
1)The Sequestration : The U.S. government continues to struggle in
meeting budget targets and reduce the federal deficit. While a
last-minute agreement delayed some cuts scheduled to automatically
AJR 4
Page 6
take effect in January, the February deadline passed without a
subsequent deal, triggering $85 billion in across-the-board budget
reductions. Both defense and nondefense programs are subject to the
sequester. Many of the large nondefense programs, including Social
Security, Medicaid, unemployment compensation, and veterans'
benefits are exempted from those cuts, and the reduction in Medicare
is limited to 2%.
In moving forward, it is likely that the federal Administration and
Congress will be reworking budgets of some impacted programs in
order to better align existing resources with national priorities.
While federal money may be tight, to the extent that AJR 4 seeks
federal funding for existing projects recommended by GSA to support
economic growth and protect the security of the nation, there may be
funding opportunities as part of broader budget discussions.
2)Related legislation : Below is a list of bills related to California
and Mexico border infrastructure.
a) AB 1545 (V. Manuel Perez) Bi-National Infrastructure and
Economic Development Bank: This bill would have expanded the
role of the California Infrastructure and Economic Development
Bank (I-Bank) to include facilitating infrastructure and economic
development financing activities within the California and Mexico
border region. Status: Held in the Senate Committee on
Appropriations, 2012.
b) AB 2113 (Hueso) Enhanced Driver License: This bill would have
authorized issuance of an enhanced driver license for the purpose
of expediting border entry. The license would be designed with
as a standard driver license with transmission technology to
denote identity and citizenship for persons entering the U.S. at
land and sea POEs. This measure is the result of testimony taken
at several CMB-NA hearings held in 2011 and 2012. Status: Held
in Assembly Committee on Appropriations, 2012.
c) SJR 13 (Vargas) Public Utilities and Cross Border
Transmission: This resolution calls on the Secretary of the U.S.
Department of Energy to reject Sepmpra Energy's application to
construct the Energia Sierra Juárez cross-border transmission
line between Mexico and California in order to preserve jobs in
California, promote energy independence and uphold California's
labor and environmental laws. Status: Approved, Resolution
Chapter 96, Statutes of 2011.
AJR 4
Page 7
d) SJR 16 (Vargas) Calexico West POE: This resolution declares
the Legislature's support for a public-private partnership to
renovate and expand the Calexico West POE and urges Congress to
enact guiding legislation to authorize private-public
partnerships, such as the one proposed for the expansion of the
Calexico West POE. Status: Approved, Resolution Chapter 124,
Statutes of 2012.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees
Imperial County Transportation Commission
Otay Mesa Chamber of Commerce
Opposition
None on file
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090