Wednesday, May 7, 2008

High Desert Loses Out on $150 Million Funding for Corridor

From the California Real Estate Journal.

MAY 5, 2008
High Desert Loses Out on $150 Million Funding for Corridor

The difficulty the Victor Valley has faced in gaining approval for state transportation funds is no different from the challenges faced by any other city or agency applying for a slice of Proposition 1B funding.

With the consensus that the High Desert will shoulder the next wave of industrial development, however, the California Transportation Commission's denial of $150 million in funding for the E-220/High Desert Corridor project is yet another hurdle the region must face.

"Certainly our county is growing, and we have an extensive list of transportation improvements that cover highway and rail," said Deborah Barmack, executive director of the San Bernardino Associated Governments, the agency responsible for regional planning and allocating funds from the county's Measure I half-cent transportation sales tax. "Unfortunately, transportation funding is diminishing along with the economy so our strategy is to develop a shelf of projects that are going through the environmental and design process so that as funding becomes available, we'll be ready for construction."

If built, the High Desert Corridor project would provide a valuable east-west connection between Palmdale and the Victor Valley, taking more trucks off surface streets and other freeways or highways such as the Cajon Pass.

It would begin at State Route 14 in Palmdale and run to Interstate 15 in Victorville. Phase 1A of the project would add 4.75 miles of a four-lane freeway from Interstate 15 to the Southern California Logistics Airport in Victorville.

"We're facing our capacity constraints along all modes, so we have tremendous volume in terms of goods movement and we haven't built up to capacity in decades," said Fran Inman, a member of the National Association of Office and Industrial Properties Southern California and senior vice president at Majestic Realty in Los Angeles. "So, what we really need to do is invest in infrastructure on the rail side and highway side."

A recent report from the Los Angeles County Economic Development Corp. and the Jack Kyser Center for Economic Research that looks at Southern California business expansion activity last year supports what Inman and others are saying about the need to invest in infrastructure. According to the report, the Riverside-San Bernardino industrial market ranked high with a 4.8 percent vacancy rate in fourth-quarter 2007.

Based on when funding comes through, it is estimated that the section of the High Desert Corridor running east of Route 395 could be completed as early as 2017, while the area west of Route 395 is expected to be built out over an 18-year period.

Barriers to Funding

In January, SANBAG filed applications on behalf of the city of Victorville, the lead agency for the High Desert Corridor project, along with a number of other goods movement-related infrastructure projects to the California Transportation Commission.

However, the application ultimately was rejected based on several problems the California Transportation Commission had with SANBAG's application.

According to commissioners' comments printed in a report on all the nominations requesting funding, the submission was incomplete and called the "scope of work unclear." At the same time, commissioners also questioned the air quality analysis and lack of a business plan and concluded the report by asking, "What is Route E-220?"

While the total project cost will not be estimated until a contractor is selected, the Southern California Association of Governments estimates the full cost to be $6.9 billion in 30-year escalated dollars. The cost of Phase 1A alone is $400 million.

"SANBAG did provide all of the information requested by the CTC," Barmack said. "Similar questions were asked on a variety of projects, some of which were funded and some of which weren't. We feel that we answered those questions and certainly if it appears that funding can be placed for the High Desert Corridor, we'll be engaged in that conversation with commission staff."

One of the greatest barriers to receiving funding was the E-220 project's status as a tier-two project.

SANBAG and a group of transportation-related entities from throughout Southern California determined priority levels based on several factors, including a required construction delivery date of 2013 and the availability of matching funds.

"We're hopeful that there will be a new category of funding identified for goods movement, and it would certainly be primed for that kind of funding," Barmack said. "There are some local transportation tax funds that may contribute to funding for this project and part of this project is slated for public-private partnership."

The public-private partnership Barmack referred to would be the Joint Powers Authority led by Chairman and San Bernardino County First District Supervisor Brad Mitzelfelt.

The JPA filed a Request for Proposal in December and received proposals in March from Jacobs Carter Burgess and Tetra Tech, said Mitzelfelt's Communications Director David Zook.

According to Zook, a contract may be awarded as early as May 23. He also said the JPA will continue applying for future rounds of transportation funding for the High Desert Corridor.

Playing Infrastructure Catch-Up

Among the projects that did receive approval for funding was reconstruction of the Devore interchange, new interchanges on Interstate 10 in Rialto and Fontana, and grade separations in the valley portion of San Bernardino County and in Barstow.

"In the Victor Valley area, priorities are the interchanges along Interstate 15 at Ranchero and Nisqualli and La Mesa and the Yucca Loma River Crossing," Barmack said.

The $60 million La Mesa/Nisqualli interchange over Interstate 15 was put on hold in March after SANBAG removed the project from being nominated for State Transportation Improvement Program funds because the city of Victorville was unable to show that it was fully funded.

Developer mitigation fees would have been required to pay for half of the project. SANBAG originally proposed $14.4 million in state funding for the interchange, but the city of Victorville would have had to commit $15.6 million to be paid back by SANBAG with future Measure I funds.

When Victorville did not sign the project advancement agreement, SANBAG elected a project in Hesperia that will construct carpool lanes for Interstate 10.

The Nisqualli project is just one more vital organ to goods movement within the High Desert area since it intersects with Interstate 15 and would be built to relieve the pressure on State Route 18 and Bear Valley Road helping link Victorville with Apple Valley.

"Bear Valley Road has a huge amount of traffic. We're looking at upwards of 70,000 vehicles per day," said Rob Kurth, executive vice president at Lee & Associates' Victorville office. "Bear Valley is mostly used for residential cars but there are a lot of trucks too."

Ultimately, State Route 18 would be realigned and constructed into a four-lane expressway serving as the end of the E-220 corridor where State Route 18 meets Joshua Road in Apple Valley.

In the immediate future Kurth said the area's larger industrial tenants will benefit mainly from Phase 1A of the High Desert Corridor project.

"Victorville is setting up its intermodal operations out of the airport [Southern California Logistics Airport] and is gaining steam on industrial users," Kurth said. "The real play for industrial brokers is that once these guys set up in that area, they've got a nice corridor to get from the airport to the 15 freeway. Right now all we have is Highway 395, which is highly congested, and there are [fewer] lanes. We're getting a lot of truck traffic going to the SCLA." Stirling Capital Investments' Southern California Logistics Airport, a part of the 8,500-acre Global Access multimodal hub in Victorville, is one of the major examples of why the High Desert Corridor project is seen as necessary. The E-220 corridor would improve access to SCLA and anticipated future development projects.

"I think right now we're a little bit behind with infrastructure as we're starting to ramp up development in the High Desert," Kurth said. "We see the next wave of growth is in industrial development. It's going to take a lot of infrastructure in the cities up here and anyone involved in planning has that as their main focus."

- E-mail Kari

Without that highway, industrial development in the High Desert is suspect. Without large scale industrial development, the High Desert will not get the jobs and the taxes that it needs to attract more development.

The infrastructure will come eventually, bad news for today's landowners.

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