A brighter shade of Gray

You couldn’t quite see your breath in the early morning light outside the state Food & Agriculture building. But it was cold, near freezing, the day after California instituted rolling blackouts for the first time in decades. More blackouts were on the way. I was waiting there with an aide to Phil Angelides, the first-term state treasurer who was about to address the state Transportation Commission. The meeting had been moved from the Capitol in the chaos after a maddened truck driver rammed his 40-ton rig into the building. We were waiting because the 47-year-old Sacramento native was running, customarily, just a bit late.

His topics for the powerful appointees overseeing the state’s multi-billion-dollar transportation apparatus were “smart growth” and “the double bottom line,” Angelides’ buzzwords for his initiatives to use state and federal dollars to begin to redirect development away from the familiar sprawl pattern and to stimulate economic growth in the California that has not shared in the big boom. But as he bustled up the sidewalk after the walk over from his office, his thoughts were already on his next event, a Capitol press conference with state Senate President Pro Tem John Burton and other legislative leaders to introduce his latest big idea, a state power authority. “A big day,” he agreed as he walked into the Transportation Commission meeting.

As he waited to go on, the bespectacled Angelides rocked forward slightly on the balls of his feet, the natty charcoal pinstriped suit and gray-flecked yet still dark hair belying his somewhat gawky and still boyish nervous energy.

“We need to set priorities for our future transportation patterns that allow for sustainable growth,” he told the commissioners, who interrupted their meeting to accommodate his schedule. “We need to promote a better balance of jobs and housing, higher density in urban centers, and transportation options other than the automobile. Our pattern has been to push development to the urban fringe, promoting sprawl and defeating sustainability, leaving labor pools behind in the urban core,” continued Angelides, suggesting that this works for neither the environment nor society.

The commissioners, who included such representatives of California’s major power blocs as Jeremiah Hallisey, a veteran power broker and Standard Oil lawyer, and Dianne McKenna, a former Santa Clara County supervisor and wife of Silicon Valley marketing maven Regis McKenna, listened attentively but asked few questions. The setting in the hastily arranged meeting room was awkward, with Angelides having to address himself to the commissioners at the front of the room, his back to the crowd behind him. Yet the audience of 60 or so bureaucrats, lobbyists and a few concerned citizens was attentive.

One of the commission’s younger staffers asked a few questions tinged with praise for the treasurer, then accompanied him part of the way as we walked over to the Capitol for the power authority press conference, talking about his experience in Washington and offering to help Angelides “down the line.” Indeed, the power crisis has raised Angelides’ profile and reminded much of the political community that, with his background and wealth, he is an obvious potential future candidate for governor.

Asked how he thought it had gone, Angelides said, “It went well,” as he paused, briefly pensive, to gaze at the fireball damage to the Capitol’s exterior. “But most people keep doing what they’ve always done.”

Packed with reporters, the press conference was a high-energy affair. Burton, the pugnacious San Francisco liberal who once employed Angelides’ wife, Julie, on his legislative staff, insisted that Angelides’ proposal for a state power authority to build new generating capacity, finance energy conservation and alternative energy and possibly take over utility transmission lines, was the key to any long-term solution for California’s energy woes, repeatedly deferring to the younger man for the details on what had become the Senate leader’s bill. Later, Burton, who has often criticized Davis for moving slowly and not far enough, said of Angelides, “Phil is doing what a leader does.”

It’s not what a state treasurer has usually done, though, as was apparent that afternoon when a reporter and news photographer met up with Angelides at the meeting of one of the nine financial authorities his office oversees. Meeting in muted light and hushed tones in a small amphitheater-style state auditorium, the Debt Limit Allocation Committee seemed surprised to see someone snapping pictures. One staffer came up to ask who we were. The intense Angelides had come and gone by then, deciding to go back to his office to work on the power authority proposal and prepare for a trip to New York to calm financial analysts who were worried about the state’s economy. A deputy toiled on in his stead.

Angelides’ high-profile departure from the past ministerial nature of his office has some marveling and others grumbling. L.A. Weekly political columnist Harold Meyerson calls him “a shadow governor,” noting pointedly that it is Angelides rather than Gov. Gray Davis, a fellow Democrat none too popular with legislative Democrats, who is coming up with more proposals to change and improve California.

Others are less enthusiastic. Davis press secretary Steve Maviglio admitted that the state power authority “is one of the ideas the governor is reviewing.” Another Davis associate was more blunt. “It’s one of 87 ideas.” But he later acknowledged that, cheeky though Angelides was in proposing it, he thought it was where the governor would have to go. Late last week, Davis endorsed the power authority, but the real fight will be over how strong it is.

Davis praised the idea in general terms in his tough-sounding State of the State address. But the governor seldom gets ahead of the curve, as the power crisis has again demonstrated, and his focus to date has been mostly short-term and ad hoc. Much of the business community, including the big private utilities that Davis has neglected to criticize for their central role in crafting the electric deregulation debacle, has been opposed to public power, even though the 30 percent of the state that has it is sailing through the crisis. In addition, Angelides and Davis, while certainly cordial now, even sharing the same pollster, have not always been friends.

While state Democratic Party chairman in 1992, Angelides favored Dianne Feinstein over Davis in the U.S. Senate primary, though he did not formally endorse her. Feinstein won. And Angelides actively explored a campaign for lieutenant governor in 1994, a post Davis sought and won that year, before deciding to run for treasurer. One veteran Democratic adviser, who, given the governor’s notoriously long memory, does not want to be named, even speculates that Angelides could find himself running for governor as early as next year “if Davis goes down the tubes.” But he thinks it unlikely.

“Gray will have upwards of $40 million with his constant fund-raising,” he points out, “and Angelides isn’t rich enough to run against that kind of money machine even if he wanted to. But I wouldn’t bet against him after term limits gets this governor.”

So there’s ample reason for gubernatorial pique at Angelides’s cheek, which a gubernatorial insider insists does not exist. But then, Angelides had a rather cheeky side at an early age. Former Sacramento City Councilman Burnett Miller recalls his re-election race in 1973, when a 20-year old college kid ran against him.

“I’ve known Phil since he was a little kid,” Miller recalls. “He was a kid that hung around the Sutter Lawn Tennis Club all the time, where I played. His dad was a friend of mine from the neighborhood. His parents were astounded that he was running and worried about how he would finish Harvard.”

“It was funny at first,” says Miller, chuckling at the memory. “Till he started doing well.”

While a political strategist-in-training, I first heard of Angelides as a result of that early campaign, at a late ’70s how-to workshop. The topic was comparative advertising. The sample was a piece produced by Miller’s campaign, a straightforward side-by-side comparison of the veteran councilman and the Young Turk. On Miller’s side of the ledger, an impressive-looking photo of a business-suited, middle-aged man with a long list of accomplishments and posts beneath his name. On the Angelides side, a photo of a wild-haired youth and a very short list of relevant experiences—Harvard undergraduate, McGovern for President volunteer. It brought the house down in the workshop, and, needless to say, didn’t do wonders for Angelides in his campaign. He lost.

Asked now about running as a college student—who went to school on the other side of the continent, mind you—Angelides grins at the memory. “It is pretty funny, looking back,” he says. “I thought Burnett [Miller] was some establishment figure. Actually, he was a liberal who did some great things. But I’d gotten turned on to politics by Allard Lowenstein [the anti-Vietnam War leader and former left-liberal congressman], who came through Harvard promoting his “Dump Nixon” campaign and I was chomping at the bit to start trying to make a difference.”

Brashly imprudent as that long-ago lemon of a campaign looks, it did turn into lemonade. Angelides met people who have proven to be very important in his life, like Angelo Tsakopoulos.

Tsakopoulos, now one of the richest developers around and a pre-eminent power broker in the region, was already a major figure in Sacramento. Angelides didn’t know him, but decided to go and ask for his support anyway. “It was a Greek thing,” says Angelides. “My parents have an immigrant background and I thought I could relate to Angelo.”

“He came in to see me,” recalls Tsakopoulos, “a skinny kid, full of energy, smart as a whip. He said he would be 21 before the election and he wanted to make changes. I liked that, so I helped a little and decided to stay in touch.”

And the young go-getter attitude of that youthful campaign gained him a slot as the day-to-day coordinator of Phil Isenberg’s successful campaign for mayor of Sacramento. Isenberg later went on to become a very influential state legislator and widely acknowledged master of California fiscal matters.

By the late ’70s, Angelides had gained a top post in the state’s Department of Housing and Community Development, headed by one of Jerry Brown’s most activist appointees, Arnold Sternberg. It was in that capacity that I first met Angelides, while I was working as a VISTA Volunteer with low-income renters. Sternberg was a great ally of anti-poverty advocates and Angelides was one of the key contacts and allies in the housing department.

Which is why some were surprised when Angelides left the activist side of the Brown Administration to go to work for then Assemblyman Mike Roos, a Los Angeles Democrat who chaired the Assembly Housing Committee. Roos was regarded by many progressives as a classic special interest Democrat and the principal tool of the landlord and developer lobbies. Much later, Roos became entangled in the corruption scandal surrounding Orange County fireworks magnate Patrick Moriarty.

But in the early 1980s, things seemed much brighter and shinier. Roos was a top lieutenant to legendary Assembly Speaker Willie Brown, serving as Assembly majority leader, and Angelides was his chief of staff. Steve Thompson, a friend of Angelides’ from local Sacramento politics and the McGovern campaign, now head of the California Medical Association, was a top aide to Speaker Brown. It was a heady time and Angelides impressed Brown, the self-described “Ayatollah of the Legislature” and long-time Democratic Party boss. His support would be important down the line.

But heady as those days were, by 1984 Angelides was ready to move on and, for a time, out of public life. He went over to see Angelo Tsakopoulos and, in what some might think was another cheeky move, told him that he wanted to be general manager of his company, AKT Development. “It was really something,” Tsakopoulos says now. He wasn’t taken aback, exactly, but he did note that Angelides didn’t know the business. Still, he hired him. “I told him he would take six months to learn. He did it in 30 days,” Tsakopoulos says with a familial pride.

“Phil wants to simplify problems as much as possible, he asks lots of questions,” Tsakopoulos says of Angelides’s management style. “He is very methodical, like solving a complex math problem, pieces at a time. I’m so happy I hired him.”

It was to be the basis of Angelides’ fortune. “It’s not about money for Phil,” Tsakopoulos insists. He notes that Angelides got out of business at a time when many were on the verge of making even bigger money. He could certainly be making many times more than he does as state treasurer.

Yet if it’s not about the money in the bigger picture of Phil Angelides’ life, it was certainly about getting the money for a time. “Making a lot of money,” muses Angelides. “It’s enabled me and Julie and our kids to live a comfortable life. And it’s liberated me to do things.”

Getting the money has also made a huge difference in Phil Angelides’ life and prospects. The diligence and meticulousness that he used as an activist and political and policy operator in the Capitol was applied in a new direction.

Developers are like movie producers. They raise money to produce projects. Which is also what political fund-raisers do. As Angelides succeeded in the development world, striking off to create his own firm, River West Development, in which he continued to work on some projects with Tsakopoulos, he turned his hand to political fund-raising. In particular, he turned his hand to political fund-raising on behalf of another Greek-American, Michael Dukakis, then the popular governor of Massachusetts. Dukakis, as it happened, wanted to be president of the United States.

Angelides and Tsakopoulos were both thrilled by the prospect of a Greek-American in the White House, and signed on to Dukakis’ campaign. With Democrat Gary Hart, the clearcut frontrunner after his near-miss insurgent 1984 candidacy, that prospect seemed most unlikely to happen in 1988. But Hart’s candidacy was cut down in a media firestorm over his private life, the particulars of which seem rather quaint today. Nevertheless, the field was wide open and Dukakis moved steadily yet swiftly to develop a powerful campaign in the vacuum of power.

One of Dukakis’ most important assets in his drive for the White House turned out to be Phil Angelides. The then 35-year-old Sacramentan emerged as one of Dukakis’ top five fund-raisers in the nation, tapping into Greek-American networks and anyone else he could think of. The Dukakis campaign was the crucible from which Angelides emerged as a major power broker. And it was an experience that has stayed with him. Though Angelides knows a galaxy of political stars, and would go on to play significant roles in the election of two U.S. senators and one president, a picture of Michael Dukakis is one of the few pieces of political memorabilia to make its way into his treasurer’s office at the Unruh Building.

Dukakis won the Democratic nomination, of course, but went on to lose the general election to George Bush I for not sufficiently realizing, among other things, that crime and the American flag are actual issues to a great many voters.

Angelides returned to business, his political stature raised well above that of a Capitol operative, disappointed by Dukakis’ defeat but carrying fond memories of the campaign. I remember him talking at the time of how much fun he had working with volunteers in Iowa, where Dukakis made a good enough showing against House Democratic Leader Dick Gephardt to go on to a New Hampshire primary victory that would key his nomination victory. Still, perhaps more than other campaigns, which are less all-encompassing and less about national identity, a presidential campaign takes a lot out of you, and Angelides needed time to recharge his batteries and get back to business. But he vowed to be ready for the next opportunity. It came perhaps sooner than he expected.

After Dukakis’ defeat, the California Democratic Party implemented new rules and moved to professionalize its operations, elevating and strengthening its state chairmanship and making it a four-year affair rather than the traditional two-year rotation between Northern and Southern Californians. After running his own think tank, working as a lawyer, studying Zen Buddhism, and working with Mother Teresa, former Gov. Jerry Brown chose to make his political comeback as the first big-time chairman of the state party, handily winning the election in 1989.

But midway through his four-year term, Brown stepped down from the party chairmanship and made a bid for the presidency, a campaign in which he ended as the Democrats’ runner-up to Bill Clinton. Someone had to replace Brown for the final two years of his term. Angelides swiftly moved into the breech. He had continued to build on the reputation he established in the Dukakis for President campaign, raising money and working with old friend Steve Thompson, the longtime Willie Brown adviser, and others in Dianne Feinstein’s 1990 campaign for the governorship against Pete Wilson. When it came time to find a new state party chairman to replace Jerry Brown, Willie Brown and Feinstein quickly agreed that Angelides would be an energetic choice.

In fact, it didn’t look like a very opportune moment for Democrats. That was putting it mildly. In California, eight years of Republican George Deukmejian in the governorship was extending into at least four more years with Pete Wilson, who resigned his U.S. Senate seat and appointed an Orange County Republican to replace him. The other Senate seat was held by Democrat Alan Cranston, a longtime powerhouse on Capitol Hill who had played a major role in reviving the Democratic Party in California during the conservative Republican heyday of the 1950s. But Cranston had been brought low by financial scandal, and would prove unable to run for re-election. And a Democratic presidential candidate had not carried the Golden State since 1964.

At the national level, things, if anything, seemed even worse. It was right after the Persian Gulf War. George Bush I was riding high with a whopping 90 percent approval rating. His re-election seemed to many to be a certainty. Indeed, when Angelides held his first press conference as state Democratic chairman, he was heckled by longtime Sacramento Bee columnist Dan Walters for pursuing a fool’s errand. Other state reporters, while more respectful, were scarcely less incredulous at Angelides’ insistence that the Democrats could win in 1992. Though Angelides was a bit abashed, he started organizing the party for the 1992 elections, when control of the Legislature, the congressional delegation, both seats in the U.S. Senate, and the presidency would be at stake.

By all accounts, Angelides’ chairmanship was a smashing success. Bill Clinton and Al Gore carried California handily against Bush and Dan Quayle, Dianne Feinstein smashed Wilson appointee Seymour, and left-liberal Congresswoman Barbara Boxer won a squeaker for the retiring Cranston’s seat.

Though not everyone was thrilled with Angelides—more than one Clinton aide called him “a raving egomaniac,” and his spirited speech at a Clinton fund-raiser held at his showcase Laguna West development was as long as the presidential candidate’s—there was little complaint about his performance. California’s two new female senators hailed his work on their behalf, the new president was happy with him and there was no shortage of good options for the future. The party chairmanship rotated south, to commentator and former Jerry Brown aide Bill Press, now co-host of CNN’s “Crossfire,” and Angelides had no interest in moving to Washington. It was clear by now that statewide office was his real interest.

After flirting with a run for lieutenant governor and deciding not to chair Kathleen Brown’s gubernatorial campaign, he made ready to run for the office Brown was giving up to run for the governorship, the post of state treasurer. Created in the early ’70s by legendary former Assembly Speaker Jesse “Big Daddy” Unruh as a post for himself after an unsuccessful bid for governor against Ronald Reagan, the job aggregated formerly appointive bureaucratic jobs overseeing the state’s vast investment funds and bonding capacity. It was a job with real potential, which is why Gray Davis sought it in 1974, losing the Democratic primary to Unruh before finding his political fortune as Jerry Brown’s chief of staff.

Kissing the ring of the great power broker on behalf of presidential candidate Hart, I once asked Unruh over a drink at Frank Fat’s why he’d wanted to be the treasurer. With a rumbling chuckle, he said, quoting bank robber Frank Sutton, “That’s where the money is.”

Jerry Brown’s sister, Kathleen, took a cautious approach to the office, emphasizing its arcane ministerial functions even as she ran for governor. Of course, as the daughter and sister of governors, she could count on media attention without risky policy pronouncements. Angelides had a more activist role in mind.

First he had to win a tough Democratic primary against then state Senate President Pro Tem David Roberti, which he did handily, spending freely from his personal fortune. But his luck ran out in the fall of 1994, as he and most of the Democratic ticket went down in the Pete Wilson landslide.

It was back to business to replenish his finances and prepare for another bid in four years. He also signed on, at the request of the late Mayor Joe Serna, to a citizens committee to reform the failing Sacramento School District. “Angelides brought needed political clout and expertise to the effort,” recalls state Secretary of Housing and Human Services Grantland Johnson, a former Sacramento city councilman and county supervisor. Working with KCRA owner Jon Kelly and others, Angelides helped Serna, who had no statutory authority over the schools, to engineer the removal of the district’s superintendent, elect a new school board majority and institute a variety of reforms. Angelides wasn’t exactly infallible, though. He miscalculated on the appeal of a needed school bond measure proposed by the old regime, withholding crucial support. It failed by only a few votes, and several more years went by before another bond measure could be passed.

1998 turned out to be a very different year for Democrats than 1994. The anti-Mexican immigrant Proposition 187 boosted Wilson in 1994, providing nervous white voters with a scapegoat for their anxiety and hurting Kathleen Brown, who focused the close of her campaign against 187. But it made clear the alliance between the Latino community and the Democratic Party, even though some cautious top Democrats, though not Angelides, had opposed Kathleen Brown’s decision to campaign openly against 187, fearing a white voter backlash.

Gray Davis was the beneficiary of that decision in 1998, with Latino voters turning out overwhelmingly for the Democratic ticket. Helped also by the hard-right drift of the Republican leadership—gubernatorial candidate Dan Lungren declared: “Californians are even more conservative than they know”—and a tough, adroit campaign, Davis won by a whopping 20 points.

Angelides swept into office along with Davis. Encountering no problems this time in the Democratic primary, Angelides decisively defeated the Republican nominee, former Assembly Speaker Curt Pringle, 53 percent to 40 percent.

Once in office, Angelides moved quickly to learn the job and roll out policy proposals. Instead of simply presiding over bond sales in the manner of most of his predecessors, Angelides sees himself as a “chief investment officer” for the state, with its huge bonding capacity and massive pension investment funds. As treasurer, he runs or serves as an influential board member on a host of investment-oriented boards, so he sees the job as providing him with the opportunity to play the role of catalyst. First was his “smart growth” strategy to begin to deal with California’s environmental unsustainable pattern of development by sprawl. Next came what he calls “the double bottom line,” to use public investments and deposits to create more wealth and opportunity for struggling communities in housing, manufacturing and community-oriented banks.

“I see a productive role for the public sector in making markets work better,” Angelides explains, placing a business-oriented cast on governmental activism. “The public can and should be a levelling factor. That applies especially to energy.”

Like most everyone else, Angelides is reacting to the electric power crisis, which will continue in one form or another for years. In full scramble mode, the Capitol is a somewhat surrealistic place right now. It’s nearly as surrealistic as reading the California Energy Plan produced in 1998 by then Gov. Pete Wilson. In it, he boasts of his legacy of electric power deregulation, forecasting lower prices and a declining rate of growth in electric demand.

Forecasting a declining rate of growth in electric power demand seems remarkably foolish today, given the continued growth of the state’s population and economy, now the world’s sixth largest. But in fact, California’s electric power demand did grow by a mere two percent a year for the 20 years prior to the 1996 deregulation. That was in stark contrast to the state’s average seven percent annual growth rate in electricity demand during the’50s,’60s and early ’70s, before the energy conservation approach championed by then Gov. Jerry Brown took hold in the late ’70s. Energy conservation helped make California the fourth lowest per capita user of energy of the 50 states. But since the 1996 deregulation, electric power usage has accelerated and conservation has declined.

Having grown up under public power with SMUD, Angelides believes that, “Energy is too important, too basic to people’s lives to have no control over it. That’s what we lost with deregulation.”

Before deregulation, California utilities owned 46,000 megawatts of electrical generation capacity, half again as much as needed to meet winter peak demand and avoid any blackouts. After deregulation, California’s private utilities rushed to sell off power plants—to the very out-of-state firms now ramming it to us. Then our private utilities used much of the proceeds to buy and build power plants in other parts of the country. Pacific Gas & Electric, for example, whose threats of bankruptcy are constant, quickly became one of the biggest electric power generators in the Northeast.

To regain some control lost when California ceded its energy future to the vagaries of a market easily manipulated by out-of-state corporations, Angelides worked with former SMUD chief David Freeman, now head of L.A.’s Department of Water & Power, and others to come up with his proposal for a state power authority.

The bill will use the state’s ability to sell revenue bonds to finance new power plants, renewable energy, a consumer loan program for more energy efficient appliances and a possible takeover of utility transmission lines, which would give the state more control over wholesale electricity prices, now overseen exclusively by the federal free marketeers of the George Bush II administration. It’s modeled after Franklin Roosevelt’s establishment of the New York State Power Authority in 1931. When squeezes come, it is intended to stabilize the market. The bonds are financed by the sale of power. “Instead of selling back to Californians at cost plus and an arm and a leg, we’ll sell it at just enough to pay off our bonds,” Angelides says. The state would use its still excellent borrowing ability to finance new power production and conservation.

“The idea here,” insists Angelides, “is to control our destiny. If we controlled 10 or 15 percent of capacity, we wouldn’t be victims of the market right now.”

Angelides says that his and Burton’s proposal for the California Consumer Power and Conservation Financing Authority is key. “This is a historically time-tested idea which will work for California’s future. We need public power in this state so we can control our own destiny.”

Burton concurs, pointing out: “We’re going to be in a crunch for quite some time. We have a steep hill to climb for the next five years, so we have to put this power authority in place now.”

The state is already getting into the power business, but in an ad hoc way through Assembly Bill 1, under which the Department of Water Resources buys power for distribution through the private utilities. Burton describes this process as “the tail wagging the dog.” With a state power authority, “We will be the dog, and we will be wagging the tail.”

“This measure is the cornerstone of the long-term solution, and we are fully committed to it,” says Assembly Majority Leader Kevin Shelley, speaking on behalf of the Assembly leadership.

That’s the long-term, and the politics between here and any enactment of the state power authority will be complicated and perhaps brutal. But what if Angelides were governor now, and had to handle the short-term? Deputy Treasurer Cathy Calfo blanches a bit at this question, but Angelides merely grins and explains he is not a candidate.

“We’re still trying to find out how much the utilities are really in the hole,” he says. There is ample evidence they are overstating their problems. “I don’t think they should go bankrupt,” Angelides says. “It would be disruptive and we would run the risk of losing what little control we have left to a bankruptcy judge, who could order big rate increases,” and possibly place important assets out of California’s reach.

“In exchange for helping the utilities stay afloat, we should get something of value.” Noting that the state has already helped the utilities as part of the 1996 deregulation, which gave them $28 billion to deal with nuclear power plants and other uneconomic assets, Angelides sees a state takeover of hydroelectric facilities or transmission lines as the best options, with stock in the companies a lesser priority.

Unfortunately, Davis feels differently, and the plan he is now pursuing focuses not on tangible assets but on stock options, which would give the state no greater control over the companies or its energy future but might allow an infusion of money to help finance utility assistance.

Any rate increases, Angelides believes, should focus on large industrial users rather than the average ratepayer. “They are the ones who pushed for deregulation,” he points out, “not consumers.”

“But we can’t take a piecemeal approach,” he says. “We’ve been doing that for years with energy and it has turned into a disaster. That’s why we need to get ahead of the curve and have this power authority.”

How far ahead of the curve is Angelides himself with the power authority and his other gubernatorial-sounding ideas? Is he too far ahead of the curve or is he riding the crest of a coming wave that will lend him not just the shadow of a governorship but its substance? One thing’s for sure. It will be a fascinating ride to watch.