The California Labor Federation does not support this measure and recommends a NO Vote. Want to learn more? Read “A Threat to Our Economy, Union Jobs and Emergency Response System: Vote NO on Proposition 53!” by Cesar Diaz in California Labor’s 2016 Top Props Series. Check it out here.
A YES vote on this measure means:
A new requirement of voter approval would be imposed before the state could issue more than $2 billion in public infrastructure revenue bonds.
A NO vote on this measure means:
The state could continue to issue revenue bonds with a dedicated revenue stream without voter approval.
Official Secretary of State Ballot Summary:
- Requires statewide voter approval before any revenue bonds can be issued or sold by the state for projects that are financed, owned, operated, or managed by the state or any joint agency created by or including the state, if the bond amount exceeds $2 billion.
- Prohibits dividing projects into multiple separate projects to avoid statewide voter approval requirement.
The state issues bonds finance public projects and pay back investors over time. There are two types of bonds—general obligation (GO) bonds and revenue bonds. When the state issues GO bonds, they are guaranteeing repayment of the bonds using any means necessary. The full faith, credit, and taxing power of the state are backing the bonds. The state is legally obligated to use any taxation power in its authority to pay back bondholders. If taxes are not viable, the state may have to sell assets to raise the revenue to make payments. If the state misses a payment, known as a default, a judge can order them to take corrective action to raise money to pay the bondholders. GO bonds are subject to statewide voter approval before being issued.
Revenue bonds finance income-producing projects, such as hospitals, parking garages, toll roads and many other projects. Revenue bonds are funded only by the users of the project, such as drivers on a toll road or water customers who finance projects through rates. The revenue from the project is set aside specifically to pay back the bond. GO bonds, in contrast, finance projects that do not produce income but provide services for the entire community. Revenue bonds are not guaranteed by state tax revenue or the General Fund and taxpayers are never on the hook to pay back the bond if the revenue source falls short. To issue state revenue bonds, the Legislature enacts a bill authorizing the issuance of the bonds, and pledges the specific revenues necessary to repay investors. Revenue bonds issued by the state are not subject to statewide voter approval requirements.
The state has recently used revenue bonds to finance a number of public infrastructure projects such as the state Water Project, Earthquake Authority upgrades, University of California and California State University infrastructure projects, Department of Corrections and Rehabilitation facilities, public schools, hospitals, state office buildings and many others. The state General Fund is not liable for repaying these bonds if the earmarked revenue source does not meet the bond payments so taxpayers are not at risk for repayment.
This measure would require voters to approve all revenue bonds issued by the state for projects costing more than $2 billion. Local Joint Power Authority (JPA) projects that include the state as a partner and issue revenue bonds would also be subject to the statewide voter-approval requirement. A majority of voters would have to approve the revenue bond in a statewide election in order for the state to issue the bond. The measure does not define the term “revenue bond” or “project” but it does preclude the state from dividing or deeming projects as multiple separate projects. The measure goes further to state that “multiple allegedly separate projects shall be deemed to constitute a single project” (emphasis added). It further specifies that projects that have physical or geographic proximity, will be physically joined in the future or cannot complete its stated purpose without the completion of another project, will be deemed a single project and subject to statewide voter approval for revenue bond financing.
Support and Opposition:
The main supporter is Stockton farmer, food processor and millionaire Dean Cortopassi, who is also a vocal opponent of the Delta tunnels project—a revenue bond funded infrastructure project. He argues that voters should have a say in the state’s largest revenue bond projects. He argues that the initiative closes a loophole that allows state agencies to issue bonds for multi-billion dollar projects without giving Californians the right to vote on the bond. They assert that California is saddled with historic levels of debt that puts the state’s long-term fiscal health in danger, though revenue bonds are paid for by taxpayers.
Opponents include Governor Brown, the State Building and Construction Trades and the Chamber of Commerce. They argue that the measure would delay or stop much needed repairs to roads, bridges, water supply and delivery systems, hospitals and universities at a time when there is a significant infrastructure backlog. Opponents further argue that the initiative is misleading in that revenue bonds repaid by users of a project who directly benefit, not taxpayers. They believe that it does not make sense to have a statewide election on projects not financed by taxpayers and not backed by state resources. Opponents believe that the uncertainty of the term “project” in the initiative makes it ripe for abuse and could be used as a tool to delay projects by calling for statewide votes or litigating their financing, making projects far more expensive and harder to finance.
The Labor Federation has supported numerous revenue and GO bond-financed projects in the past, both on the ballot and through legislation.