Proposition 53: Revenue Bonds
Jolene Walsh and Danielle Coats
August 11, 2016
1 | emwd.org
Disclaimer
• This information is provided for informational purposes only so EMWD
may consider a position on the aforementioned proposition.
• This information is not intended to advocate for a yes or no vote on the
ballot proposition.
2 | emwd.org
Proposition 53: Revenue Bonds
• One of 17 initiatives that have
qualified for the November 8, 2016,
ballot
• Sponsored by Dean Cortopassi, a
wealthy Delta farmer
• Proposition 53 is also referred to as
the “Cortopassi Initiative” or the
“No Blank Checks Initiative”
3 | emwd.org
What Does Proposition 53 Do?
• Proposition 53 requires statewide voter approval for revenue bonds for
projects that meet the following conditions:
– The total amount of revenue bonds sold for the project exceeds $2 billion.
The measure specifies that the $2 billion figure be adjusted annually based off
of the Consumer Price Index; and
– The project funded by the revenue bonds would be funded, owned, operated,
or managed by the state, including any joint powers agency (JPA) or similar
body created by the state or in which the state is a member.
4 | emwd.org
Current Practice
• Voter Approval Not Required for State Revenue Bonds
– Under the California Constitution, state general obligation bonds need voter
approval before the state can use them to pay for a project. State revenue
bonds do not need voter approval under existing state law.
Source: Legislative Analyst’s Office
5 | emwd.org
What Projects Would it Apply to?
• The initiative could apply to a broad range of projects including:
–
–
–
–
–
–
–
–
Water shortage facilities
Desalination plants
Roads
Highways
Water treatment facilities
Hospitals
Ports
Potentially University of California and Cal State facilities
Any state and some local projects that exceed $2 billion,
where the state finances the project or is a participant in a JPA
6 | emwd.org
What Comprises a Project?
• While it is aimed at the California WaterFix and potentially the high speed
rail, the measure intentionally does not call out a specific project in order
to capture future large scale projects.
• However, it also does not define what a “project” is, which leaves concern
and confusion as to what constitutes a project, ie. is it a single building? Is
it multiple buildings or structures, like a complex?
The vague reference to a project and the reasonable expectation that the courts and
the state will have to weigh-in on determining what constitutes a project could have a
chilling effect on the delivery of large-scale infrastructure investments in California.
7 | emwd.org
Additional Concerns
•
•
•
•
•
•
Proposition 53 could undermine local control by delaying or blocking much
needed infrastructure projects being pursued by local water agencies and
other local jurisdictions.
There is no exemption for emergencies or major disasters where critical
infrastructure is damaged or needed. In the event of a major disaster local
governments may have to wait for voter approval to replace major
infrastructure.
It would allow voters in distant communities, that have no financial or other
interest in the project, to reject projects outside their communities.
Undermines the beneficiary pays principles.
The measure targets revenue bonds, which are typically backed by private
investors. Revenue bonds are repaid by users of a project who directly benefit,
not taxpayers.
The LAO states that the new voter requirement might discourage some
jurisdictions from pursuing projects due to the additional costs and
uncertainty associated with the project.
8 | emwd.org
Arguments in Support
• Supporters of Proposition 53 state that:
– Californians have incurred historic levels of debt that put long-term fiscal health in
danger.
– Californians deserve the right to vote on all new major bond debt before they are
expected to pay for it.
– This initiative will close a policy gap that policy makers have used to by-pass public
scrutiny.
9 | emwd.org
Recommendation
• The recommendation is that the Board of Directors of Eastern Municipal
Water District pass a resolution in opposition to Proposition 53.
10 | emwd.org
Contact Information
Jolene Walsh
Senior Director of Public and Governmental Affairs
(951) 928-3777 ext. 4347
Danielle Coats
Senior Legislative Program Manager
(951) 928-3777 ext. 4526
Email: [email protected]
Email: [email protected]
11 | emwd.org