Billions in New Bonds Should Not Escape Voter Approval
Former Speaker Willie Brown once said, “In the world of civic projects, the first budget is really just a down payment.” The strategy, he noted, was to start construction of a project quickly so it would be hard to stop once people learned of the real cost which, in many cases, could be many multiples of the initial price represented to citizens.
Constant cost overruns and a lack of accountability plague California’s infrastructure projects. Politicians casually throw “millions” and “billions” around like a game of monopoly, leaving hard-working families and future generations to pay the debt they so flippantly create.
Over the last 20 years, $50 billion in revenue bond debt has been issued without voter approval. A loophole in state law allows politicians to commit taxpayers to repaying enormous revenue bond debt without voter oversight.
Clever politicians and special interests have discovered this deceptive voter avoidance scheme and are using this loophole to sign Californians up for multi-billion dollar projects with little accountability and zero voter oversight. This has become a very popular funding mechanism for politicians and Sacramento insiders who would prefer to leave voters out of the process.
The result is careless project planning and massive cost overruns beyond the “first budget.”
have to borrow because all that money goes to pay for excessive pensions.
The good news is that an initiative on the November ballot will close this loophole, hold politicians accountable and ensure that Californians’ voice is heard before they get stuck footing the bill for these huge projects. The Stop Blank Checks initiative requires statewide voter approval for state revenue bond projects that borrow over $2 billion. These are the state’s biggest revenue bond projects that affect millions of Californians. If a project results in increased water rates, commute costs or other unavoidable fees, then voters should have a say.
Voter approval requirements for new debt date back to the earliest days of California’s history. And what was true 100 years ago is even more so today: Because long term financial obligations are paid by future generations, we should not allow politicians – who desire to placate special interests which stand to gain from megaprojects – to commit to massive debt without a direct check by those who will be on the hook.
But political elites hate voter approval and over the course of the last several decades, new esoteric debt instruments like “Certificates of Participation” and “revenue bonds” have been created for the purpose of avoiding voter approval. While “revenue bonds” are not inherently bad, especially for smaller projects, they are far more susceptible to abuse than are general obligation (GO) bonds. And that abuse is more likely as the size of the project gets bigger.
But we can stop this abuse by passing the Stop Blank Checks initiative appearing on the November ballot which will give voters a voice on the state’s largest projects. This will go a long way in holding politicians accountable and force them to be more responsible with California’s long-term debt spending. Moreover, it will help voters understand the full cost of future projects that they are expected to pay.
Californians would be wise to pass the Stop Blank Checks initiative as a needed first step in addressing California’s mountain of debt.
Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.
RELATED ARTICLES FROM THE CALIFORNIA POLICY CENTER
by Marc Joffe, March 29, 2016
by Marc Joffe, January 19, 2016
by Kevin Dayton, July 21, 2015
by Ed Ring, October 28, 2014