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Re: Jerry Brown, allies spend millions to kill measure that could doom high speed rail, Delta tunnels projects
Author: erk
Date: 10-21-2016 - 14:23
Thanks for the Slate Mailer.
Prop.53 has a very low ($2 billion) threshold, and applies to all revenue bonds regardless of who issues them and why. So ... as an example ... water board and EPA require your town to build a new sewer plant that will cost $5B. Town raises sewer rates as much as it can without shutting the place down, then issues revenue bonds against those rates to come up with the $5B needed to meet the water quality law within the (say) 5-year deadline (increased rates otherwise would take 25 years to accumulate the $5B, which would have to be closer to $10B by then due to inflation and even modest penalties for non-compliance). Under P.53 that would require a statewide approval vote. Fails because the rest of the state doesn't want new taxes even though they won't pay them (and arguably they even benefit without taxes because the water downstream will be cleaner). Failure results in multi-million $$ fines against the town and shutting down of building and other permits, and the new plant still has to be built somehow. Essentially, that town, and everybody that lives or does business there, gets to declare bankruptcy and move away. THAT is what is wrong with P.53.
That is NOT an exaggeration of its effects. Another example: all those transportation sales taxes on the ballot are normally built out by bonding early for money to get projects started right away; that minimizes the effect of inflation on project costs and gets the capacity built soonest. Changing that to pay-as-you-go to avoid a second, statewide vote on the program after it was already approved locally at best delays project delivery for many years, and more likely results in some projects never being built before the tax expires. Doing revenue bonds on a project-by-project basis (below the $2B threshold) is possible for a while, but also cuts into funding available because of the cost of doing that multiple times (and paying potentially higher interest rates in the future given how low they are now).
And where's the inflator in the $2B cap? Right, there isn't one. Which means in 10-20 years ALL revenue bonding will require a statewide election.
Ironically, P.53 would have no immediate effect on HSR. The bonds for the first batch of projects were already authorized as General Obligation Bonds (everybody's tax $$) not revenue bonds (those who benefit pay). The current megaproject that would be immediately affected is indeed the Delta tunnels, which is of course the project the guy promoting P.53 is after, and he is unconcerned about collateral damage.
Prop.53 has a very low ($2 billion) threshold, and applies to all revenue bonds regardless of who issues them and why. So ... as an example ... water board and EPA require your town to build a new sewer plant that will cost $5B. Town raises sewer rates as much as it can without shutting the place down, then issues revenue bonds against those rates to come up with the $5B needed to meet the water quality law within the (say) 5-year deadline (increased rates otherwise would take 25 years to accumulate the $5B, which would have to be closer to $10B by then due to inflation and even modest penalties for non-compliance). Under P.53 that would require a statewide approval vote. Fails because the rest of the state doesn't want new taxes even though they won't pay them (and arguably they even benefit without taxes because the water downstream will be cleaner). Failure results in multi-million $$ fines against the town and shutting down of building and other permits, and the new plant still has to be built somehow. Essentially, that town, and everybody that lives or does business there, gets to declare bankruptcy and move away. THAT is what is wrong with P.53.
That is NOT an exaggeration of its effects. Another example: all those transportation sales taxes on the ballot are normally built out by bonding early for money to get projects started right away; that minimizes the effect of inflation on project costs and gets the capacity built soonest. Changing that to pay-as-you-go to avoid a second, statewide vote on the program after it was already approved locally at best delays project delivery for many years, and more likely results in some projects never being built before the tax expires. Doing revenue bonds on a project-by-project basis (below the $2B threshold) is possible for a while, but also cuts into funding available because of the cost of doing that multiple times (and paying potentially higher interest rates in the future given how low they are now).
And where's the inflator in the $2B cap? Right, there isn't one. Which means in 10-20 years ALL revenue bonding will require a statewide election.
Ironically, P.53 would have no immediate effect on HSR. The bonds for the first batch of projects were already authorized as General Obligation Bonds (everybody's tax $$) not revenue bonds (those who benefit pay). The current megaproject that would be immediately affected is indeed the Delta tunnels, which is of course the project the guy promoting P.53 is after, and he is unconcerned about collateral damage.
