SACRAMENTO (CN) — As voters await the presidential election, California Gov. Jerry Brown is focused on a statewide proposition he spent millions of dollars to suppress. If approved, Proposition 53 could stop work on two multibillion-dollar public works plans that Brown considers his legacy projects.
Coined the "Stop Blank Checks" initiative, Proposition 53 would sap decision-making power from legislators and state officials and require voter approval for megaprojects that seek $2 billion or more in revenue bonds.
Decades of borrowing, often with voter approval, have swelled California's state debt to more than $330 billion. And the Golden State is pouring billions more into its largest-ever public works projects: a high-speed bullet train and a $16 billion Delta tunnels water project.
Fiscal conservatives, including the Howard Jarvis Taxpayers Association, have united behind Proposition 53. The proposal would reroute control over multibillion-dollar bond decisions from bureaucrats to the taxpayers who foot the bill, said David Wolfe, legislative director at the Howard Jarvis Taxpayers Association.
"Unelected bureaucrats can basically approve these [bonds] willy-nilly without transparency for really big projects that frankly might not generate any revenue," Wolfe said.
Critics of the constitutional amendment, including Brown and a host of public safety groups and local governments, call Proposition 53 "terribly written" and "dangerous," due to its potential to stall infrastructure projects and the state's response to natural disasters.
"Prop. 53 irresponsibly fails to contain an exemption for natural disasters or major emergencies. That flaw could delay our state's ability to rebuild critical infrastructure following earthquakes, wildfires, floods or other natural or man-made disasters," the California Professional Firefighters warned in a statement.
The measure landed on the statewide ballot thanks to the deep pockets of California farmer and former Brown supporter Dean Cortopassi. He spent more than $4.5 million promoting and collecting signatures to place the measure on the November ballot. Cortopassi failed to qualify a similar measure for the 2014 election.
Proposition 53 calls for a state constitutional amendment requiring statewide voter approval of any government project financed with more than $2 billion in state revenue bonds. If the state wants to issue major revenue bonds, it would need to poll voters in a special or general election.
At issue are revenue bonds which are typically repaid by money generated from the completed public project for which they were issued. Bridge tolls, increased water rates and airport fees are examples of fees used to repay revenue bonds.
Usual buyers of state-issued revenue bonds include municipal bond mutual funds, investment banks and hedge funds. Revenue bonds can be attractive to investors because they carry a higher interest rate than state-issued general obligation bonds.
While general obligation bonds require voter approval because they are repaid with General Fund revenue, California officials can issue revenue bonds without asking voters.
Officials can also dig up revenue for projects through a less commonly used method known as lease revenue bonds. Lease revenue bonds generate funding for projects not expected to bring in revenue, such as state buildings or prisons.
Proposition 53 critics say the state's revenue bond policy doesn't need a tune-up because there is no risk in bureaucrats issuing bonds that are bought by private parties.
Supporters say the state's credit rating could drop if it doesn't repay the large bonds.