Proposition 53: Revenue Bonds. Statewide Voter Approval.

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Rejected
The Question: 

Should statewide voter approval be required before any revenue bonds can be issued or sold by the state for projects where the bond amount exceeds $2 billion?

The Situation: 

The state funds its operations and infrastructure by using annual tax revenues (“pay-as-you-go”), and by borrowing money through selling bonds to investors who, over time, are paid back with interest.

There are two main types of bonds: general obligation bonds and revenue bonds. The state repays its general obligation bonds out of the state General Fund. Revenue bonds are typically repaid using the revenue received from fees and other charges paid by the users of the projects (such as bridge tolls, rent, and utility rates). General obligation bonds require statewide voter approval before the state can issue them to pay for a project; revenue bonds, however, do not require statewide voter approval under existing state law.

The Proposal: 

Statewide voter approval would be required before revenue bonds could be issued or sold by the state for any projects costing over $2 billion. This law would apply to:

  • all projects financed, owned, operated or managed by the state; and
  • all projects financed, owned, operated, or managed by joint agencies formed between the state and local city or county governments, another state, or a federal government agency.

Dividing large projects into separate smaller projects in order to avoid the requirement of statewide voter approval would be prohibited.     

Fiscal Effect: 

Unknown. Financial impact on state and local governments, both short-term and over time, would depend on factors such as: which projects are affected, the outcome of a statewide vote, and whether alternative projects or activities are implemented instead that could result in higher or lower costs compared to the original project.

What a YES or NO Vote Means
A YES Vote Means: 

State revenue bonds totaling more than $2 billion for a project that is funded, owned, or managed by the state would require statewide voter approval.

A NO Vote Means: 

State revenue bonds could continue to be used without voter approval.

Support & Opposition
Supporters Say: 

Proposition 53 will:

  • Ensure that voters directly choose whether or not the state can implement extremely large, expensive projects, such as the bullet train and the proposed tunnels under the Delta.  
  • Close the loophole in state law that requires voter approval for general obligation bonds but not billion-dollar revenue bonds.  
  • Protect California’s long-term fiscal health by discouraging spending that adds to the state’s debt load.     
  • Mandate transparency about the true costs of projects.
     
Opponents Say: 

Proposition 53 will:

  • Take away local control by requiring a statewide vote for many local projects, even when they are funded by local users and ratepayers.    
  • Prevent or delay repair and maintenance of the state’s water systems – the most pressing infrastructure issue the state currently faces.    
  • Prevent or delay repair and maintenance of  infrastructure projects and systems after emergencies or natural disasters.           
  • Jeopardize California’s long-term economic health and safety due to deferring necessary infrastructure work.