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Prop 53: Revenue Bonds

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Sheppard Mullin

Sponsored by Sheppard Mullin, a full service, global law firm with 750 attorneys.  The firm handles corporate and technology matters, high stakes litigation and complex financial transactions.  Visit www.sheppardmullin.com

Updated 1:30 PM Nov. 9, 2016

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Prop 53 failed by a vote of 48.6% yes and 51.4% no. Revenue bonds of $2 billion or more will not need approval of voters statewide.

What is Prop 53 about?

Proposition 53 is about who gets to approve state revenue bonds when they are more than $2 billion. 

Is a “revenue” bond different from a regular bond?

Yup. But it’s not hard to understand.

A regular bond, or “general obligation” bond, is sold to investors and paid off by the government and taxpayers. A revenue bond is paid off with revenues from the project that the bonds financed. So, if we use revenues bonds to build a toll road, the tolls pay off the bond. These bonds are used mainly for public infrastructure.

See? Easy. Now you can impress your friends.

 What would Prop 53 do?

Prop 53 proposes that any revenue bond over $2 billion would need approval by the voters statewide. Right now revenue bonds are approved by the legislature.

Local bond measures by school districts, cities, counties, or community colleges would be exempt. So would projects on U.C. campuses.

But if local agencies partner with the state on a bond it would need statewide voter approval.

The $2 billion limit would be adjusted according to inflation.

What are the arguments for Prop 53?

Supporters have dubbed Prop 53 the “No Blank Checks” initiative. They say:

  • California is already deep in debt. This gives voters a voice in spending money on huge infrastructure projects.
  • Prop 53 makes politicians accountable for accurate estimates on the cost of projects. Look at the bullet train. It was supposed to cost $10 billion. Now they say it will cost $60 billion.  
  • The legislature has expanded the definition of revenue bonds so they can be used to build things that don’t pay for themselves, like prisons. This is not the right use of revenue bonds.
  • Prop 53 does not affect local projects or projects for U.C. campuses who could still issue their own revenue bonds without approval from voters statewide.
  • The main supporter of Prop 53 is a farmer and self-made millionaire who is tired of excessive government spending. He wants to contain debt that will burden our children and grandchildren for decades to come  

What are the arguments against Prop 53?

Opponents say Prop 53 would be terrible. They say:

  • It would erode local control. How? Because if state and local governments collaborate, then voters on a local level could kill projects in other parts of the state, projects they don’t care about.
  • It would delay repairs after an earthquake or other disasters because we’d have to wait for an election cycle to get voter approval for revenue bonds.
  • Prop 53 would threaten our ability to fix old infrastructure, make buildings quake safe, or build water projects to prepare for future droughts.  
  • Prop 53 is financed by one multi-millionaire farmer near Stockton. He wants Prop 53 to pass to prevent a big water project from going in near his farm. (The water project they are referring is the twin tunnels project in the Delta. But that’s another story.)

 Who is behind Prop 53?

The sole contributors behind Prop 53 are Dean Cortopassi and his wife. Cortopassi is a wealthy farmer and food processor from Stockton. He has put $4.5 million dollars behind Prop 53.

The California Republican Party also supports Prop 53.

Who is against Prop 53?

Governor Jerry Brown is against Prop 53. He is joined by the State Building and Construction Trade Council. That’s an organization of construction unions whose members build a lot of public works projects.

Other opponents include the California Chamber of Commerce, organizations of firefighters, hospitals and local governments.

It’s expected they will spend a lot of money to fight Prop 53.

What does a “yes” or “no” mean?

A “yes” vote means you want revenue bonds of $2 billion or more to be subject to voter approval statewide.

A “no” vote means you want to keep things the way they are.

Click here for a cheat sheet on all the California ballot propositions.

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