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Kevin Dayton

California Supporters of Economic and Personal Freedom Can Plan for 2014 by Thinking Locally

Want to advance and protect economic and personal freedom in California in 2014?

Turn off the talk radio. Instead, turn on Cable Channel 19 or whatever station broadcasts your local government meetings. Or look up your local government web sites for agendas, minutes, and archived videos of meetings.

You may discover the Left advancing its agenda through the mundane policy implementation and administrative operations of your local governments, with virtually no resistance or news media coverage. But you can turn the tables.

Here are two suggestions on how YOU can make a difference in 2014 in your city.

Explain Bond Measures to Your Friends, Neighbors, and Coworkers

California voters almost always approve ballot measures that authorize local K-12 school and community college districts to borrow money for construction by selling bonds. Most voters know little about school construction finance. They vote for bond measures to “help the kids.”

While this incomplete knowledge about bond measures gives educational districts a chance to mismanage huge amounts of money with impunity, it also gives you the opportunity in social settings to provoke critical thinking about bond measures. Regale your friends, neighbors, and coworkers with these tidbits:

  1. Few people realize that the state’s K-12 school districts and community college districts have relentlessly borrowed money for construction since 2000. That’s when 53.4% of California voters approved Proposition 39 to reduce the threshold for approval of most school construction bond measures from two-thirds to 55%.
  2. No one has apparently calculated the exact total borrowed amount through bond sales since 2000, but the total may exceed $100 billion, including state matching grants from the $35.8 billion in statewide bond measures approved in the mid-2000s. Los Angeles Unified School District alone has a $20 billion bond-funded construction program. (Those bond proceeds are also being used to buy iPads.) Note that these amounts do NOT include the substantial  interest payments owed on the money borrowed through bond sales.
  3. In 2012, voters authorized 116 local education agencies in California to borrow a total of $15,266,651,190 ($15.3 billion) for construction by selling bonds to investors. Voters let West Contra Costa Unified School District grow its $1.77 billion debt and let San Diego Unified School District borrow another $2.8 billion in addition to the $2.1 billion they approved in 2009. Voters approved a $475 million bond measure for the Oakland Unified School District: it passed with 84%, the highest percentage of approval for any bond measure in 2012.
  4. The dollar amount for the bond measure (cited on the ballot but rarely mentioned by the campaign to pass it) is not a grant award that comes from President Obama or “somewhere.” It’s the amount of money that voters are letting the educational district borrow from investors by selling bonds. The educational district pays that amount back through the collection of property taxes. People who rent or lease property indirectly help the property owner pay those taxes, so most people are paying for the bonds. It’s NOT “free money.”
  5. The dollar amount cited on the ballot does NOT include interest paid on the money borrowed through bond sales. Yes, bond measures involve interest payments, just like mortgages, credit cards, and payday loans. And that interest can be substantial, especially if the educational district sells Capital Appreciation Bonds (see below).
  6. Who buys bonds and provides the money to educational districts? Investors in municipal bonds include wealthy individuals, mutual and money market funds, property and casualty insurance companies, and commercial banks. (Ironically, some vocal advocates for educational spending deride these investors as the “One Percent.”)
  7. The financial services industry also takes a cut of bond transactions through underwriters’ discounts (bond broker fees) and bond counsel fees, disclosure counsel fees, paying agent fees, escrow agent fees, rating agency fees, bond insurance fees, verification agent fees, financial adviser fees, printing fees, and other miscellaneous expenses. When politicians take advice from professional campaign consultants and claim that “all the money stays in the community,” they’re either uninformed or lying.
  8. Professional consultants specialize in helping educational districts win voter approval for bond measures, often stretching the law though clever schemes to use taxpayer funds to pay for campaign and message development. Ballot titles for routine construction bond measures often deceive and manipulate voters – who would have the gall to oppose the “Student/Veterans’ Affordable Education, Job Training, Classroom Repair Measure?”
  9. Most voters don’t know that many educational districts have recently sold a type of “general obligation bond” called “Capital Appreciation Bonds,” as opposed to the traditional “Current Interest Bonds.” When an investor buys a Current Interest Bond, that investor gets a regular interest payment every six months and then gets the original amount borrowed (the principal) back at the end of the borrowing term (the date of maturity). But when an investor buys a Capital Appreciation Bond, that investor does not receive an interest payment until the end of the borrowing term. However, the accumulating interest compounds over time, resulting in one huge interest payment at the end. Because of Capital Appreciation Bonds, your local school board and community college board can get their names on a bronze plaque for a shiny new school, but they’ll be retired or dead when the massive tax bill comes due for your children and grandchildren. A new law (Assembly Bill 182) may prevent some of the worst excesses from Capital Appreciation Bonds, such as in Poway Unified School District (in San Diego County), “where borrowing $105 million will cost $1 billion.”
  10. And yes, it appears that Proposition 39 was written broadly enough to allow school districts to buy iPads and other electronic tablets using borrowed money from bond sales.

Interested in learning more? Check out The Most Comprehensive Web Site Ever Developed Against a California School Construction Bond Measure.

Encourage Your City to Run Its Own Affairs Without State Interference

Because of its philosophies concerning the proper role of government, the Left struggles with the federalist concept of structural checks and balances as a fundamental principle of American government. They are irked when provincial governments exercise their rights under this system to evade costly, burdensome, and intrusive policies imposed by the centralized government.

This circumstance persists in California in regional pockets where community leaders are inclined to support fiscal responsibility and limited government. Some cities are using or plan to exercise their right under the California Constitution to have “home rule” authority over their municipal affairs with a charter. There are 121 charter cities in California, with dozens of “general law” cities considering a ballot measure in 2014 for voters to enact a charter.

Not surprisingly, unions in particular chafe against the idea that California cities should have the right to manage their own affairs, in defiance of the state legislature and governor. For example, public employee unions and construction trade unions, with their leftist allies, spent more than $500,000 in their successful campaign to defeat a proposed charter in Costa Mesa in the November 2012 election. As that election approached, a professor of public administration at Chapman University (in Orange County) described the City of Costa Mesa as the ideological “ground zero for virtually everything taking place in the country” and its proposed charter as “a political manifesto of how government should be organized in the 21st century.”

Such massive union campaign spending against ballot measures to enact charters proves that charters can be cost-effective tools for cities to provide essential services at a more reasonable cost for taxpayers. Additional evidence of the value of city charters comes from the actions of the legislature. Construction trade unions felt compelled to sponsor bills in 2011 (Senate Bill 922)  and 2012 (Senate Bill 829) to withhold state funding for charter cities that adopted policies prohibiting government-mandated Project Labor Agreements. In 2013, construction union lobbyists pushed through Senate Bill 7, which withholds state funding for charter cities where construction contracting policies deviate from state law regarding government-mandated wage rates (so-called “prevailing wages”).

Capitol Weekly described Senate Bill 7 as “arguably the most important bill to emerge this year from the Legislature.” Despite the complexity of the issue, there were more than 160 news and opinion articles in California in 2013 concerning Senate Bill 7 and the deliberations of city councils in “general law cities” to ask their citizens to approve charters. See News and Opinion Articles on California Charter Cities – 2013.

Finally, unions sponsored Senate Bill 311, which restricts ballot measures for proposed city charters or proposed city charter amendments to statewide general elections. Unions want charter issues on the ballot only when infrequent voters are motivated to go to the polls because of a high-profile election for President or Governor or U.S. Senator.

If you want to go on the offense in 2014, consider your city’s options under a charter.


Additional Sources

Proposition 39: School Facilities. 55% Local Vote. Bonds, Taxes. Accountability Requirements.

Proposition 39 was approved by 53.4% of voters in November 2000

In 2012 California Voters Authorized Community College Districts and K-12 School Districts to Borrow $15.3 Billion for Construction Through Bond Sales

Charter Cities: League of California Cities


Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com. Follow him on Twitter at @DaytonPubPolicy.

 

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