Proposition 53: Revenue Bonds Jolene Walsh and Danielle Coats August 11, 2016

Disclaimer This information is provided for informational purposes only so EMWD may consider a position on the aforementioned proposition. This information is not intended to advocate for a yes or no vote on the ballot proposition.

Proposition 53: Revenue Bonds One of 17 initiatives that have qualified for the November 8, 2016, ballot Sponsored by Dean Cortopassi, a wealthy Delta farmer Proposition 53 is also referred to as the “Cortopassi Initiative” or the “No Blank Checks Initiative”

What Does Proposition 53 Do? Proposition 53 requires statewide voter approval for revenue bonds for projects that meet the following conditions: The total amount of revenue bonds sold for the project exceeds $2 billion. The measure specifies that the $2 billion figure be adjusted annually based off of the Consumer Price Index; and The project funded by the revenue bonds would be funded, owned, operated, or managed by the state, including any joint powers agency (JPA) or similar body created by the state or in which the state is a member.

Current Practice Voter Approval Not Required for State Revenue Bonds Under the California Constitution, state general obligation bonds need voter approval before the state can use them to pay for a project. State revenue bonds do not need voter approval under existing state law. Source: Legislative Analyst’s Office

What Projects Would it Apply to? The initiative could apply to a broad range of projects including: Water shortage facilities Desalination plants Roads Highways Water treatment facilities Hospitals Ports Potentially University of California and Cal State facilities Any state and some local projects that exceed $2 billion, where the state finances the project or is a participant in a JPA

What Comprises a Project? While it is aimed at the California WaterFix and potentially the high speed rail, the measure intentionally does not call out a specific project in order to capture future large scale projects. However, it also does not define what a “project” is, which leaves concern and confusion as to what constitutes a project, ie. is it a single building? Is it multiple buildings or structures, like a complex? The vague reference to a project and the reasonable expectation that the courts and the state will have to weigh-in on determining what constitutes a project could have a chilling effect on the delivery of large-scale infrastructure investments in California.

Additional Concerns Proposition 53 could undermine local control by delaying or blocking much needed infrastructure projects being pursued by local water agencies and other local jurisdictions. There is no exemption for emergencies or major disasters where critical infrastructure is damaged or needed. In the event of a major disaster local governments may have to wait for voter approval to replace major infrastructure. It would allow voters in distant communities, that have no financial or other interest in the project, to reject projects outside their communities. Undermines the beneficiary pays principles. The measure targets revenue bonds, which are typically backed by private investors. Revenue bonds are repaid by users of a project who directly benefit, not taxpayers. The LAO states that the new voter requirement might discourage some jurisdictions from pursuing projects due to the additional costs and uncertainty associated with the project.

Arguments in Support Supporters of Proposition 53 state that: Californians have incurred historic levels of debt that put long-term fiscal health in danger. Californians deserve the right to vote on all new major bond debt before they are expected to pay for it. This initiative will close a policy gap that policy makers have used to by-pass public scrutiny.

Recommendation The recommendation is that the Board of Directors of Eastern Municipal Water District pass a resolution in opposition to Proposition 53.

Contact Information Jolene Walsh Senior Director of Public and Governmental Affairs (951) 928-3777 ext. 4347 Email: walshj@emwd.org Danielle Coats Senior Legislative Program Manager (951) 928-3777 ext. 4526 Email: coatsd@emwd.org