Pete Rates the Propositions
Sensible opinions on the California ballot propositions      since 1980      by Pete Stahl

Read the ratings:
Prop. 68 - YES
Prop. 69 - YES
Prop. 70 - NO
Prop. 71 - YES
Prop. 72 - NO
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Pete Rates the Propositions
June 2018

Pete recommends:
68   YES   Conservation, Parks, and Water Bonds
69   YES   Earmark Transportation Improvement Fee
70   NO   Two-Thirds Vote of Legislature for Cap-And-Trade
71   YES   Effective Date for Ballot Measures
72   NO   Reassessment Exemption for Rainwater Capture Systems
        My Semi-Biennial Lecture on Bonds

Proposition 68: Conservation, Parks, and Water Bonds – YES

Summary: Provides $4.1 billion to fund natural habitat conservation; neighborhood, regional, and state parks; flood protection; and other water projects. These are important programs with legitimate capital expenses for which bond funding is entirely appropriate.

Details: See My Semi-biennial Lecture on Bonds, at the end of this document, for my opinion of bonds in general.

coming soon

Proposition 69: Earmark Transportation Improvement Fee – YES

Summary: This year you’ll notice a new Transportation Improvement Fee on your vehicle registration. Prop 69 will require the state to spend this only on transportation. This is sensible: special fees should support the associated activity. Prop 69 also similarly restricts the new sales tax on diesel fuel. This is less sensible, but relatively small potatoes ($300 million vs. $1.6 billion annually), so I’m not sweating it.

Details: coming soon

Proposition 70: Two-Thirds Vote of Legislature for Cap-And-Trade – NO

Summary: Prop 70 would require a one-time, two-thirds supermajority vote of the Assembly and Senate in 2024 to allow the state to continue spending “cap-and-trade” revenues. Prop 70 exists only to provide political cover for Republican legislators who voted last summer to extend cap-and-trade to 2030. There is no reason to vote for it.

Details: coming soon

Proposition 71: Effective Date for Ballot Measures – YES

Summary: Moves the effective date of propositions passed by voters from the day after the election to five days after election results are certified. This will prevent close-call measures from causing confusion. More importantly, it will prevent propositions from specifying an earlier effective date, such as 11:59 p.m. on Election Day, in a sinister attempt to ambush other propositions on the same ballot.

Details: coming soon

Proposition 72: Reassessment Exemption for Rainwater Capture Systems – NO

Summary: When a major improvement is made to someone’s proper-ty, the county reassesses it, resulting in higher property taxes. Prop 72 would exclude rainwater capture systems from this process. This will encourage efficient use of our limited water. It will also make our unfair property tax system acceptable to more people, forestalling the day when we finally fix it properly.

Details: The famous Proposition 13 of 1978 says that a property's assessed value can increase only 2% a year as long as the property isn't sold or significantly improved. So, while your property may be worth twice what it was when you bought it, its assessed value will have barely changed. Since property taxes are based on assessed value instead of real value, the size of your property tax bill depends more on how long you've owned your property than how much it's really worth. It's sort of like paying income tax based on how long you've had your current job instead of how much money you make. It's ridiculous.

In the forty years since Prop 13 passed, we voters have approved about a zillion little exemptions to let special people avoid reassessment when they move or remodel: disaster victims, people who inherit property from their parents or grandparents, people over 55 who move into cheaper homes, people who fire-proof or earthquake-proof their property, people who live in historic buildings. Prop 72 extends exemptions to people who install rainwater capture systems.

On the surface Prop 72 seems reasonable and innocu-ous. But every time we grant a reassessment exemption like Prop 72 proposes, we make the lunacy I pointed out above more palatable, and thus postpone the day when California implements a more equitable property tax system. Prop 72 hopes to eliminate the complaints of yet another class of citizens upset with the system of "property tax based on length of ownership," and thus perpetuates a law that's fundamentally flawed.

I try not to recommend protest votes, but I make an exception for issues related to Prop 13. As California housing prices skyrocket, soon it won't be unusual for people who have just bought their property to pay many times more property tax than their neighbors who have owned since 1978. It's as unfair and arbitrary to base taxation on length of ownership as it would be to base it on length of hair or length of name.

Prop 72 will pass easily. Your "no" vote might just send a tiny message that we are unwilling to accept the inequity of Prop 13 any longer.

My Semi-Biennial Lecture on Bonds

When California wants to finance a large project, it asks the voters for permission to take out a loan. Prop 68 is just such a request. If voters approve, the state may take out a loan for the project by selling general obligation bonds, which are paid back with interest over 35 years or so. The bond payments come out of the state's main budget, the General Fund. So when we vote on bond measures, we are really voting on whether the projects in question ought to be added to the state's budget.

"Wait a minute!" I hear you cry. "What about those interest payments? Won't we end up paying more for interest than for the bonds themselves?" This may once have been the case, but with today's low interest rates each dollar of bond money will cost only 30 cents in interest, accounting for inflation. (See details on p. 114 of your ballot pamphlet.)

"Okay," you admit, "but loans are still more expensive than pay-as-you-go." This is true. Still, loans are the only way to buy a house, or a car, or anything else that you need immediately but can't pay for yet. It's worth paying the premium of interest to get the funding now.

"Well and good," you continue, "but there are $9 billion in bonds on this ballot. Isn't that too much to borrow?" For you, yes, but the State of California can handle it. Bond payments today amount to less than 5% (and shrinking) of the General Fund, down from a high of nearly 6% seven years ago. Prop 68 will barely increase that figure. Accounting for both Prop 68 and all bonds previously authorized by voters, the Legislative Analyist predicts the debt ratio will continue to decline.

Prop 68 will fund long-lived, tangible acquisitions, such as land and school buildings. It's sensible to make extended payments for things that will be used far into the future.

Remember, too, that California's population continues to grow by hundreds of thousands of people every year. Borrowing makes particular sense if you know your income will go up in the future. As the state grows, the General Fund will certainly grow too.

There is one last reason to vote for a bond measure. In addition to being formal requests for permission to take out loans, bond measures are also looked upon as referenda on the merits of the proposed projects. If a bond measure fails, legislators are likely to believe that the public feels the project is not worthy of receiving state funding. By voting no, you may have meant, "Yes on the project but no on the bonds," but your message to Sacramento will read, "No on the project." So if you vote down a bond measure just because you don't like bonds, you may well have killed forever the project the bonds were to have funded.

Copyright © 1980-2016 Peter L. Stahl
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