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Report: Voters better start learning how construction bonds work

Craig Clough | July 27, 2015

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school-constructionWith LA Unified needing another $40 billion or so to modernize every school, it is likely that the district will ask voters for a lot more through bond sales in the coming years.

But a new report from the California Policy Center says voters should be more skeptical and engaged when it comes to construction bonds, arguing that the state needs to slow down and rethink how it repays for them.

The report says construction bonds in California are creating massive amounts of debt that will take generations to pay off and are sometimes unnecessary.

The report, titled “For the Kids: California Voters Must Become Wary of Borrowing Billions More from Wealthy Investors for Educational Construction,” also found that “most Californians are unaware and uninformed about this relentless borrowing and the amount of debt already accumulated to pay for school construction. Most voters cannot explain how a bond measure works and do not get enough information to make an educated decision about the wisdom of a bond measure.”

Around the state, voters have approved $110.4 billion in construction bonds since 2001, when Proposition 39 reduced the voter threshold required for approval. In addition to local bonds, three statewide measures have approved another $35.8 billion.

And more bonds measures may be on the way. A 2016 statewide ballot will ask for $9 billion, while LA Unified plans to ask for several billion and at least 100 other districts may be asking for several billion more, the report noted.

According to the report, “It is time to be wary.”

Among the changes it calls for is the elimination of companies with a self-interest in bonds to be involved in their passage. For example, the $9 billion statewide bond set for the 2016 ballot was put there by the Coalition for Adequate School Housing, an organization that includes construction companies that would benefit heavily from its passage.

The report calls for state lawmakers to pass legislation that does the following:

  • Provide adequate and effective oversight and accountability for bond measures.
  • Enable voters to make a reasonably informed decision on bond measures.
  • Eliminate or mitigate conflicts of interest in contracting related to bond measures.
  • Reduce inappropriate, excessive or unnecessary spending of bond proceeds.
  • Improve understanding of bond measures through public education campaigns.

The California Policy Center is a conservative-leaning organization with a reputation for favoring anti-tax policies. It was described by Eureka Times-Standard columnist Linda Atkins earlier this year as “a renowned conservative pressure group disguised as a ‘think tank’ that’s out to push the California public into believing that they deserve government services for free.”

Despite the group’s right-leaning views, the report is likely to find one fan in Gov. Jerry Brown, a Democrat who has called into question the heavy use of construction bonds and supports restructuring the process that currently calls on the state to provide matching funds for local bond measures. Brown stated in January he would prefer the burden to be shouldered more heavily by local districts.

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