Op/Ed: Voters Should Decide Debt Financing

0
206
Share this:

By Kevin Muldoon / Newport Beach Mayor Pro Tem

The same City staff that incurred $281 million dollars in debt service to finance the Civic Center Complex doesn’t want the voters to have a say in the amount of debt financing required for large projects.

If you watched the July 26 Council meeting, you probably saw the exchange between Staff and myself regarding certificates of participation (COP’s).  When a municipality seeks to fund large projects using debt financing without getting voter approval, they circumvent the 2/3 popular vote required to issue bonds by using COP’s instead.

COP’s do not require a vote of the people, but they have the same effect bonds have of dedicating future revenue to make payments on the loan.

In the case of our Civic Center, lease payments are made by the City to occupy its own city hall.

Although the City had managed to operate for almost 100 years without using COP’s, City staff stated that it would be a bad idea to require a popular vote to do so going forward: “We have a highly educated constituency, but they generally don’t have the time or interest to get into the minutia of mundane public infrastructure projects.”

I respectfully disagree. There is nothing minute or mundane about incurring $281 million dollars in debt service on a Civic Center.

I believe Newport Beach residents are educated and interested enough to have a say in large projects that require debt financing.

With the assistance and vetting of our outside bond counsel, we have drafted the Newport Beach Taxpayer Protection Act to include a vote of residents to approve new projects over $10 million dollars when financed with COP’s. It would not apply to the refinancing of existing debt.

Should the charter amendment pass, COP’s may be used for large projects over $10 million dollars if a compelling case is made to a majority of the residents in a general or special election. If the case can’t be made, then the Council can still use the cash on hand, reserves, a line of credit, or simply wait for sufficient funds to commence a project.

Writing in support of the initiative, Jon Coupal, President of the Howard Jarvis Taxpayers Association explains, “Government has become way too reliant on debt that bypasses voter approval. The special interests that benefit from government spending as well as the bond industry don’t like having their agendas subject to those ‘pesky’ voters for whom they have little regard. But the voters are the ones who have to pay off the debt so they certainly should have the right to have their voices heard.”

“Requiring voter approval for esoteric debt instruments, such as revenue bonds and “certificates of participation” is wholly consistent with the philosophy of Proposition 13 which trusts the voters – not today’s politicians – with the most important fiscal decisions:  new taxes and the assumption of public debt.”

If you would like a say in large projects that require debt financing, then I ask for your support for the Newport Beach Taxpayer Protection Act.

Kevin Muldoon

Mayor Pro Tem of Newport Beach

Share this: