Posted on 07/01/2002 9:10:43 AM PDT by John Jorsett
The ratio I had to meet in private industry was a two year payback.
EBUCK
In Kali they are a socialist scheme of getting by prop 13 and the so called debt limits which are not there after Davis et al. "Taxpayers will be nailed at home in terms of property taxes for local school bond measures and then nailed in terms of general state taxes for any additional bonds that might be issued," says Lew Uhler, the Sacramento-based president of the National Tax-Limitation Committee. "It's going to be a nightmare."
Then there is this little goodie: McClintock has taken to traveling with what he calls the California Debt Clock.
"We're adding over $1 million in new debt per hour, and that's all money that will be tacked onto your future taxes unless we restore sound fiscal management to this state," McClintock says.
"The debt clock helps us communicate to fellow Californians that we need to eliminate the waste and out-of-control spending that's driving up our debt and fueling the call for more taxes," he says.
Wonder why the media hasn't had a word on that? /sarcasm
In advising various public agencies, I regularly advise some of them on the theoretical benefits and problems with borrowing money for some capital projects. If one is a manager of a City owned electric utility and one is building a new substation that has a 20 to 50 year life, there are some good reasons to issue 20 year bonds to pay for the project.
One reason is that if the project were paid from current revenues by current rate payers their rates would be higher now than they would need to be. Some of them might die and no live to see the full benefits of the project over the next 20 to 30 years. For most public agencies borrowing costs are pretty reasonable (unlike credit cards). Funding public capital projects is in some respects a "cross-generational" subsidy. If folks want to do this kind of thing it is fine and actually results in lower societal costs in the long run, but it is a subsidy to the future.
At least it is not a reverse generational subsidy like the way Social Security is lining up to be.
I ususally advise my clients on the downside of borrowing too much for capital projects. One of the biggest, is that you never know about the future of the local economy and what you can afford in the future. Another has to do with what other kinds of infrastructure will be needed that you may not be able to affort because you are maxed out on bonds.
Your comments were electric, but somewhat charged, representing currently popular opinion (sorry, it was just too tempting).
Seldom are civic capital projects discounted for risk of technical supercedure or other changes in market conditions. That is because the funds are guaranteed at gunpoint. The voters could be accepting that risk consciously, but it is seldom the case. Usually what happens with 30-year GOs or Revenue bonds is that the beneficiaries are the bond holders who lend against the resulting subsidized economic opportunity: the banks.
My dad was a municipal financing consultant in California for forty years. You don't have to tell me about the California bond market or the corruption therewith. :-)
Seriously, you are right that bonds will get repaid and that now-a-days seldom is the issuance of debt seriously questioned. It should be, but many lenders have become lack. Your comments were right on.
My only criticism of his article is this: He did not mention Article 16, Section 1 of the California Constitution which contains specific limitations on borrowing.
SECTION 1. The Legislature shall not, in any manner create any debt or debts, liability or liabilities, which shall, singly or in the aggregate with any previous debts or liabilities, exceed the sum of three hundred thousand dollars ($300,000), except in case of war to repel invasion or suppress insurrection, unless the same shall be authorized by law for some single object or work to be distinctly specified therein which law shall provide ways and means, exclusive of loans, for the payment of the interest of such debt or liability as it falls due, and also to pay and discharge the principal of such debt or liability within 50 years of the time of the contracting thereof, and shall be irrepealable until the principal and interest thereon shall be paid and discharged, and such law may make provision for a sinking fund to pay the principal of such debt or liability to commence at a time after the incurring of such debt or liability of not more than a period of one-fourth of the time of maturity of such debt or liability; but no such law shall take effect unless it has been passed by a two-thirds vote of all the members elected to each house of the Legislature and until, at a general election or at a direct primary, it shall have been submitted to the people and shall have received a majority of all the votes cast for and against it at such election; and all moneys raised by authority of such law shall be applied only to the specific object therein stated or to the payment of the debt thereby created...
Californians don't need a moratorium on debt, they just need to elect legislators who will follow the constitution.
Completely off the radar screen. Amazing. The "RAWS", too. Certainly some shoe must drop very soon, since the fiscal year ended yesterday, and the California Constitution says things come to a stop until a budget is passed.
The Legislature shall pass the budget bill by midnight on June 15 of each year. Until the budget bill has been enacted, the Legislature shall not send to the Governor for consideration any bill appropriating funds for expenditure during the fiscal year for which the budget bill is to be enacted, except emergency bills recommended by the Governor or appropriations for the salaries and expenses of the Legislature.
What power bonds? What power RAW's? Has Davis realized that this dog don't hunt? I think so.
"Enronesque" (Davis' Deceptive Budget! My emphasis!)
This is exactly why the Repellicans MUST stand firm! It's inexcusable to burden business and industry when they finally get their heads above water while CA government keeps growing that taxing burden on society!
This editorial should have been written by the Simon Campaign, but Noooooooo! It was writen by a government loving editor who just took over from the previous government loving, business blighting editor!!!
You Simon guys better make the most of this. I've got my signs and bumper stickers ready, but I'm gonna throw 'em away if you don't start making hay! The years half gone... Giddy UP, will ya? Let's ROLL!!!
Our reps should be making hay with this while the sun shines to produce globular warming gasses out of that swamp in Sacratomato!
P.S. Somebody better be given Assembly Leader Dave Cox some strong support about now with BIG PUBLICITY and lots of credit!!! He's being a HERO!!!
I think it's high time for an SUV traffic jamming PROTEST in the Crapitol!!!
I sure hope Davis signs it to guarantee his rejection by the voters! Of course the lock-step Demonicrat Slaves will not let SUV envy stop them from re-electing the creepy emergency powered Governot!!!
I realized then that, in the fiscal chain - from top to bottom - I was the only one that knew how to balance a checkbook.
Pathetic.
Just what I was thinking. CA's implosion will make the S & L debacle seem like child's play. Unfortunately, every "Joe and Jane 6-pack" in fly-over country will have to pony up to bail out CA. I resent that mightily.
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