Cal-Tax Positions | Home  January, 2000 Proposition 13 Fiscal Impacts

The California Taxpayers' Association (Cal-Tax) supports Proposition 13, the Safe Drinking Water, Clean Water, Watershed Protection, and Flood Protection Bond Act on the March 7, 2000 ballot. This bond would provide $1.97 billion in funding for needed water projects that are important for California's economy, public health, and quality of life. Cal-Tax endorses Proposition 13 because it is fiscally responsible, it does not raise taxes, and it pays for projects that are important for all Californians.

Water infrastructure is an important component of economic development in California. Without adequate, reliable supplies of clean water, neither business nor residential development can proceed. Much of California's water system was created decades ago. Periodic improvements are needed to keep up with growth and to keep existing systems working well. State general obligation bonds like Proposition 13 do not cause a tax increase. Payments on the bond will be made over 20 to 25 years from existing revenues in the state general fund. The passage of a bond merely commits State Legislators to make these bond payments one of their highest budget priorities as they allocate funds. Proposition 13 will require about $135 million a year in debt payments - this is about 0.2 percent of next year's projected general fund budget. This small fraction is a reasonable amount to pay for investing in important facilities that will benefit future generations. It is important that California fund these types of projects while the economy and the state budget are strong.

The Cal-Tax Board of Directors evaluates each bond proposal and takes a position based on the following criteria:

Bonds are an appropriate financing tool under the following circumstances:

• The project to be financed is a capital facility or infrastructure project and the bond funding will pay for land acquisition and capital costs, not for maintenance, operations, non-construction salaries or wages, or ongoing costs.
• Non-bond financing is not a reasonable option.
• The project costs are appropriately shared by future taxpayers because the project will have a useful life at least as long as the term of the bonds and future taxpayers will benefit from the facility that is built with the bond proceeds.
• It is not appropriate for bond funds to pay for equipment, computers, or similar items that will not be useful for at least as long as the debt is outstanding.
• For state bonds, projects funded must be of state-level concern and importance. State bonds should not pay for local projects that do not have significant extra-territorial impact.
• Interest rates for indebtedness are not abnormally high and the overall state debt level will not be excessive.