Two years ago, in a rare display of support for transparency in government finance, the Legislature and then-Gov. Jerry Brown required local governments and school districts to tell voters how proposed bond issues would affect their property taxes.
That would seem to be just common sense and good government, but local officials complained that Assembly Bill 195 would be too difficult to implement. Their real motive, however, was a fear that telling voters that their tax bills would increase might discourage them from voting for the bonds.
The author of the 2017 legislation, Assemblyman Jay Obernolte, a Big Bear Lake Republican, responded with a bill to modify the required disclosures. But later, after this column reported that most officials had, however reluctantly, complied with the law, he dropped his follow-up measure as unnecessary.
Local officials still wanted to be taken off the transparency hook, however, and last year, just before the state budget was to be passed, a “trailer bill” popped up to suspend the transparency law for two years – thereby exempting the 2018 crop of bond measures. It was drafted, Obernolte said, by the Legislature’s Democratic leadership without his knowledge.
The Exemption Bill Was Not Taken to a Floor Vote
For whatever reason, though, the exemption bill was not taken to a floor vote. Therefore, the 2017 disclosure law remains on the books as local officials begin drafting bond measures for 2020 elections, and some apparently still don’t like telling voters about their tax consequences.
San Jose Spotlight, a non-profit news site that covers its city much like we at CALmatters cover the state, reported recently that San Jose Mayor Sam Liccardo and members of the city council will press the Legislature to change, or at least suspend, Obernolte’s disclosure law.
“AB 195, while well-intentioned, is about providing disclosure to voters so there is trust that the government entity will use money the way it is intended to be used, and voters will know what they’re paying for,” Liccardo said during a city council meeting. “The problem is, implicit in AB 195, a mechanism that will ensure that no agency can maintain that trust because we’re required to state a cost to the bonds that, in most cases, will be wrong, and is only an estimate and can only be an estimate, because of changing durations for the bond, as well as interest rates.”
A Reasonable Estimate Is Much Better Than Telling Voters Nothing
City administrators recommended opposing rules that “inhibit” the city’s ability to issue bonds or increasing reporting duties, and that position was endorsed by the council with one dissenting vote. The dissenter, Councilman Johnny Khamis, cautioned his colleagues about seeking “bond secrecy.”
Khamis is quite correct. The law Liccardo and others want to overturn requires that officials make a good faith estimate of how much property taxes will be increased to repay the borrowed money and interest. It may not be possible to be more precise, given the ups and downs of the bond market, but a reasonable estimate is much better than telling voters nothing, which was the practice before Obernolte’s bill was approved.
If that knowledge makes some voters less willing to approve the bonds, so be it.
CALmatters is a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more stories by Dan Walters, go to calmatters.org/commentary.