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Public Domain
Bond Measure Guidelines and Guardrails
The policy document below was jointly authored by Mimi Willard (COST President), attorney Mark Chavez (Mill Valley resident), and municipal bond expert Steve Lang (Mill Valley resident).
The background:
The Coalition of Sensible Taxpayers was approached by community leaders with the idea of jointly developing a set of guidelines to ensure local bond measures are fair, responsible, and accountable. Through this collaboration, we have jointly developed a framework for local governmental entities to utilize in crafting responsible proposals for raising revenue, for voters to evaluate the merits of each bond measure that they are asked to approve, and for subsequent oversight to be effective in ensuring the funds are spent as promised.
These Guidelines for bonds complement CO$T’s Sensible Tax Criteria – which Marin agencies regularly use to develop proposals for taxes that are necessary, fair, transparent, and as affordable as possible – but includes provisions intended specifically to address problematic issues that can and have arisen with local bond measures. COST has a history of supporting tax measures that largely comply with our Sensible Tax Criteria while sometimes opposing tax measures that substantially violate them.
Voter supported bond and tax measures can play a positive role, funding necessary investment in long-lived, expensive infrastructure projects and providing essential sources of revenues to fulfill community needs. However, many bond and tax measures impose unnecessarily large taxes for decades, list an intentionally expansive set of potential uses, and lack sufficient transparency in the ballot language voters rely upon. These shortcomings are exacerbated by the failure to include effective mechanisms for oversight and accountability in the expenditure of taxpayer dollars.
In recent years, school districts, municipalities and other bond issuers have adopted the practice of proposing the largest dollar amount for a bond measure that is allowed under California law or supported by voter polling, instead of the specific amount required to complete necessary infrastructure projects. The issuers sometimes list projects to be financed with bond funds but include provisions in the bonds purportedly granting them expansive authority to alter or abandon the specific projects voters believe they are approving in voting for the bond measures. The vigorous and active citizen oversight boards promised in many bond measures are generally ineffective and little more than paper tigers operating under bylaws and with appointees selected by the issuers they are supposed to regulate.
For these reasons, CO$T, Marin community leaders, and municipal finance experts are providing these Guidelines to use in formulating and assessing bond measures. We believe that adherence to these requirements will ensure that future, necessary projects can be funded while protecting taxpayers from flawed or wasteful measures.
CO$T will henceforth consider the following Guidelines in deciding whether to support, oppose, or take no position on bond measures being brought before Marin voters. We encourage agencies to consider these Bond Guidelines in developing proposals for voter approval
1. Necessity — The measure should be limited to funding necessary, long-lived infrastructure projects. The proponent of the measure should consider alternatives such as making more efficient use of existing tax revenues; seeking grants, matching funds, and private donations; or selling surplus property.
2. Focus — The proponent of the measure should consider smaller, narrowly-tailored measures centered on specific, well-defined needs (e.g., funding a new community library; replacing deteriorated sewers or building new levees in a particular area).
3. Size — The dollar amount generated by the measure should be determined by the estimated cost of the necessary projects that it will fund and NOT by the maximum amount allowed under California law or the dollar amount supported by voter polling. Consideration should be given to sizing the bond so as to not unduly burden those least able to pay;
4. Term — Shorter terms should be considered, especially (but not solely) for assets and projects with short lives (e.g., proponents should not fund technology with 30 year money). Shorter term bonds lower total borrowing costs (fewer years of interest payments and lower interest rates) and lessen the dependence on future generations to pay off obligations incurred by current voters. Proponents should consider using smaller, shorter term measures, more frequently.
5. Specific uses — In the bond resolution and the Voter Guide the proponent should disclose specific, intended uses of the funds to be generated by the measure. It should make clear if there is an intent to build new buildings and for what purpose; what other necessary renovations and upgrades will occur (e.g., repairing/replacing roofs; adding solar arrays and charging stations; renovating athletic fields; resurfacing swimming pools and replacing heaters; replacing sewer lines; building a new city hall; road widening; etc.). This should not be a laundry list of every possible use but a specific list of intended uses (recognizing that funds may be insufficient to fund the entire list).
Uses not on the list cannot be funded with proceeds from the measure. If a proponent has a facilities plan that identifies needs, bond funds shall only be expended on those identified needs. Proponents should issue fewer bonds than authorized and spend less taxpayer money if some anticipated expenditures ultimately are not needed or feasible.
7. Ballot question disclosure — The 75-word question on the ballot should disclose all of the largest, specific, intended uses of funds in declining dollar order, estimated aggregate cost to taxpayers (as shown in the Voter Guide’s Tax Rate Statement), term, the existence of escalators and absence of exemptions. Sample language:
“To fund capital projects – new classroom building and arts complex at Specified School(s), repair/replace/install roofs, HVAC, electricals, ensure disability access, upgrade/replace technology, science labs, and athletic fields – shall Hypothetical High School District be authorized to issue $xxx million in bonds, costing taxpayers annually $yyy per $100,000 assessed value (estimated 30-year total $zzz million with interest), with $xxx median first year levy increasing with assessed value, spent only on school facilities with no senior exemptions permitted by law?”
8. Citizen oversight appointments and powers — Citizen oversight committees should be appointed and empowered to review each expenditure of funds generated by the measure both before it is authorized and after it is spent, and report any spending that is inconsistent with the ballot resolution. In appointing members of the oversight committees, preference should be given to those with relevant expertise (e.g., capital project oversight, accounting, financial analysis, and municipal bonds) and should include, if available, a representative of a bona fide taxpayer organization.
9. Advisory committees — Proponents should establish advisory committees of builders, architects, engineers, construction professionals, planners, and finance or accounting experts to effectively and efficiently guide capital improvement and infrastructure projects.
10. Discretionary powers — Proponents should refrain from including in measures expansive provisions purporting to authorize the proponents to fundamentally alter the nature, scope or location of the specific projects identified in the measures. Such provisions may render the project list meaningless.
11. Maintenance — Proponents should adopt and adhere to a plan to fund upkeep of their facilities. The agency’s board and Citizen Oversight Committee should ensure adherence to the plan.
12. Accountability — Each measure should include a section which identifies every successful bond or tax measure sponsored by the proponent in the previous 15 years, the intended purposes of the measure, the dollar amount raised by the measure, the dollar amount expended to date of the funds raised by the measure and states which of the delineated purposes were achieved.
13. Conflicts of interest — Proponents should not contract with any entities making contributions to the political campaign for a measure. Extra scrutiny of, and guarding against, such relationships and transactions should be part of the mandate of the citizens oversight committees.
14. Competitive bidding — Construction should be done as cost-effectively as possible. Efforts should be made to avoid contracting protocols that don’t guarantee awarding the final project in a competitive bid.
15. Voter approval — Proponents should consider delaying spending or contractually obligating a measure’s proceeds until the measure is approved by voters.