California Proposition 1C

Christopher Smith — Mon, 06 Nov 2006 18:48:00 +0000

And the hits keep coming! Once again the 1 Plan folks are up to their old tricks. This time in the form of nearly $3 billion in bonds for “housing velopment” (in quotes because the term is applied loosely with this proposition).

This one follows the classic bond measure formula: ask for tons of money, partition it up in to all kinds of different little accounts so that everyone feels they got something, and then wrap it in a bow that says, “no new taxes”. Of course, if you read the fine print on this proposition, you’ll find this little ditty:

“55350. There shall be collected annually, in the same manner and at the same time as other state revenue is collected, a sum of money in addition to the ordinary revenues of the state, sufﬁcient to pay the principal of, and interest on, the bonds as provided herein, and all ofﬁcers required by law to perform any duty in regard to the collections of state revenues shall collect that additional sum.”

Yup. It’s right there in black and white.

That’s basically what most of this 1 Plan initiative is all about: solving the state’s fiscal and infrastructure problems by using bonds as back-door tax increases.

I’m actually not against tax increases on principle, but bonds bug me because tax payers are on the hook not just for the principal but the interest. If you just did a tax increase and paid as you went, you could save a ton of money. Anyway, let’s look at where this money is going.

This one is billed as allocating funds as follows: “Funds may be used for the purpose of providing shelters for battered women and their children, clean and safe housing for low-income senior citizens; homeownership assistance for the disabled, military veterans, and working families; and repairs and accessibility improvements to apartment for families and disabled citizens.”

If you read the bill though, the biggest single account the money will end up with is $850 million earmarked for “Regional Planning, Housing, and Infill Incentive Account”. You’re probably wondering what all that means. I sure did. The “Infill Incentive Account” is provides grants to developers who tear down developments to put up denser housing developments (you’d think that’d be a profitable enough business already, wouldn’t you?). Then there is “no more than” $200 million of that $850 set aside for “parks, development or rehabilitation to encourage infill development”. I think that means fixing up the neighborhood so that developers can reap more profits when they do their infill projects. Then there is money for water, sewage, transportation “or other public infrastructure costs associated with infill development”.

There are a bunch of other funds allocated, but it looks much like the $850 million fund. The bottom line is that this fund is really designed to subsidize denser housing development state wide. Some opponents have argued that it doesn’t make sense to have housing development funded on a state wide basis. While it’s true that you probably aren’t going to see much need for infill development in rural California, the reality is that denser urban development provides a lot of benefit to the surrounding area outside the urban setting, not the least of which is increased tax revenue.

I think though, that this bill has a lot of the same problems as the LA’s proposition H: it subsidizes what should be profitable development and totally ignores the real crux of the problem: zoning laws that create an artificial scarcity. I can only imagine what is proponents expect will happen when funds from this bond have been spent (are we planning on not growing the state after that?).

Trying to get a guage on the impact of this proposition is tricky. This bond is only about 3x the size of the one proposed for the city of LA, and it’s being applied state wide. I’m sure a lot of the money will be spent in San Francisco, San Jose, Sacremento, Los Angeles, and San Diego where real estate dollars don’t buy you much in the way of new homes. I’ve seen estimates suggesting this measure will add merely 10,000 housing units. At that point, you have to ask yourself if this is the best way to spend the money.

Given that the bond market isn’t as friendly as it was a few years ago, and last I checked California didn’t have a stellar credit rating, it just seems like any bond that isn’t desperately needed should get a thumbs down, and I’m going to throw 1C in to that ring.

Xblog: California Proposition 1C

California Proposition 1C