Big role for bonds, taxes in California election next month

Reuters News
Posted: Oct 11, 2013 3:43 PM

SAN FRANCISCO (Reuters) - Of the 74 local ballot measures before California voters in November's off-year election, 47 propose bonds or tax increases, including a sales tax hike in Stockton needed to help the city exit from bankruptcy, according to a report released on Friday.

School districts and community colleges are requesting nearly $375 million in eight bond measures while two healthcare districts, a recreation district and a fire-protection district are proposing more than $416 million in bonds, according to the report provided to Reuters on Friday by Michael Coleman, a fiscal policy adviser to the League of California Cities.

Five school districts are seeking voter approval for extending or raising parcel taxes on property while another eight ballot measures put forward by three cities and five special districts also would raise or extend parcel taxes.

Voters in 12 cities will be asked to raise sales taxes, mostly by a half-cent, while 10 other cities have other types of tax increases on their ballots.

In Stockton, voters face a measure asking them to lift the city's sale tax by three-quarters of a cent to help pay for the city's plan to exit bankruptcy and hire additional police officers to tackle its long-standing crime problems.

Stockton, a city of about 300,000 residents in California's Central Valley, filed for bankruptcy in June 2012, becoming the biggest city to do so until Detroit filed earlier this year.

Stockton officials on Thursday filed their plan for adjusting debts to exit from bankruptcy with the judge hearing the city's case. The plan assume voters will approve the proposed sales tax increase next month.

If Stockton's voters reject the sales tax increase, the city would need to shut libraries, community centers and some fire department stations to protect police services.

Additionally, without revenue from the tax measure, Stockton will likely be unable to fulfill proposed settlements with bond insurers Ambac, Assured Guaranty and National Public Finance Guarantee, according to a disclosure statement filed on Thursday with the U.S. Bankruptcy Court in Sacramento, California, where the city's bankruptcy case has been heard.

Assured and National led the fight by Stockton's so-called capital markets creditors against the city in its bankruptcy case, contesting the city's threats of forcing losses on bondholders while leaving pension payments intact, which raised concerns in the U.S. municipal debt market.

Stockton is leaving its pension payments intact in its plan to exit bankruptcy. Stockton officials say the city's workforce has contributed to the restructuring of the city's finances through deep job cuts and pay and benefit concessions while retired employees are losing their subsidized health care, eliminating a massive liability for the city.

(Reporting by Jim Christie; Editing by Phil Berlowitz)