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BONDS ARE NOTHING MORE THAN “CREATIVELY LABELED” TAXES AGAINST PROPERTY! |
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Welcome to the Silicon Valley Property Taxpayers’ Association - Bonds are Just “Creatively Labeled” Taxes Against Property portion of our Web Site. When a local revenue district brings a bond measure to the public requesting voter approval, invariably it fails to disclose that bonds are really nothing more than another “creatively labeled” tax against property. This “neglect” on the district’s part is no oversight because it’s all part of the overall strategy employed by professional electoral consultants such as Larry Tramutola. For a good primer on the subject of general obligation bonds, we refer you to the discussion on the Howard Jarvis Taxpayers’ Association web site. There you will learn bonds are nothing different than any other ordinary debt security [e.g., promissory notes or “IOUs”]; in this case, the indebtedness is repaid by an “agency of government.” But to enhance their marketability and reduce their cost to the agency, the State allows local agencies to guaranty repayment with new tax levies [e.g., “assessments”] against all non-exempt parcels [see Article XIII, §3 of the California Constitution] within their geographical boundaries in the form of a further increase in the ad valorem tax rate [see Article XIIIA, §1(b)(3)(B) of the California Constitution]. State bonds on the other hand are different; they aren’t repaid with new taxes against statewide properties. Instead, the State only sells three major types of bonds: General Fund-Supported [which are repaid from the State’s General Fund (which is largely supported by general tax revenues)]; Traditional Revenue [which are repaid from a designated revenue stream - usually the projects these bonds finance]; and, Budget-Related [which are repaid from the equivalent of a ¼-cent share of the State sales tax]. The proponents of local bond measures [such as the one which has brought you to this web site] want you to think their bonds are repaid just as if they were State bonds. Because as you can see they are not, hopefully you can now see local revenue districts have an incentive to ensure you remain confused. So take a close look at the bond measure which has brought you to this web site. Where does it clearly and unambiguously inform you that repayment comes from new taxes which will be levied ONLY against property? Only by reading the fine print [e.g., the “Tax Rate Statement” (mandated by Elections Code, §9401) and County Counsel’s “Impartial Analysis” (mandated by Elections Code, §9280)], which are both buried in legalese, does one learn the truth: “the entire debt service will be paid through property taxation!” We think it makes little difference to the typical homeowner whether a new exaction against his/her property which appears on his/her County ad valorem tax bill is separately labeled as a “special tax;” or, a “special assessment;” or, an “ad valorem” component inclusion [everything in excess of 1% of assessed valuation (see Article XIIIA, §1(b) of the California Constitution) represents such a component] because a tax is still a tax is still a tax [e.g., “a rose by another name is still a rose” (isn’t it?)]. The problem here is local revenue districts [like the district which has brought you to this web site] have a conflict of interest; e.g., a disincentive [for a variety of reasons] to make you understand a bond is really a tax. Furthermore as Howard Jarvis Taxpayers’ Association observes, political consultants [like Larry Tramutola] are hired by school and community college districts [at public expense] explicitly for the purpose of counseling their clients to never, never admit a bond is a tax. In fact should the word “tax” ever be introduced into a discussion, proponents are instructed to “move away from that and talk about what the benefit is.” And the facts suggest that in the real world, the confusion works! According to the Howard Jarvis Taxpayers’ Association, 90% of all school and community college bond measures are successful! Consider that in March of 2004 the voters of Kern County were presented with ten different local ballot measures, each proposing new taxes against local homeowners’ properties! Only three were labeled parcel “tax” measures per se, and the remaining seven were labeled bond measures! All three parcel tax measures were defeated, and all seven bond measures were approved [furthermore, all bond measures passed by at least 66-2/3%, and some passed by as much as nearly 80%]! Now do you really think Kern County homeowners who were opposed to further “taxing” themselves were in favor of further “taxing” themselves insofar as general obligation bonds were concerned? Do you really think local property owners found general obligation bond measures to be worthy of increased “taxation,” yet not so insofar as parcel “tax” measures were concerned? Or do you think voters simply did not realize [e.g., they were “confused”] that in-truth-and-in-fact there is no distinction to be made between the source of funding for both? The lesson to be learned if you’re a local revenue district like a school or community college, is that if you want to “trick” voters into passing a new “tax” against property owners only, you should creatively label your proposed new “exaction” a “bond!” This is exactly what the district which has brought you to this web site has done! You may be saying to yourself, wait a minute; I thought Proposition 13 limited the amount of ad valorem taxes [e.g., a fixed dollar amount per each $100 of assessed valuation] which could be assessed against real property to 1% of its initial assessed valuation? Although in a vacuum that’s a true observation, in 1986 Proposition 46 [Article XIIIA, §1(b)(2) of the California Constitution] exempted new ad valorem taxes from this limitation when levied to repay “the interest and redemption charges on...bonded indebtedness for the acquisition or improvement of [government] real property.” Therefore whatever one chooses to “label” new levies to repay local government bonded indebtedness, bottom line, they represent new taxes against property! There is another reason why most bond measures are crafted in a way that misleads voters into thinking they do not represent new taxes. Bond counsel and underwriters work on a contingency fee basis. Therefore unless local bond measures actually pass, local revenue district attorneys and bond underwriters are paid nothing for their substantial work in bringing bond measures before the electorate [remember, heavyweight political consultant Larry Tramutola has cautioned, “if someone is offering something free, question its validity and rest assured the firm offering the free service is going to make money somewhere down the line”]. Since these are the “professionals” who draft bond measures and provide estimates of cost on the district’s behalf, do you think their motivation is to be clear and forthright to voters? Or do you think their motivation is to engender confusion so they will eventually be paid for their work [if you think about it, it’s almost as if the district has retained “the fox to guard the chicken’s coop”]? Furthermore, the compensation we’re talking about is not inconsequential [to learn more about how high that compensation can total, you’re invited to click here]! What do you think about an agency of the state that deceives voters into believing a bond measure, if approved, will be repaid from general revenues when in truth-and-in-fact, it will be repaid from new taxes against property owners only? And if you agree the local bond measure which has brought you to this web site represents your local revenue district’s attempt to “trick” voters into passing a new tax measure ONLY local property owners will repay; and you don’t appreciate the tactic; we urge you to VOTE NO! Should you have questions or comments, please address them to Silicon Valley Property Taxpayers’ Association at: |
