BACKGROUND
State Spending on Resources Programs. The
state operates a variety of programs to conserve
natural resources, protect the environment, provide
flood control, and offer recreational opportunities
for the public. The state also operates a program
to plan for future water supplies, flood control,
and other water-related requirements of a growing
population. In addition to direct state expenditures,
the state also provides grants and loans to local
governments and nonprofit organizations for
similar purposes. These programs support a variety
of specific purposes, including:
- Natural Resource Conservation. The state has
provided funds to purchase, protect, and improve
natural areas—including wilderness and open-space areas; wildlife habitat; coastal wetlands;
forests; and rivers, lakes, streams, and their
watersheds.
- Safe Drinking Water. The state has made loans
and grants to public water systems for facility
improvements to meet state and federal safe
drinking water standards.
- Flood Control. The state has funded the
construction and repair of flood control projects
in the state Central Valley flood control system.
The state has also provided financial assistance
to local agencies for local flood control projects
in the Sacramento-San Joaquin River Delta and
in other areas outside the Central Valley.
- Other Water Quality and Water Supply Projects. The state has made available funds for various
other projects throughout the state that improve
water quality and/or the reliability of water
supplies. For example, the state has provided
loans and grants to local agencies for the
construction and implementation of wastewater
treatment, water conservation, and water
pollution reduction projects.
- State and Local Parks. The state operates the
state park system and has provided funds to local
governments for the acquisition, maintenance,
and operation of local and regional parks.
- Funding for Resources Programs. Funding
for these various programs has traditionally come
from General Fund revenues, federal funds, and
general obligation bonds. Since 1996, voters have
authorized approximately $11 billion in general
obligation bonds for various resources purposes.
Of this amount, approximately $1.4 billion is
projected to remain available for new projects
as of June 30, 2006, primarily for water-related
purposes. Legislation enacted earlier this year
provides $500 million from the General Fund for
emergency levee repairs and other flood control-related expenditures.
PROPOSAL
This initiative allows the state to sell $5.4 billion
in general obligation bonds for safe drinking water,
water quality, and water supply; flood control;
natural resource protection; and park improvements.
(See “An Overview of State Bond Debt” on page 96
for basic information on state general obligation
bonds.) Figure 1 summarizes the
purposes for which the bond money would be
available for expenditure by various state agencies
and for loans and grants, primarily to local agencies
and nonprofit organizations. In order to spend
most of these bond funds, the measure requires
the Legislature to appropriate them in the annual
budget act or other legislation.
FISCAL EFFECTS
Bond Costs. The cost of these bonds would
depend on interest rates in effect at the time they are sold and the time period over which they are
repaid. The state would likely make principal and
interest payments from the state’s General Fund
over a period of about 30 years. If the bonds were
sold at an average interest rate of 5 percent, the cost
would be about $10.5 billion to pay off both the
principal ($5.4 billion) and interest ($5.1 billion).
The average payment would be about $350 million
per year.
Property Tax-Related Impacts. The initiative
provides funds for land acquisition by governments
and nonprofit organizations for various purposes.
Under state law, property owned by government
entities and by nonprofit organizations (under
specified conditions) is exempt from property
taxation. To the extent that this initiative results
in property being exempted from taxation due
to acquisitions by governments and nonprofit
organizations, local governments would receive
reduced property tax revenues. We estimate these
reduced property tax revenues would be several
million dollars annually.
Operational Costs. State and local governments
may incur additional costs to operate or maintain the
properties or projects, such as new park facilities,
that are purchased or developed with these bond
funds. The amount of these potential additional
costs is unknown, but could be tens of millions of
dollars per year.
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