Bloomberg Businessweek (Europe)

A California­n’s extreme measures to fight bond issues

A state ballot initiative could derail big-ticket projects “It is to instill some discipline in … feeding off the public trough”

- −Romy Varghese and James Nash, with Sowjana Sivalogana­than and Michael Marois

Dino Cortopassi, a farmer outside Stockton, Calif., watched as the Central Valley city loaded up on debt for such amenities as a riverfront ballpark, only to slash services as the economy went into free fall. In 2012, Stockton declared bankruptcy, citing pension and other debt obligation­s, including municipal bonds. That spurred Cortopassi to write the No Blank Checks Initiative, a ballot measure that would require voter approval for many revenue bond issues exceeding $2 billion.

The initiative has been certified for the November 2016 ballot, and Cortopassi has pledged $4 million of his own money to promote it. “This is an effort to halt California’s rush into deeper and deeper debt,” says Cortopassi, 78, who co-owns Stanislaus Food Products, one of the largest tomato packers in the state. “It is to instill some discipline in a totally undiscipli­ned feeding off the public trough.”

Cortopassi’s campaign against profligacy comes as public finances are reviving in California. In July, Standard & Poor’s raised the state’s bond grade to AA– from A+, the highest in 14 years, rewarding Governor Jerry Brown’s moves to use windfall tax revenue to pay off debt and bolster savings.

California voters already have to approve general obligation debt, which is backed by taxpayers. Revenue bonds are repaid through money generated by the projects being financed, such as tolls on roads or fees from water customers. California and local agencies have sold $310 billion of the securities since 2008. Brown has proposed using revenue bonds to pay for two $15 billion tunnels under the Sacramento­San Joaquin Delta, where Cortopassi’s operations are located, to funnel water from the Sacramento River to the parched southern half of the state.

A review by the state Legislativ­e Analyst’s Office says Cortopassi’s measure may wind up reducing funding available for large-scale projects. At a minimum, requiring projects to be put to a statewide vote would impose “costly delays in repairing our roads, colleges, and water systems and make it harder to respond to natural disasters,” says Gareth Lacy, a spokesman for Brown.

It would also make California dependent on more expensive forms of financing, according to the Citizens to Protect California Infrastruc­ture, a coalition of business groups and labor unions organized to sway voters against Cortopassi’s initiative. The group, which has raised more than $120,000 and spent $71,000 so far, has publicized Cortopassi’s financial contributi­ons

to groups opposing the constructi­on of the Sacramento River water pipelines. “It is disingenuo­us and dangerous of him to threaten a massive sweep of California infrastruc­ture if his goal was to defeat the Delta tunnel project,” says Loren Kaye, who leads the California Chamber of Commerce Foundation for Commerce and Education.

Cortopassi says he’s not driven by his own personal interests, but by concern for California’s future fiscal health. Before the 2014 midterms, he took out full-page ads in newspapers across the state explaining California’s debt situation and urging voters to reject individual bond measures. He says he hopes his current effort will end the need for that sort of campaignin­g: “This is the people’s chance to choose their own destiny.”

The bottom line A California farmer is spending millions to persuade voters to demand a veto over public projects worth $2 billion or more.

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