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”

Bloomberg Businessweek (North America) - - Contents -

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.” �Romy Vargh­ese and James Nash, with Sow­jana Si­val­o­ganathan and Michael Marois

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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