California Proposition 148, Water Resources Bond Act (1990)
If Proposition 148 had passed, it would have provided for a bond issue of $380 million to provide funds for a water resources program. It also would have made changes to the Water Conservation Bond Law of 1988 relating to administrative fees and to the California Safe Drinking Water Bond Law of 1976 relating to loans.
Up through 1990, the State of California had provided loans and grants to local water agencies with money it raised from selling general obligation bonds. The loan/grant programs were usually administered by the State Water Resources Control Board (SWRCB) and the Department of Water Resources (DWR). As of June 1990, all but about $518 million of $2 billion authorized by previous bond acts had been spent or committed to specific projects and applications had been received for most of the uncommitted funds. This state of affairs led the state legislators who voted to put Proposition 148 on the ballot to conclude that more bonds should be sold.
Prior to Proposition 148, the State of California had not sold general obligation bonds to fund flood control, drought assistance, or border area pollution control projects. Proposition 148's terms included those types of projects.
The fiscal estimate provided by the California Legislative Analyst's Office said:
I. 1990 Bond Costs
Direct Cost of Paying Off the Bonds. For most of these bonds, the state typically makes principal and interest payments from the General Fund over a period of about 20 years. If the bonds are sold at an interest rate of 7.5 percent, the total cost would be about $735 million to pay off both the principal ($380 million) and the interest (about $355 million). Generally, the interest on bonds issued by the state is exempt from both federal and state taxes. However, due to changes in federal tax law, a portion of the bonds may not be exempt from federal taxes. In this case, these bonds would be issued by the State Treasurer at a higher interest rate. If this occurs, the total cost of paying off the bonds would be higher.
Net State Costs. Part of the total cost of paying off the bonds will be offset by the principal and interest repayments on the various loans. These repayments will total about $205 million over the life of these bonds. (These repayments would be about $70 million higher if the full interest costs were charged on these water loans.) This will reduce the net state cost to $530 million, or an average of about $22 million per year.
II. State Cost From Reducing Interest Rate on 1976 Safe Drinking Water Bond Loans
Between 1976 and 1986, the state made loans of about $120 million to local water agencies from this bond act. The repayments of these loans are used by the state to pay off the bonds. This measure reduces, by 50 percent, the interest rate charged on these loans. That in turn, will reduce the state revenues available to pay off the bonds. Assuming that these loans were to be repaid over a term of 30 years, the loss in state revenue would be about $110 million. This measure does not provide a funding source to offset this state revenue loss. As a result, there will be a corresponding increase in state General Fund costs to pay off the 1976 bonds.
Path to the ballot
The California State Legislature voted to put Proposition 148 on the ballot with Assembly Bill 1312 (Statutes of 1990, Ch. 919) in accordance with the provisions of Article XVI of the California Constitution.
- Hastings California I&R database
- Los Angeles Law Library, 1990 ballot propositions (dead link)
- November 1990 election results (pages 9-10)