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California Proposition 28, Bonds for Water (1984)

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California Proposition 28, or the California Safe Drinking Water Bond Law of 1984, was on the November 6, 1984 statewide general election ballot in California as a legislatively-referred bond act, where it was approved.
  • Yes: 6,509,505 (73.5%) Approveda
  • No: 2,344,558 (26.5%)

Proposition 28 provided $75 million to provide funds for improvement of domestic water systems to meet minimum drinking water standards.

Fiscal impact

The fiscal estimate provided by the California Legislative Analyst's Office said:

1. Cost of Paying Off the Bonds

The bonds authorized by this measure probably would be paid off over a period of up to 20 years. The principal portion of these repayments would average $3.8 million per year. In addition, the state would have to pay interest on the borrowed funds. We estimate that if the bonds were sold at an interest rate of 10 percent, the annual cost of these interest payments would average approximately $3.9 million.

The source of funds that would be used to make both principal and interest payments is the state's General Fund. The net cost to the state General Fund, however, would consist of the principal and interest payments on the bonds, less repayments of loans made under the program.

2. Other Fiscal Effects

Increased Borrowing Costs. Generally, an increase in the amount borrowed by the state tends to raise the rate of interest on borrowed funds. Consequently, the state and local governments could incur higher costs under other bond programs as a result of this measure. The size of these costs cannot be estimated.

Revenue Loss. The interest paid by the state on these bonds would be exempt from the state personal income tax. Therefore, to the extent that the bonds are purchased by California taxpayers in lieu of taxable investments, the state would collect less income tax revenue. It is not possible to estimate what this revenue loss would be.

Path to the ballot

The California State Legislature voted to put Proposition 28 on the ballot via Assembly Bill 2183 (Statutes of 1984, Ch. 378).

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