Bond measures submitted to voters

On occasion, bond measures are submitted to voters in the State of California, such as this November 5 when the statewide electorate will consider two different $10 billion bond measures, one on climate change and one on school facilities.

What are the statutory rules for these bond measures that are placed on the ballot by the state or local governments? The Elections Code, in Division 9, Chapter 5, provides several statutes related to bond issues. They are contained in Sections 9400 to 9405.

Section 9400 specifies that Chapter 5 applies to all bond issues proposed by a county, city and county, city, district, or other political subdivision, or by any agency, department, or board, the security for which constitutes a lien on the property for ad valorem taxes within the jurisdiction and the proposal for which is required to be submitted to the voters for approval.

Section 9401 requires that, in connection with each bond issue, a statement be mailed to the voters with the sample ballot for the bond election. The statement required by this section must be filed with the elections official conducting the election not later than the 88th day before the election. The statement must contain specified information, including the best estimate for average annual tax rate, highest tax rate, and total debt service.

In addition, the statement may contain a declaration of policy of the legislative or governing body of the applicable jurisdiction, proposing to use revenues other than ad valorem taxes to fund the bond issue, and the best estimate from official sources of these revenues and the reduction in the tax rate levied to fund the bond issue resulting from the substitution of revenue.

Section 9402 requires all official materials to contain a statement of tax rate data. Those materials include any voter information guide prepared, sponsored, or distributed by the jurisdiction that has proposed the bond issue or that is financed in whole or part by funds furnished by that jurisdiction, directed at or including a bond issue proposal, but excluding a notice of election required by law to be posted or published.

Section 9403 provides that failure to comply with this chapter does not affect the validity of any bond issue following the sale and delivery of the bonds. Section 9404 makes a legislative declaration that the essence of compliance with this chapter is good faith in presenting to voters the most accurate available information for their use in effecting comparisons and exercising judgment in casting their ballots.

Section 9405 specifies that, whenever the elections official is required to mail a statement, only one copy of the statement is to be mailed to a postal address where two or more registered voters have the same surname and the same postal address. In addition, this code section only applies if the legislative body adopts this section and the election official conducting the election approves of the procedure.

In the following question-and-answer format, let’s review other pertinent information related to bond issues on the ballot:

What is a definition of a bond fund? According to the Department of Finance (DOF), a bond fund is used to account for the receipt and disbursement of non-self-liquidating bond proceeds.

Who pays for the bonds? According to DOF, depending on the provisions of the bond act, either the General Fund or a special fund pays the principal and interest on the general obligation bonds.

What is a revenue bond? Broadly defined, a revenue bond is a type of municipal bond that is repaid by the operating revenues of the public entity.

Who uses revenue bonds? Revenue bonds are primarily utilized by government entities to subsidize infrastructure projects.

Who guarantees a revenue bond? The financial obligation is primarily guaranteed by the operating revenues. Assets (e.g., the infrastructure project) are used as collateral for the bond (i.e., the loan).

What does “G.O.” stand for in a GO bond? It means general obligation (i.e., an obligation of the state or local government).

What is a GO bond? A general obligation bond (GO bond) is a municipal or state bond measure that is backed by the good faith and credit of the issuing state or local entity.

What is the source of funds for a GO bond? These bonds are based upon the taxing authority of the issuing governmental entity, rather than from the revenues from a project.

What is the collateral used with a GO bond? Assets are not used as collateral. GO bonds are premised on the debt obligation being repaid through taxation or other revenues of the government entity.

Are bond measures submitted to the voters? Some are. For example, bond measures proposed by a local or state entity when the security for the bond would constitute a lien on the property for ad valorem taxes within the jurisdiction.

When a bond issue goes to the ballot, what must be provided to the voters? A statement must be mailed to the voters with the sample ballot for the bond election. the statement must contain specified information, including the best estimate for average annual tax rate, highest tax rate, and total debt service. It also has to contain a declaration of policy of the legislative or governing body, as well as a statement of tax rate data.