Ballot Propositions: A Cheat Sheet

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From Standard & Poor's RatingsDirect

This could increase debt levels over time, but as the case is right now, Standard & Poor's will examine a local government's overall debt burden in the context of other credit factors.

Proposition 207 would restrict the use of eminent domain to purchase property for public use, a narrower test than the public benefit standard used by the U.S. Supreme Court. More important, it would require local governments to compensate property owners for the economic impact of land use regulations implemented after the proposition is approved, or waive such regulations. Arizona's role as one of the fastest growing states suggests that even if local governments are able to avoid paying regulatory takings claims by waiving the rules, governments on the frontier of metropolitan growth could face infrastructure costs to serve largely unplanned development.

California

The legislature has placed four bond authorizations on the ballot, totaling $37.25 billion, to fund a five-year capital plan proposed by the governor involving transportation infrastructure, housing assistance, educational facilities, and flood control. Passage of all four measures would not materially affect state credit quality, as per capita debt would remain near its current moderately high levels, assuming current population growth continues and its 2004 deficit recovery bonds are retired by 2010, as anticipated.

The state projects that debt service as a percent of general fund spending would remain under 6%. There will also be a citizen's initiative (Proposition 84) to approve $5.4 billion for water-related projects.

Other measures include Proposition 88, a $50-per-land-parcel tax to be used for local education. This could provide minor fiscal help to local school districts, depending on whether the state continued funding school district aid at the same level.

Proposition 90 would prevent state and local governments from condemning or damaging private property, including uncompensated "downzoning," to promote other private projects. This would not have an immediate effect on governmental credit quality, but could slow down or make more expensive redevelopment agency activities that contemplate major private redevelopment. Since investment-grade tax allocation bonds generally already have adequate tax increment coverage, the immediate impact on tax increment bonds would be small.

Colorado

Only two of the 14 ballot questions—Amendment 39 and Referendum J—would have a major direct effect on local government finances. Both cover substantially the same topic and would require local school districts to devote at least 65% of their operational expenditures on classroom-related instruction beginning in fiscal 2008.

Amendment 39 is a constitutional amendment; Referendum J is a statute. Passage of one of these two questions would not invalidate the other, but constitutional provisions would supersede statutory ones.

The state estimates that the average school district spends about 60% of its budget under Amendment 39's definition of classroom instruction, and about 83% of budget under Referendum J's definition. Districts that spend under the limit would be required to boost classroom instruction by two percentage points per year until reaching the limit.

The state estimates that 166 school districts would have fallen short under Amendment 39's definition in fiscal 2005 by a total of $278 million, while three would have fallen short under Referendum J for a total of $1 million.

Other ballot questions could have an indirect effect on bond credit quality. Amendment 38 would expand the ability of citizens to challenge or propose state laws, and make it generally easier to gather signatures to put a citizen's initiative on the ballot. This would likely increase the number of citizen initiatives reaching the ballot.

Referendum E would create a property tax exemption for military veterans disabled in the line of duty. Referendum F would move deadlines for recall elections from the state constitution to statutory law. Referendum H would eliminate a tax deduction for businesses employing illegal aliens.