Newport bond debt measure to get further review; won't make November ballot

The Newport Beach City Council took initial steps forward Tuesday on a proposed charter amendment that could mandate residents' approval of certain amounts of future bond debt.

The council voted 4-3 to send the amendment to the city Finance Committee so the seven-member advisory body can vet the proposal before the council can vote to place it on a ballot. Council members Keith Curry, Tony Petros and Ed Selich dissented.

The move slowed the process for the amendment, which was originally considered for the Nov. 8 election. Instead, 2018 is the earliest voters could see it on the ballot.

Discussion of the charter amendment came at the behest of Councilman Scott Peotter, who has long criticized the previous City Council for incurring bond debt to fund a portion of the controversial $143-million Civic Center project. The charter amendment, he said, would place much-needed controls on the city's future spending habits by imposing certain debt procedures and restrictions.

"It's not going to bring back that money, but it's going to insert the voters in the process," Peotter said. "I trust the voters, and I have no problem erring on the side of the voters."

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The city charter currently restricts the city from entering general obligation bond debt –similar to school bonds – that exceeds an amount equal to 15% of the total assessed value of the property in the city. General obligation bonds, which cause an increase in local property taxes, cannot be issued without two-thirds voter approval.

The proposed charter amendment would not affect the rules for general obligation bonds.

However, Peotter is suggesting that the city also restrict other types of debt, such as certificate of participation bonds, which were used to fund part of the Civic Center project. COP bonds do not require an increase in property taxes, according to city Finance Director Dan Matusiewicz.

Under the proposed amendment, a single debt issuance could not exceed 25% of the annual revenue of the fund that would repay the debt.

For example, if the city planned to repay bond debt from the roughly $200-million general fund, the amendment would cap the city's borrowing potential at $50 million. A simple majority of voters would have to sign off if the city wanted to borrow a larger amount, according to Matusiewicz.

The proposed amendment also seeks to restrict the city from incurring non-callable debt, or debt that keeps the city from paying it off early or refinancing if rates allow.

The $128 million in bonds that helped fund the Civic Center project, which are repaid by the city over a 30-year period, cannot be refinanced or paid early without the city incurring a penalty.

Bonds that don't allow payoff within five years would not be allowed without a majority vote of the people, unless voters decide to extend the time period, according to the proposal.

Curry has been vocal in his disapproval of Peotter's proposal, calling it irresponsible and an example of amateur-hour politics.

"This is designed to leave a big turd in the city after [Peotter] leaves," Curry said. "This is pathetic. This is bad public policy. Nobody else in America has this policy. It's an absolute disgrace."

Another proposed charter amendment would ask voters to consider whether the charter should require at least five of the seven council members to vote in favor of a general tax increase before placing the increase on the ballot for voter consideration. Current city policy requires a simple majority of the council.

The council signed off last year on the measure, which was spearheaded by Curry. On Tuesday it was expected to vote to add it to the ballot for this year's election.

However, Mayor Diane Dixon opted to combine Peotter's proposal with Curry's and send them both to the Finance Committee for consideration.

"Neither the two-thirds vote on new taxes nor the bonded debt item was vetted by the Finance Committee and exposed to in-depth public debate and discussion," Dixon said. "There has been no council-approved special tax imposed on residents in over 50 years or in anyone's memory, and I do not believe any such tax increase is likely to see the light of day, particularly between now and November 2016. So I do not believe there is a need to put such a matter on the November ballot this year before the Finance Committee has had a chance to look at it."

Curry took issue with the amendments being combined, partly because his had already been vetted by the City Council.

"There's no real question about its value; it's simply a political ploy to try to combine it with a very poorly drafted, poorly conceived proposal from Mr. Peotter and to sort of hijack this idea and have everybody pretend the history that's happened over the course of the last year didn't occur," Curry said.

The Finance Committee and the City Council will both have to sign off on the proposed charter amendments before they can move forward.

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Hannah Fry, hannah.fry@latimes.com

Twitter: @HannahFryTCN

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