Newport considers giving voters more say over bond debt
The Newport Beach City Council on Tuesday will consider placing a charter amendment on the November ballot that would mandate residents’ approval of certain amounts of future bond debt.
Councilman Scott Peotter requested during the council’s May 24 meeting that it discuss referring to the city Finance Committee a proposed charter amendment to impose certain debt procedures and restrictions.
Peotter said he will ask his colleagues Tuesday to streamline the process and approve the charter amendment proposal without sending it to the Finance Committee in an effort to make the Orange County registrar of voters’ Aug. 12 deadline to get measures on the ballot for the Nov. 8 general election.
If the council approves the amendment, the city’s attorneys would review it and it would be brought back to the council for final approval, Peotter said.
“I’m not trying to keep the city from borrowing money, but if you’re going to do major borrowing then you should take it to the voters for simple majority approval,” he said.
Join the conversation on Facebook >>
The city charter currently restricts the city from entering into 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 the city also restrict other types of debt, like certificate of participation bonds, which were used to fund part of the controversial $143-million 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.
Councilman Keith Curry said the proposal is “ill-advised” and could make it challenging for the city to undertake large projects that could require debt, such as seawall replacement, which is expected to cost about $60 million.
“Residents of Balboa Island, the peninsula and other low-lying communities should think long and hard about the ramifications of making the public improvements necessary to protect your homes and families subject to a public vote by those living miles away with no direct benefit,” he said.
Tuesday’s City Council meeting will begin at 7 p.m. at City Hall, 100 Civic Center Drive.
--
Hannah Fry, hannah.fry@latimes.com
Twitter: @HannahFryTCN
ALSO
Mesa Water allows watering on any day
At 50, Avila’s El Ranchito is still all about family
Plan for 384 apartments and a restaurant gets thumbs down from Newport commission
