Commentary: Certificates of Participation are nothing more than a way around Proposition 13

According to the California Policy Center, our state and local bond debt was estimated at $1.3 trillion in 2015, a staggering amount costing every resident almost $33,000.

Most of the debt was adopted in compliance with Proposition 13’s requirement of voter approval. Proposition 13 required two-thirds voter approval for “general obligation” bonds — a tax by another name.

This year we celebrate the 40th anniversary of Proposition 13, the landmark taxpayer revolt that allowed millions of Californians to save their home from excessive property taxes.

During the ensuing 40 years, the political elites have created esoteric financing tools to end-run Proposition 13’s voter requirement.

My hometown of Newport Beach is the poster child of a city that did an end-run around Proposition 13 to avoid a public vote for our $142 million City Hall. If the price tag isn’t appalling enough, the underhanded way we were stuck with the debt should be a warning to all taxpayers.

They used Certificates of Participation (COP), an esoteric financing tool engineered by the political elite as an end-run around Proposition 13.

A COP creates a revenue stream by essentially leasing its own facilities to itself — technically, as a different public facilities corporation — with the facilities offered as collateral to bondholders. When the debt is repaid, the facilities become the agency’s.

Put another way, Newport taxpayers are leasing city assets to ourselves to pay bondholders for the City Hall debt.

The legal fiction costs taxpayers $8 million per year through 2041. We will pay $228 million for a monument to political ego and excess.

Whether you like the City Hall project or not, I believe voters should have a right to decide if they want to use debt to pay for it or future non-essential mega-projects.

Recently, the Newport Beach council voted to place a charter amendment on November’s ballot requiring a public vote on debt for these projects.

Opponents of the charter amendment claim it will tie the hands of future city councils.

I say, good. It’s our money they’re spending.

The other argument advanced by opponents is Newport will be the first city in California requiring voter approval.

I say good. Let’s start a movement across California.

Mike Schroeder is a Newport Beach resident and past chairman of the California Republican Party.