Brown Divulges Plans to Sell $11-Billion Backlog of Bonds

California Treasurer Kathleen Brown announced plans Thursday to sell $11 billion in bonds over the next three years, a move she said will take advantage of low interest rates and help clean up the backlog in voter-approved school, prison, water, parks, rail and other projects funded by bonds.

Brown said at a Capitol news conference that she would like to sell all but $700 million of the $12.9-billion backlog she inherited when she took office in January--but only if no new bonds are approved by voters.

That’s a big “if,” since both voters and the Legislature have been approving record numbers of bond projects in recent years--$5 billion worth of prison, education, water and other bond projects in 1988 and $5.9 billion in 1990. The backlog grew because voters approved bonds faster than the Legislature and individual agencies could develop the projects.

Brown acknowledged that if voters continue to approve bonds at the same rate they’ve been doing it in recent elections the backlog will remain about $9 billion.

Bonds are the traditional way the state raises the large amounts of money necessary to build prisons, schools and other major capital construction projects. They allow the state to raise the capital needed for the projects immediately, then pay them off with interest over 20 years.

During her campaign last year, Brown defeated the incumbent, Thomas W. Hayes, now the state finance director, in part by criticizing him for not being aggressive enough in acting on voter-approved bond projects.

“One of the reasons that I can be as aggressive as I am is because interest rates are lower than they’ve ever been in the last 18 years. Yesterday I sold $400 million in various general obligation bonds at a total interest cost of 6.06%,” Brown told reporters.

Under Brown’s scenario, the cost of paying the principal and interest on bonds will jump from $1.3 billion this budget year to between $2.3 billion and $2.7 billion by the end of the 1994-95 fiscal year.

Brown’s plans were outlined in a 36-page booklet that she said represented the first formal long-term bond sale program ever put together by a treasurer.