Newport Group Seeks to Hobble Council’s Plans

Furious over the prospect of a nearly $50-million civic center, a coalition of Newport Beach residents wants to place an initiative on next year’s ballot that would require voters to approve financing of most big municipal projects.

If the measure passes, it would be the first time in California that local voters put the brakes on what’s become a common way for government to raise money to buy property and build structures such as civic centers and libraries.

Critics say the city’s way of handling these projects is an end run around voters.

Also, if passed, the measure would mark the second time that voters in Newport Beach have stripped power from the City Council. The Greenlight initiative, passed in 2000, requires voters to sign off on major developments.

“It doesn’t surprise me that there’s a backlash ... and, quite frankly, I hope they’re successful,” said John Coupal, president of the Howard Jarvis Taxpayers Assn.

At issue are so-called certificates of participation: tax-free investment securities sold to raise money to buy property and build facilities that are leased back to the government. Unlike traditional bonds that are repaid from the city treasury, voter approval isn’t required.

But the Newport Beach initiative would require the city to get voter permission before issuing more than $3 million in certificates or incurring debt for more than two years.

The state Constitution requires two-thirds approval of other forms of debt, including new fees and taxes, though school bonds can pass with a 55% vote. The Newport Beach city charter also requires a public vote for general obligation bonds.

But these certificates have allowed municipalities up and down the state to wiggle around voters, Coupal said.

“At the end of the day, [the certificates] look like a bond, they walk like a bond and they quack like a bond. And they should be approved by voters.”

Officials with the League of California Cities said they were unaware of any similar ballot attempts.

The financing method is valid, said league analyst Dan Harrison, because it provides flexibility for governments to pay for improvements. Voters should “trust their city councils to make good judgments about things like that,” he said.

Cities have found their hands tied when they tried to get voter approval for tax increases or bond issues, said Newport Beach Councilman Tod W. Ridgeway, who supports the new civic center. The Legislature created the certificates to give cities another way to finance capital improvements, he said.

Debt repayments would represent only a fraction of the city’s $180-million annual budget, he said.

“The question is, is this a proper subject for an initiative?” he asked, suggesting that the measure might be illegal because it intrudes on the legislative authority of a city council.

“People are elected by a larger constituency so they can do their job,” he said.

To qualify the City Indebtedness Control Initiative for the November 2006 ballot, supporters have six months to collect 6,200 signatures from Newport Beach voters.

John Buttolph, an attorney and former council candidate, drafted the measure because he was dismayed by the council’s support for a new civic center, with a growing price tag of nearly $50 million.

The reinvented City Hall, fire station and parking garage would be financed by the certificates that the city would repay as lease payments annually.

The roughly $4-million annual payments would double the city’s debt service each year, Buttolph said.

Though Newport Beach is hardly hurting for money -- its annual property tax share jumped from $29 million five years ago to about $55 million this fiscal year -- the real estate boom that fueled those proceeds is cooling. The council should be preparing to pare costs, not increase them, he said.

“They like to say that no one’s taxes are going to go up, but $4 million from the budget each year is coming from the other services that make up our quality of life,” Buttolph said.

The measure has drawn far-flung support, from conservative former Newport Beach Assemblyman Gil Ferguson to Greenlight, a citizens group that helped pass the slow-growth measure requiring developers to take major projects to voters.

Ferguson said he had no quarrel with a new City Hall, which he said was needed, but that it was wrong for the city to circumvent voters with a project that would take decades to repay. Certificates also carry higher interest rates than traditional bonds because they aren’t tied to a specific tax or fee for repayment.

The city has been planning the civic center for months. A 2003 study of the existing building called it overcrowded and inefficient, and some other facilities didn’t meet earthquake standards or handicapped requirements.

In May, the council agreed to a $19.7-million project to replace City Hall, but the estimate for it, a fire station and parking grew to $41.5 million. Now, the council is considering improvements that would push the cost to $49.7 million.

To put an ordinance on the November 2006 ballot, valid signatures from 10% of the approximately 62,000 registered Newport Beach voters are needed.