This is an important year for California as we head to the polls in November to vote on a number of key propositions. While there are 12 propositions, only 11 of them are actually on the ballot for vote; Proposition 9, which would have split California into three states, was removed from the ballot in July 2018.
As you read through each measure, it is important to note that states can issue two types of bonds: general obligation or revenue bonds. General obligation bond are backed by the issuer’s taxing authority and repaid through the state’s general funds which means that the state can simply raise taxes to pay for the bonds. Revenue bonds are backed by the specific revenue from a project. For example, if the State issues revenue bonds to build a toll bridge, the revenue from that bridge will be used to repay the bonds and the state cannot raise taxes or use other sources of income to pay for the revenue bonds. This article gives a brief synopsis on each proposition to help you do additional research on issues that matter the most to you.
Proposition 10
I have listed this proposition first because it is generating the most media attention. California leads the nation in high cost of housing, especially in cities such as Los Angeles or San Francisco. Voting yes on this proposition would “allow local governments to adopt rental control and repeal the Costa-Hawkins Rental Housing Act.” Costa-Hawkins is a state law that allows landlords to raise rents when a tenant moves out and prohibits rent control on houses built after 1995, it also excludes all condos and townhouses. If proposition 10 passes, it could cap rents and lower property values on houses, apartments, and condos because their future cash flow would be limited.
Proposition 1: Housing Programs and Veterans’ Loans Bond
Voting yes on this proposition will allow California to issue $4 billion of general obligation bonds and use the proceeds to provide housing related programs for veterans. The bulk of the funds will be for the CalVet home loan program and the Multifamily Housing Program, which offer loans to veterans as well as loans for the construction of housing for veterans.
Proposition 2: Use Millionaire’s Tax Revenue for Homelessness Prevention Housing Bonds Measure
Voting yes on this proposition will allow California to use the revenues from Proposition 63, which was passed in 2004, on $2 billion of revenue bonds for housing for homeless individuals with mental health issues. Proposition 63 is a 1 percent tax on Californians who make over $1 million a year. Writers of legislation like to use the term millionaire’s tax because they recognize that the majority of the state’s population makes less than a million dollars a year and those individuals like seeing the rich pay more taxes.
Proposition 3: Water Infrastructure and Watershed Conservation Bond Initiative
Voting yes on this proposition will allow California to issue $8.9 billion of general obligation bonds. The proceeds of the bonds will be used for water-related infrastructure and environmental projects. Almost half of the money ($4.035 billion) will be used on projects benefiting disadvantaged communities. The total interest paid on the bonds will be $17.3 billion, according to the state’s fiscal analyst.
Proposition 4: Children’s Hospital Bonds Initiative
Voting yes on this proposition will allow California to issue $1.5 billion of general obligation bonds. The proceeds of the bonds will be used for the Children’s Hospital Bond Act Fund, which funds grants to children’s hospitals for construction, expansion, renovation, and equipment projects.
Proposition 5: Property Tax Transfer Initiative
Voting yes on this proposition will amend proposition 13 (passed in 1978) and allow homeowners age 55 or older to transfer their real estate taxes regardless of the new home’s market value, location, or the number of times the homeowner moves. Currently, homeowners who are 55 or older are able to transfer their property tax assessment to a new home only if the new home is of equal or lesser value within the county. Homeowner can do this once in their lifetime and the county of residence decides if they qualify for the exemption.
Proposition 6: Voter Approval for Future Gas and Vehicle Taxes
Voting yes on this proposition would repeal the current taxes on gas and auto fees that were passed in 2017 and require California to vote on any future increases in taxes on gas or auto fees.
Proposition 7: Permanent Daylight Savings Time Measure
Voting yes on this proposition would make daylight savings time permanent in California. This of course is my favorite and gets my “yes” vote.
Proposition 8: Limits on Dialysis Clinics’ Revenue and Required Refunds Initiative
Voting yes on this proposition would require dialysis clinics to refund patients their money if the revenue received by the clinics exceeds 115 percent of the cost of providing that service. The measure also prohibits the clinics from discriminating or refusing service to a patient based on what type of insurance the patient has.
Proposition 11: Ambulance Employees Paid On-Call Breaks, Training, and Mental Health Services Initiative
Voting yes on this proposition would require ambulance employees to be on-call and paid during their breaks, impose mandatory training for Emergency Medical Technicians (EMT) by their employers and require employers to pay for mental health services for EMTs. For some reason, the California Teachers Association opposes this measure, but there is no given explanation.
Proposition 12: Farm Animal Confinement Initiative
Voting yes on this proposition will ban “the sale of meat and eggs from calves raised for veal, breeding pigs, and egg-laying hens confined” in areas less than 43 square feet for calves, 24 square feet for pigs, and 1 square feet for hens.
Ara Oghoorian, CFA, CFP®, CPA is the President & Founder of ACap Asset Management.
ACap Asset Management, Inc. is a “Fee-Only” investment management firm headquartered in Los Angeles, CA specializing in helping doctors and healthcare professionals make sound financial decisions.
Contact ACap at info@acapam.com or 818-272-8511.
