Proposition 5

Lower Supermajority Requirement to 55% for Local Bond Measures to Fund Housing and Public Infrastructure Amendment

Would amend the California constitution by lowering the required threshold to 55% for any borrowing to fund affordable housing construction, down payment assistance programs and a host of “public infrastructure” projects, including those for water management, local hospitals and police stations, broadband networks and parks. Currently, most city and county bonds require the support of at least two-thirds of those voting to pass.

If it passes, the new cut-off would apply not just to future bonds, but any that are on the ballot this November. Proposition 5 is a legislative constitutional amendment that requires a simple majority (50% + 1) to pass.

Fiscal Impact: This will make certain local bonds more likely to pass, leading to more funding for local causes. It will also increase local funding for housing assistance and public infrastructure. The amount of this increase is unclear, but as local voters approve more bonds, local governments would have more borrowing costs, likely paid with higher property taxes.

See Endorsements for Proposition 5

Pro:

Supporters argue that allowing just one third of voters to overrule the wishes of two thirds is undemocratic. If the majority of voters want their local government to borrow money to fund desperately needed affordable housing or other public infrastructure, they should be able to do so.

Backers also say this is a question of local control. Reducing the required vote threshold from two-thirds to 55% would allow local officials to fund their own priorities more easily without having to rely as much on statewide bonds or federal dollars.

A YES vote on this measure means: Certain local bonds and related property taxes could be approved with a 55 percent vote of the local electorate, rather than the current two-thirds approval requirement. These bonds would have to fund affordable housing, supportive housing, or public infrastructure.

YesOnProp5.org (Campaign Website)

Con:

Opponents argue that it’s always easy to support taking on more debt if you aren’t the one who has to pay it back. When a local government decides to borrow money, that tab almost always gets put on property owners — who might make up a minority of voters — through higher taxes. Rather than allow a narrow majority to make what are potentially financially irresponsible decisions, the choice to issue a bond should be made only when a broad consensus exists.

Critics also call this measure just the latest attempt by Democratic lawmakers to undo the taxpayer protections that California voters embedded into the state constitution with Proposition 13.

A NO vote on this measure means: Certain local bonds and related property taxes would continue to need approval by a two-thirds vote of the local electorate.

Background

Housing Is Expensive in California. A typical California home currently costs around twice the national average. Similarly, renters in California typically pay about 50 percent more for housing than renters in other states.

Local Programs Help Pay for Housing. Some programs help low-income Californians afford housing. For example, governments help pay for housing reserved for low-income residents. Other programs provide housing and services to specific groups. Examples of such groups include people with disabilities or those at risk of chronic homelessness. We refer to affordable and supportive housing programs as “housing assistance.”

Local Governments Also Pay for Public Infrastructure. Examples of infrastructure projects paid for by local governments include roads, hospitals, fire stations, libraries, and water treatment facilities.

Local Governments Often Use Bonds to Pay for Housing Assistance Programs and Public Infrastructure. Bonds are a way for local governments to borrow money and then repay it plus interest over time. Similar to the way a family pays off a mortgage on their home, bonds allow governments to spread costs over a few decades.

Certain Bonds Require Two-Thirds Approval of Local Voters. For cities, counties, and special districts, bonds paid for by increased property taxes typically require two-thirds of local voters to approve them. These are called general obligation bonds.

Proposal

Proposition 5 changes the rules in the California Constitution for approving certain local government general obligation bonds. It also requires local governments to monitor the use of revenues in specific ways.

Lowers Voter Approval Requirement for Certain Bonds. Proposition 5 lowers the voting requirement needed to approve local general obligation bonds if they would fund housing assistance or public infrastructure. Specifically, Proposition 5 lowers the voter approval requirement from two-thirds to 55 percent.

Requires Specific Oversight Activities. Proposition 5 requires local governments to take specific steps to monitor the use of bond funds supporting housing assistance and public infrastructure. For example, local governments would need to conduct annual independent financial and performance audits. Citizens’ oversight committees also would be appointed to help supervise spending.

Fiscal Effects

Certain Local Bonds More Likely to Pass. A lower voter approval requirement would make it easier to pass local general obligation bonds for housing assistance and public infrastructure. Recent local election results suggest that an additional 20 percent to 50 percent of local bond measures would have passed under Proposition 5’s lower voter approval requirement. Those measures would have raised a couple billion dollars over many years. A lower voter approval requirement also could mean local governments propose more measures.

Increased Local Funding for Housing Assistance and Public Infrastructure. An increase in the approval of local bonds could increase funding available for housing assistance and public infrastructure. The amount of this increase is not clear. Based on recent trends, it could be at least a couple billion dollars over many years. The amount of the increase would vary across local governments. If local voters approve more bonds, local governments also would have more borrowing costs. These costs would be paid with higher property taxes. Ultimately, any future bond approval would depend on decisions by local governments and voters.

Source: LAO Analysis of Proposition 5

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Berkeley IGS Poll

Official California Documents

Official Voter Guide

Campaign Finance Information

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Nonpartisan Analysis

Proposition 5, Make it Easier for Local Governments to Fund Affordable Housing, Infrastructure Projects. CalMatters.