Kosmo’s Considerations - 2006

Kosmo for Assembly 2006

Kosmo takes positions on issues of direct concern to taxpayers and homeowners for California. He also takes positions on ballot measures that will impact the economy. This is because, as taxpayers, he knows from painful experience when the economy turns sour and tax revenues go down, governments' usual first reaction is to reach for taxpayers' wallets. Therefore, Kosmo recommends:

Prop. 1A - YES (Transportation investment. No tax increase)
Prop. 1B - No position (Transportation bond)
Prop. 1C - NO (Housing bond. More debt)
Prop. 1D - NO (Education bond. More debt)
Prop. 1E - No position (Flood control bond)
Prop. 83 – No positionProp. 84 - NO (Water bond. More debt)
Prop. 85 - No positionProp. 86 - NO (Tobacco. Tax increase)
Prop. 87 - NO (Oil companies. Tax increase)
Prop. 88 - NO, NO, NO (PROPERTY TAX INCREASE)
Prop. 89 - NO (Public funding of campaigns. Tax increase)
Prop. 90 - YES (Protect home ownership)

Kosmo endorses the following candidates:
No, No, No on Phil Angelides
Tom McClintock
Bruce McPherson
Claude Parrish
Chuck Poochigian, NOOOO Jerry Brown. Vote to Retire Jerry!
Steve Poizner Richard "Dick" Mountjoy

Kosmo also urges a vote of NO on all local bonds that do not require a two-thirds vote for passage.

Kosmo struggling with his latest opponent

Caution: Bonds Have A Hidden Cost
By Jon Coupal

There was a popular song a few years ago called, "Money forNothing." While the tune was a satire on the vast amounts paid tosuccessful rock stars, the title could just as easily apply to manyvoters' attitudes toward bonds.

As we approach the November election with over $41 billion in bondson the statewide ballot, and additional billions being consideredfor local jurisdictions, now is a good time to brush up on thesignificance of bonds, their true costs, and how they are repaid. The California Constitution gives the electorate the right to voteon state and local general obligation bonds.

However, the rules for passage are different for each category. State bonds, commonly used for infrastructure improvements likehighways and to provide additional funding for school construction,require a simple majority vote of the statewide electorate forapproval. These bonds do not trigger a tax increase, but are repaidfrom the state's general fund into which virtually everyone paysthrough sales and income taxes.

Although there is at least the appearance of fairness to a systemthat allows a majority vote to approve bonds that are repaid byeveryone, these bonds are hardly a perfect means to finance longterm capital improvements.

First, these bonds are more expensive than many voters imagine. Mostare aware that bonds mean debt that must be repaid, but just likewhen we see that must-have item that we charge to a credit card, itis easy to overlook the impact of compounding interest. Since mostgovernment bonds are issued with a 30 year payback, a good estimateof the actual cost to taxpayers is to double the face amount of thebond. Additionally, when the state takes on a lot of debt, bondbuyers demand higher interest rates to compensate themselves for theperceived additional risk. This makes the bonds even more expensive.

Second, since bond repayment has first call on the general fund,less money is left behind to pay for transportation, education,healthcare and other programs Californians consider important. Inother words, the amount of debt we must pay from the general fundmeans less money to finance other government programs or forinfrastructure on a "pay-as-you-go" basis where taxpayers get, byfar, more bang for their buck.

The second category of bonds on which we vote is local generalobligation bonds used for local infrastructure projects, librariesand schools. Although everyone can vote on these bonds, propertyowners are singled out as solely responsible for the repayment ofprincipal and interest. Both commercial and residential propertyowners see a tax increase when these bonds are approved, but thehardest hit are the single-family homeowners who, unlike businessesthat can pass additional costs on to customers, must pay the entireamount.

Wisely, the drafters of the California Constitution of 1879recognized the inherent unfairness of letting everyone vote on a taxthat would be placed on a minority of the community. To level theplaying field, they required a two-thirds vote for passage of theselocal general obligation bonds under the belief that if passed witha higher vote threshold, it would be a reflection of a strongcommunity consensus, including the support of those who would bepaying the principle and interest bills.

This system served the state well for over a century. Then, in 2000,Netflix CEO, Reed Hastings -- author of the Proposition 88 propertytax increase on the November ballot -- and his merry band ofbillionaires bankrolled the misleading campaign that passedProposition 39, which lowered the vote for local school bonds to 55percent. The measure has virtually guaranteed that all school bondspass, regardless of merit, and has saddled property owners with tensof billions of dollars in bond debt.

So, for the upcoming election, a large percentage of Californianswill confront bond proposals that require a majority vote, a 55percent vote, and a two-thirds vote.
Although this may seem complex there is a simpler way to classifybonds. Those that are a necessary evil and those that are anunnecessary evil.
The "necessary evil" bonds are those that build something like abridge or a sewage treatment plant that would be very difficult tofund immediately out of existing revenue. Although paying for theinfrastructure improvement means going into debt, the debt may bejustified in that it allows government to continue to provide vitalservices that would be curtailed if an immediate cash outlay wererequired.

"Unnecessary evil" bonds are those like some we have seen in recentyears marketed as measures to help the environment. However, closerexamination has shown that some of the backers of these bondsbenefit, because when the bonds are passed, the state becomesobligated to buy property they own at inflated prices.

Unfortunately, some bonds contain both flimflam and worthwhileprojects, which make it even more difficult for voters to weightheir merits. Ultimately, Californians would be wise to approach all bonds withextreme caution. The debt bonds create is an irreversible obligationthat continues for decades. Don't buy into voting yes unless theneed for a bond is proven beyond a reasonable doubt.