California passes $20 billion bond issue; Bay Area adds another $20 billion

$20 billion worth of statewide bonds will be on the ballot in California's November presidential election, and another $20 billion will be on the ballot in a regional bond election.

At the state level, lawmakers last week reached agreements on two $10 billion general obligation bonds that were expected to be approved in a floor vote this week.

The measures were proposed as Senate Bill 867a $10 billion statewide bond for the construction of K-14 schools, and Bill 247a climate bond worth 10 billion US dollars.

A sign outside a polling place in San Francisco in March. Voters there will vote on a $20 billion regional housing bond and $20 billion in state GO bonds in November.

Bloomberg News

These measures will compete for attention on the ballot in what some expect to be a record year for school district bond measures. The election is already intrigued by a $20 billion regional housing bond measure in the San Francisco Bay Area.

The nationwide measures were proposed as Senate Bill 867a $10 billion statewide bond for the construction of K-14 schools, and Bill 247a climate bond worth 10 billion US dollars.

Proponents say the school bond would improve the lives of millions of children and modernize public schools, while the climate bond would fund clean water, wildfire prevention and reconstruction projects.

“These bond measures are critical to the future of this state. They invest in our children and their neighborhood schools and ensure that communities large and small have access to clean drinking water and are protected from wildfires,” said Democratic Senator Mike McGuire of Healdsburg.

The Senate leader added that he ran for a seat on the school board at age 19 after watching his high school decline.

“Our students, teachers and staff deserve better, especially those in underserved schools where resources are limited and facilities are outdated and sometimes dangerous,” McGuire said.

Proposition 51, the last statewide bond measure to support school construction, was passed by voters in November 2016 and has long since been exhausted.

If the statewide school bond law is passed, local districts will be required to provide matching funds to secure state funds.

“I think we're going to see a record number of GO school bond measures on the ballot in 2024,” said Adam Bauer, president and CEO of municipal consulting firm Fieldman, Rolapp & Associates.

In 2020 and 2022, the number of school bonds up for vote was low and the need for funding for school construction is still there, Bauer said.

“In 2024, school districts will increase their funding to make up for the bond shortfall of past cycles,” he said.

He confirmed that school districts are finding themselves in situations where they lack money for projects because they have not issued bonds in some time.

“That's exactly the right thing to do, and they hope the state will bring a bill to the vote that will help provide the necessary resources,” he said.

McGuire said of the statewide climate bond that the communities he represents have been devastated by wildfires. Ensuring the state's communities have the tools to protect themselves from wildfires, drought and flooding is “critical to the long-term success of the state,” he said.

“Our historically underserved communities on the front lines of the climate crisis cannot afford to wait any longer, which is why we must take urgent action to build California’s climate resilience,” said Assemblyman Eduardo Garcia (D-Coachella), who co-chairs the Assembly’s Climate Bond Working Group with Assemblyman Lori Wilson (D-Suisun City).

SB 867 would allocate at least 40% of the bond funds to disadvantaged communities.

The money would be allocated in seven ways: $3.8 billion for clean drinking water and drought and flood protection, $1.5 billion for wildfire protection and forest resilience, $1.2 billion to address rising sea levels, $1.2 billion to protect biodiversity, $1.55 billion to build parks and outdoor recreation areas, $450 million for extreme heat protection, and $300 million for climate-smart and resilient ranches and farms.

The climate bond will “invest in our future by prioritizing critical needs such as safe and affordable access to drinking water, wildfire prevention, extreme heat mitigation, sustainable agriculture and clean, renewable energy,” Wilson said.

Adam Bauer, President and CEO of financial advisory firm Fieldman, Rolapp & Associates
“I think we’re going to see a record number of GO school bond measures on the ballot in 2024,” said Adam Bauer, president and CEO of Fieldman, Rolapp & Associates.

Fieldman, Rolapp & Associates

The San Francisco Bay Area's $20 billion regional general obligation bond measure would help build or preserve 90,000 affordable housing units in the nine-county region, supporters say.

The Board of the Bay Area Housing Financing Authority, a regional committee comprised of local elected officials, voted unanimously at its June 26 meeting to place the Bay Area's first regional housing bond on the general election ballot.

According to a California association of real estate agents, only 17% of the state's homebuyers can afford a single-family home, whose median price is $814,280. 24% can afford a condo or townhome, whose median price is $655,000. Housing Affordability Report published on May 9th.

To afford a single-family home, CAR calculates, buyers must earn $208,400 annually and make monthly payments of $5,120, including principal, interest and taxes, on a 30-year fixed-rate mortgage with an interest rate of 6.86 percent.

San Mateo and Santa Clara – two counties in the BAHFA region – are the most expensive areas to buy a home, according to CAR.

If approved, $10.4 billion would go toward building 36,000 affordable homes, $3 billion would go toward preserving 14,000 existing affordable homes and $6.6 billion would be provided as flexible funds to preserve 22,000 homes and provide assistance to homebuyers, a report said.

Under current law, the BAHFA measure would need to be approved by at least two-thirds of voters to pass. The bonds would be repaid using ad valorem property taxes in the nine-county region.

However, the state's voters will also consider Assembly Constitutional Amendment 1, which would set the voter approval threshold for bond measures for affordable housing and infrastructure at 55%. According to BAHFA, if ACA1 passes, the authority's bond measures would only require a 55% voter approval threshold.

“Today's vote is the culmination of years of effort by so many people across our region,” said BAHFA Chairman Alfredo Pedroza, a Napa County county supervisor. said in a statement“The Bay Area’s long-standing housing affordability issues affect all of us, our friends, our neighbors and our family members.”

The bond measure would divide 80% of the funds among the nine counties (and the cities of San Jose, Oakland, Santa Rosa and Napa, each of which contributes more than 30% of their county's public housing needs) in proportion to each county's tax contributions to the bond. BAHFA would use the remaining 20%, or $4 billion, to create a new regional program to finance affordable housing construction and preservation projects throughout the region.

The measure would also create a citizen oversight committee and an account for bond proceeds. The committee would report to the boards of BAHFA and the Association of Bay Area Governments. There would also be an annual independent audit.

It remains to be seen whether voters will approve the bond measures with the same enthusiasm as the authors of the proposals for the programs they would support.

David McCuan, a professor of political science at Sonoma State University, pointed out that Governor Gavin Newsom and lawmakers have already made efforts to relieve voters’ attention by to deal with some initiatives legislativelyinstead of presenting them to the voters.

“There could have been 22 to 24 statewide initiatives on the ballot, but instead there will be nine to 11,” McCuan said.

“Voters' wallets are already under a heavy burden, and it is a contentious election year,” he said.

Consider all the attention being paid to the battle between former President Donald Trump and President Joe Biden, he said.

“Bond measures have worked pretty well at the local level over the last 10 to 15 years, but California is approaching the bond debt limit,” he said. “When that condition occurs, it's easier to get a no than a yes.”

Local ballot measures, including tax and school bonds, to name a few, have achieved 70% approval ratings, and statewide measures have enjoyed 33% to 38% approval ratings over the past decade, he said.

McCuan believes that fiscal measures, bonds and measures to change voting thresholds will not be as well received as in the past. Whereas previously 70 percent of the vote was expected, he predicts that the average approval rating will drop to as low as 50 percent.