PROP 1A – Vote NO
This is the first in a series of posts explaining the various initiatives on the November ballot in California.
Background:
There are four general obligation bond measures on the November 5th ballot, totaling $16.8 billion in new authorizations. Bond financing is a type of long-term borrowing that the state uses to raise money for various purposes. The state obtains this money by selling bonds to investors. In exchange, it agrees to repay this money, with interest, according to a specified schedule. Generally, the total cost over the life of a bond issuance is about twice the authorized amount since interest must be paid in addition to the principle. Note also that for each bond measure approved, a portion of the state’s annual revenues must be set aside for debt-service payments on the bonds and therefore are not available for other state programs. This means that in order to pay for any bond measure approved, the legislature would either have to raise taxes or cut expenses elsewhere in the budget.
This Proposal:
This bond measure is called the SAFE, RELIABLE HIGH-SPEED PASSENGER TRAIN BOND ACT. It provides for a bond issue of $9.95 billion to establish high-speed train service linking Southern California counties, the Sacramento/San Joaquin Valley, and the San Francisco Bay Area. This is for train service between cities, not for local commuter train service. The total cost of approving this bond measure would be about $20 billion to pay off both principal ($9.95 billion) and interest ($9.5 billion). However, it is important to note that this bond measure would fund only the first phase of the project. The total cost to develop and construct the entire high-speed train system would be about $45 billion, so additional funds would be needed.
Recommendation:
My recommendation is to vote no. The State of California is currently facing a huge budget crisis and in order not to run out of money is being forced to offer for sale billions of dollars of new general obligation bonds. There has also been speculation that the State may have to borrow billions of additional dollars from the Federal Government in order to remain solvent. While high speed train service may be a desirable goal for California, it would be irresponsible to incur additional debt at this time.
For more information: Voter Information Guide – Prop 1A
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by David Boaz or 
by David Bergland, both excellent books on libertarian thought.
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