Business/Economics, Opinion, U.S.

Voting for local levies and bonds only puts your local community deeper in the debt hole

“They [banks] didn’t vote for the bond issue, they didn’t support the bond issue.  They’re simply trying to underwrite some of them.”-Paul Sheldon Foote, California State University Fullerton

Professor Foote is explaining that, what he calls “…stupid idea…” bonds/levies, are forms of debt voted on by taxpayers, but funded by investment bankers.  

You don’t want local government and school district employees to lose their jobs.  You don’t want to see kids lose out on education programs that might be cut.  But voting for a levy, or bond issue, means you’re supporting those jobs and education programs purely on debt.

“Local governments draft levy bonds to sell at current market rates to raise capital for work projects.”-eHow money

Local bond levies, are forms of debt sold by your local officials to investors.  Those investors expect a return on their investment, that’s where the increases to your property tax/fees come in.  Investors pay the up front costs by buying local bonds, and you the taxpayer pay back the investor.
“The voters typically saddle the cost of funding such projects through increased tax levies.”-eHow money

If your local officials were truly conservative in their fiscal and monetary policies, there would be no need for most of the bond levies that you’re tricked into voting for.

In fact, it becomes a downward spiral, many bond levies are actually being used to pay off previous bond issues.  It has to stop, before there’s no one left who’s willing to invest in the next bond/levy issue.

In fact the debt crisis in California is due in part to investors not wanting to back up any more bond issues: “The state treasurer can not possibly issue every single one of them [bond issues] because, fortunately, the ratings agencies and investors see through it and would not possibly finance every single stupid idea that comes out of politicians!”–-Paul Sheldon Foote, California State University Fullerton

So what’s the answer?  An economics professor in the United Kingdom likes what North Dakota has done with its own State Bank: “The answer is, is to use the state bank mechanism for all your capital projects… And [North] Dakota is in fact, in practice, in a way a public bank giving a lead in that respect.”-Rodney Shakespeare

Shakespeare says the public bank in North Dakota charges interest on loans, but the revenue from that interest stays in North Dakota, and does not go out of state to corporate controlled banks.

Written by: Hutchins AAron on July 12, 2011.