CALIFORNIA’S MULTI-BILLION DOLLAR BONDAGE PROPOSITION

Prop. 1 and 2 will cost taxpayers billions and benefit at least four of California’s 90 billionaires

NEWS RELEASE – Planetary Solutionaries  -

For more information contact Patrick Porgans pp@planetarysolutionaries.org

3 November 2014 

California Governor Jerry Brown is up for re-election, and, when he wins, will make history as the state’s first fourth-term governor.

Ironically, Brown is not out campaigning for his job. Instead, he is the major proponent of two “legislative sponsored” ballot initiatives, Proposition 1 a water bond” and Proposition 2, a “rainy day” fund, which reportedly have the overwhelming support of Democrats and Republicans.

Brown‘s T.V. ads claim voter approval of Prop. 1 and 2 will enable Californians to save water and money, and secure the Golden State’s economic and financial future, increase water supply reliability, and help it prepare for climate change.

Prop. 1 “Authorizes $7.5 billion in general obligation (G.O.) bonds for state water supply infrastructure projects, including surface and groundwater storage, ecosystem and watershed protection, wetlands restoration, and drinking water protection. Voter approval of Proposition 1 would increase state bond (indebtedness) cost averaging $360 million annually over 40 years,” according to the Secretary of State Office.

Taxpayer groups claim that Brown is plunging California deeper into debt. Some critics charge that Brown is promoting his father’s and his legacy to complete the State Water Project (SWP). Others contend issuance of the G.O. bonds is an ingenious financial scheme to use the state’s tax-base, credit rating and natural resources to promote and sustain the fortunes of California billionaires that benefit from SWP, at the expense of taxpayers.

Brown is viewed as being fiscally conservative; however, his support for the water bond would not save money it will cost taxpayers ‘$15 billion in new debt. This debt obligation will be repaid from the state’s heretofore deficit-ridden General Fund.  

California is already inundated with a total of $147.8 billion in G.O. bonds that have already been authorized, according to the State Treasurer’s Office; repayment on that debt is around $300 billion.

Currently, there is $78.5 billion in outstanding general obligation (G.O.) bond debt. Every dollar the State borrows in G.O. bonds, it cost two dollars, according to the State Treasurer, Bill Lockyer. Repayment costs on the outstanding G.O. bonds are in excess of $150 billion. In order to put the magnitude of this debt in perspective, the current general fund expenditures to keep the state running is $107 billion. The annual debt service to repay outstanding G.O. bonds is around $8 billion.

Prop. 1 and 2 are inextricably tied together. The “rainy day fund” requires annual transfer of state general fund revenues to budget stabilization account. It also requires half the revenues be used to repay state debts. Limits use of remaining funds to emergencies or budget deficits.

Critics of both propositions view them as a backstop that authorizes a legal way to issue more bonds and drain money from the General Fund that could be used to fund other essential services. Critics claim that the rainy day fund is just another way of soaking the taxpayers to pay to provide water projects that benefit at least four of California’s 90 billionaires , who have a combined acreage in excess of 720,000 acres that are in need of water and infrastructure. Water realized from the bond act will be used to plant more permanent crops and foster additional urban development in Central and Southern California.

Approval of both propositions would enable Brown and his supporters to open the flood gates and promote more G.O. bonds to cover the debt for the estimated $63 billion “Delta fix – twin tunnels” (Bay-Delta Conservation Plan) and the High Speed Rail “Bullet Train”; initially estimated to cost  $40 billion, it is currently at $68 billion.  Recently, the California Supreme Court refused to hear the case involving the issuance of bonds for the high speed rail, clearing the way for the state to sell up to $9 billion in G.O. bonds.

Proposition 1 was initially conjured up under former Republican Governor Arnold Schwarzenegger’s Administration, as was the Bullet Train and the Delta tunnels, all of which are being championed by Brown.  Schwarzenegger, also viewed as a fiscal conservative, was a strong advocate of G.O. bond indebtedness that Californians will be repaying into the next century.

Prior to the state’s current budget, draconian budget cut, effecting safety-net services, education, jobs, parks and other public services were slashed from the General Fund to offset G.O. bond debt. The state’s credit and bond rating went down the drain, and major investment firms lost interest in the bonds.

Brown kept Schwarzenegger’s Director of Finance, Ana J. Matosantos. During the last two budgets of the Schwarzenegger’s reign, and the first budget Brown approved, they had made draconian budget cuts from the General Fund in excess of $100 billion during a three-year period.

Things went from bad to worse when the State had entered into a deal in a 2010 failed attempt to sell 11 properties in a sale-leaseback transaction to extract revenue from the state’s real estate assets to provide revenue for the state’s budgetary shortfalls. This deal was challenged in the courts, and received a scathing review from critics. A report on the details of the sale was published by the state’s Legislative Analyst’s Office (LAO). G.O. bonds are backed by the full faith and credit of the State, which has the authority to sell public assets to cover the state’s debt.

While it is not the intent to discount Brown’s assertions, critics claim it is a matter of interpretation. For example, since the mid 1990’s, more than $19 billion in G.O. bonds have been authorized for water supply reliability, safe and clean water programs, water for fish, drought relief, and habitat improvement.  Voters were assuaged to approve those bonds because they had politicians’ assurances that it would resolve the very water shortages the state is currently experiencing, since the mid-1990s.

Government records attest to the fact that California has expended vast sums of money on water development projects in the past century. The Golden State has the most developed water storage and delivery system in the United States.

In fact, it was Brown’s father, Edmund G. “Pat” Brown, Sr., who successfully launched the California State Water Project (SWP), by getting voters to approve a $1.75 billion G.O. bond,  back in November 1960, to build the Project that sold to the public on the promise it “would pay for itself.”

The concept was prefaced on the assertion that SWP water and power contractors would be obligated to repay all of the reimbursable cost for the SWP.  The record does not support that assertion.

Conversely, the data indicate that project has not, nor will it ever pay for itself. More than a half-of-century later, there is still $392.9 million in outstanding debt on the SWP $1.75 billion bonds. “Completion of the SWP is now estimated to be more than $50 billion, which does not include all of the costs.

SWP contract require that contractors pay certain annual cost even if they do not receive water; the revelation of the SWP’s economic plight surface at the end of the 1987-1992 droughts.  In 1994, Senate hearings revealed that the SWP was not paying for itself and bond syndicates were troubled about the financial integrity of the Project. Those findings and concerns were affirmed by testimony from SWP agricultural contractors asserting that they were on the verge of default. The crisis prompted the state to resort to issuing commercial paper to make good on the SWP’s financial obligations.

 Insiders contend that Proposition 1 is just another in a longstanding series of publicly subsidized bailout for SWP contractors. Governor Brown, Sr. conceded that the SWP was knowingly underfinanced and contractually over committed (“sold” more water than it could deliver), since its inception.

Whichever is the case, the final determination of the fate of Prop. 1 and 2 will be determined by the voters on November 4th. #

Signing of homeowners bill of rights three years late and a $1 trillion short

Planetary Solutionaries, Article by Patrick Porgans, Solutionist

PUBLIC SERVICE ANNOUNCEMENT – IMMEDIATE RELEASE     11 July 2012
Los Angeles, CA USA 

Today, California Gov, Jerry Brown,signed the “Homeowner Bill of Rights” into law (SB 900 and AB 278. This bill purportedly will curtail banks from fraudulent foreclosures. 

Reportedly, Brown tweeted that “this law will stop banks from foreclosing on Californians
 who are trying in good faith to renegotiate their mortgages.”

State Attorney General Kamala Harris campaigned for the legislation, and added a presentation on her website on how it will benefit California families.

Critics point out that the bill does not take effect until the beginning of the year and servicers aren’t obligated to consider applications for loan modifications or appeals submitted before Jan 1, 2013. Occupy Fights Foreclosures, a subcommittee of Occupy LA, is calling for an immediate moratorium on foreclosures to protect the thousands of families facing foreclosures right now.

In the meantime, there are many among the millions of foreclosure victims of the bank-induced subprime-mortgage crisis, robo-signing; derivatives-hedge betting, Wall Street bailout and fraud view it as more political grandstanding, years late and, according to some estimates, $1,000,000,000,000.

In California alone, the total cost of the foreclosure crisis to homeowners, the property tax base, and local governments could add up to at least $650 billion and possibly reach as much as $1 trillion? That’s just one of the major findings of a report, released by a coalition of faith, community and labor groups in California that are demanding that Wall Street pay its fair share to helping California recover from this devastating crisis.

Many are questioning the government’s ability to use or enforce existing laws designed to protect victims of crime.Others question the need for such a law so late in the game; after all, it is estimated that by year’s end two-million foreclosures would have taken place in the Golden State. 
Government insiders contend the new law is a clever way to promote the illusion of protection and accountability. They may have a point, the fact that the state’s Constitution, Article I, already provides protection for victims of crime. Supporters of the bill point to the positive benefits contained in the bill. 
Critics question why make new laws when existing ones are not being enforced. Although the banks have agreed to a multibillion dollar settlement, and have paid hundreds of millions of dollars in fines levied by the Security Exchange Commission; all this has been without an admission of guilt.

One ranking Congressman recently summed it up like this during a hearing attended by the major bank executives testifying before Congress. He said, members of his constituency have and continue to rob banks, should we grant them the same prosecutorial discretion and/or immunity as the banks’ are presently seeking?

The Rule of Law, in its most basic form, is the principle that no one is above the law. The rule follows logically from the idea that truth, and therefore law, is based upon fundamental principles which can be discovered, but which cannot be created through an act of will. 

Political insiders recognize that Brown and state’s attorney general Kamala Harris can make a lot of political “hey” out of the enactment of this new victims’ rights law, which, coincidentally, came out after the signing of the attorneys generals settlement with the five major banks involved in the subprime mortgage crisis. 

The promises made by five of the nation's largest banks under the much-ballyhooed $25 billion mortgage settlement have a surprisingly short shelf life.

Under the deal struck in February, Bank of America, Wells Fargo, Citigroup, JPMorgan Chase and Ally Financial pledged to stop the illegal practices that sparked false documentation and "robo-signing," which helped push many homeowners into foreclosure and caused endless headaches for millions of other borrowers.

But the legal agreements among the banks, and the states and federal government hold for only three-and-a-half years; the pledge runs out in 2015.

Others argue that Golden State’s Constitution, Article I, already provides a Victim’s Bill of Rights. Unfortunately, at this point, concerns as to the applicability of the existing victims’ rights law, left unchallenged, may become a moot point, upon signing of the new law.

Supporters of the bill point to the positive benefits contained in the bill, and as a step forward. Opponents contend that it is more like two-steps backwards. 

Planetary Solutionaries point to the simple fact that both Brown and Kamala had the authority to stop foreclosures at least three years ago, and failed to do so. 

To Brown’s credit, he did threatened to stop foreclosures when he served as state attorney general; however, that did not happen. 

Kamala reportedly ran her campaign on the hold the banks accountable and stop bank foreclosures.
Despite all the rhetoric the Golden State and its taxpaying residents are the victims of the bank-induced mortgage crisis causing significant economic impact and financial disruption.

Brown could have also exercised his authority to “Declare a State of Financial Emergency”, which is also provided for in the State’s Constitution, Article IV, section 10(f). 

Brown exercised this authority in January 2011, at which time he “declared a state of fiscal emergency in California" due to the state’s unrelenting budget crisis. 

Although foreclosure victims appealed to Brown to and Kamala to exercise their respective authority to stop the bank-induced foreclosure, they opted not to do so. The appeal was meant as a means to stabilized the crisis and ensure a flow of much needed tax revenues to aid the state’s deficit-ridden General Fund.

California's lawmakers approved a $92.1-billion FY2013 budget on June 15, 2012, with a Senate vote of 23-16 and an Assembly vote of 50-25, along party lines. Gov. Brown signed the budget on June 28, 2012, after vetoing $195 million in spending, $91.3 million from the general fund and $66.8 from special funds and federal funds.

The money to fund the General Fund comes predominately from sales, income, real estate and property taxes.

Brown critics claim that as a two-time governor he should have known that the mortgage crisis and related foreclosures would take a terrible toll on tax revenues used to for the deficit-ridden General Fund.

The cost to the taxpayers for each of those many foreclosures will amount to an estimated $38 billion, alone. The loss in property values exceed $600 million, combined with the loss in tax revenue to local and state treasuries more than $1,000,000,000,000, The nationwide government-bank settlement amounted to just $25 billion.

Although contact was made with the designated agencies responsible for collecting and distributing taxes collected by the state, none could provide the amount of tax revenue losses and related foreclosure costs incurred to date.

Instead of stopping the financial hemorrhaging, and ensuring anticipated tax revenues, Brown, along with his predecessor, Arnold Schwarzenegger succeeded in axing out more than $100 billion in General Fund budget cuts in the previous three state approved budgets.

California’s Draconian budget cuts continue to take their toll on education, safety-net services, jobs, and, other related taxpayer-funded social programs.

Under Brown and Schwarzenegger’s fiscal austerity plan, using the same finance director, Ana Matosantos, they have been pushing the issuance of tens-of-billions of dollars in new debt, via the sale of General Obligation (GO) bonds, for water and water-related programs, and the high-speed rail; a plan that could cost taxpayers as much as $68 billion. 

Currently there are $147 billion in authorized GO bonds; $80 billion of which has been issued. According to state treasurer Bill Lockyer, It will cost us two dollars for every dollar borrowed and spent.... “

Bond measures that appear on statewide ballots include a disclaimer that goes something like this: “This measure appropriates money from the General Fund to pay off bonds.” 

Translation:“This measure does not raise your taxes to repay the bondholders.” Instead, bond debt is repaid from the same limited pot of money that funds our schools, universities, safety-net programs, criminal justice system, and other key public structures. Because voters don’t have to weigh the value of what the bonds would buy against their willingness to pay for them, bonds may look a bit like free money to many California voters, according to the California Budget Project.

However, a recent report from State Treasurer Bill Lockyer makes clear that bonds are no free lunch. Debt service – principal and interest payments – on outstanding bonds will cost the state an estimated $6.9 billion in 2011-12, equal to 7.8 percent of General Fund revenues.

At its peaking 2007-2008, General Fund spending was $103 billion. Given the deep spending cuts included in the 2011 Budget and the 2012 Budget, overall General Fund spending is now $91.3 billion, $11.6 billion lower than five years earlier. General fund spending as a share of the state’s economy is down to its lowest level since 1972-1973, when Brown served as governor.

The repayment of those bond come essentially off the top of the taxes paid into the General Fund. Currently, depending on government’s numbers, the debt service represents about eight or nine percent of the fund. Estimates by the state indicate that total annual debt service on GO bond could eat up as much as 12% of the fund in the near future.

Although, the use of GO bonds is an established method of funding state projects, serious questions have been raised, that remain unanswered, regarding the alleged misuse of GO bonds.

About a half of dozen of the state’s 100 billionaires have and continue to be the recipients of billions of dollars of profits and give-away programs derived from the issuance, sales and distribution of GO bonds which are repaid from the deficit ridden General Fund.

Brown recently said that the lion’s share of the state’s portion of the settlement will go into the General Fund. A matter that will be the subject of an upcoming series of articles, which raises doubts about the seriousness of the state’s recurring budget and general fund crises and examines how the issuance of GO bonds amount to a shift in the state’s annual debt load. 

Essentially, how some of California's billionaires are using the public’s credit rating, tax base, natural resources, and key-politically held offices to amass and sustain their fortunes as the expense and to the demise of its residents.#

For more information contact pp@planetarysolutionaries.org

California Tax Revenue Decline Inches State Toward Trigger Cuts
BusinessWeek

When lawmakers agreed on the budget in June, it appeared the US economic
recovery was picking up pace. But the continuing debt crisis in Europe and
the impasse between Congress and the White House over raising the debt
ceiling shook confidence in the ...
<http://www.businessweek.com/news/2011-10-11/california-tax-revenue-decline-inches-state-toward-trigger-cuts.html>

By Michael B. Marois and James Nash

Oct. 11 (Bloomberg) -- California took in less revenue than needed to stay within its budget last month, leaving the most- populous U.S. state at risk of triggering automatic cuts to universities and caregivers for the elderly and disabled.

The state had $705 million less on Sept. 30 than Governor Jerry Brown and Democrats projected in their budget for the year that began July 1, Controller John Chiang said yesterday. The $86-billion spending plan included a series of reductions to be activated if revenue falls below certain levels.

The first tier, if the shortfall is $1 billion, would trim University of California and California State University budgets by $100 million each, increase community-college fees by $10 per unit and cut in-home services for the elderly and disabled who need help. In December, Brown’s finance department will estimate whether the rest of the year’s revenue can meet the original projection.

“The potential for revenue shortfalls is precisely why the governor and Legislature included trigger cuts in this year’s state spending plan,” Chiang said in a statement. “September’s revenues alone do not guarantee that triggers will be pulled. But as the largest revenue month before December, these numbers do not paint a 

hopeful picture.”

http://www.businessweek.com/news/2011-10-11/california-tax-revenue-decline-inches-state-toward-trigger-cuts.html

Note to Reader(s): more info on Bonded Indebtedness and Orchestrated Budget Crisis, go to www.planetarysolutionaries.org, click :Ongoing Projects; California Bondage.

As Suspected By Carter annd Porgans - Brown is Behind the Canal

http://blogs.alternet.org/danbacher/2011/08/19/jerry-brown-reaffirms-support-for-delta-killing-peripheral-canal/

Jerry Brown reaffirms support for Delta-killing peripheral canal

by Dan Bacher

Governor Jerry Brown, in his remarks to the editorial board of the Fresno Bee on Wednesday, August 17, reaffirmed his support for a peripheral canal or tunnel to facilitate the export of more California Delta water to corporate agribusiness and southern California water agencies.

The Bee piece focused on Brown's support for high speed rail - and provided little detail about Brown's plan to build the canal, a project opposed by a broad coalition of Delta residents, fishermen, family farmers, Indian Tribes and environmental justice communities.

"The rail project is one of two major infrastructure projects on Brown's agenda," according to the Bee. "He said today that he will have a plan for the other project - a peripheral canal or other way to move water through or around the Delta - within a year." (http://blogs.sacbee.com/capitolalertlatest/2011/08/jerry-brown-calls-for-high-spe.html#ixzz1VKloTwTj)

On August 11, California Natural Resources John Laird and Department of the Interior Deputy Secretary David J. Hayes unveiled their "aggressive schedule" to build Delta "conveyance" through Governor Arnold Schwarzenegger's Bay Delta Conservation Plan (BDCP).

The U.S. Department of the Interior (DOI), the U.S. Department of Commerce, and the California Natural Resources Agency agreed to a schedule for completing an effects analysis and a combined environmental impact statement/environmental impact report (EIR/EIS) as part of the BDCP by June 2012. ( http://resources.ca.gov/docs/Final_-_DOI_CNRA_BDCP_Schedule_Release.pdf)

They also agreed to considering a "suite of alternatives" for evaluation in identifying a proposed Delta conveyance project. Those alternatives include a variety of conveyance facilities with capacities ranging from 3,000 to 15,000 cubic feet per second.

Governor Brown is continuing to promote Schwarzenegger's peripheral canal," Barbara Barrigan-Parrilla, executive director of Restore the Delta, responded to Brown's latest affirmation of support for the canal. "That is too bad. He is another career politician clinging to ideas from the past that will not serve the present. It's a shame that he is not looking at cutting edge technology and new solutions to create a positive environmental and economic legacy for California.

Likewise, Calleen Sisk-Franco, the Chief and Spiritual Leader of the Winnemem Wintu Tribe, said, "The Tribe is totally against the canal in any form."

"Governor Brown has put the canal, a huge project to take water from the Delta, on the fast track, explained Sisk-Franco. But both the little salmon and adult chinooks need the fresh water in the estuary to acclimate when they go up and down the river.

She emphasized, Many people assume that the Governor is doing the best job for us. However, what he is really doing is the best job he can for the corporations.

The corporate agenda behind the peripheral canal and general obligation water bonds is revealed in the ground-breaking two part investigative report, "Budgets, Billionaires, Bonds, Big Profits and the Brown Family," written by Patrick Porgans and Lloyd G. Carter. (http://www.lloydgcarter.com/files_lgc/Billionaires%20and%20Bonds.pdf)

 "Part One focuses on how the wealthy and landed have used the public bond process in California to further their own interests, while promoting and profiting from the state’s budget crisis. Part Two focuses on the family legacy of Gov. Edmund G. Pat Brown, who first mastered the art of selling water bonds half a century ago, to finance the construction of the State Water Project, which was sold as a project that would pay for itself. It never has," explained Porgans and Carter. (http:www.planetarysolutionaries.org)

Brown's support for the peripheral canal should come as no surprise, since he backed the earlier version of the peripheral canal during his previous term as Governor. The voters overwhelmingly voted down the peripheral canal proposal during the election of November 1982.

Canal opponents believe the construction of the canal, designed to divert massive quantities of badly needed fresh water out of the Delta, would likely result in the extinction of Central Valley steelhead, Sacramento River chinook salmon, Delta smelt, longfin smelt, green sturgeon and other imperiled fish species.

The fish-killing canal is teamed up with an equally destructive "habitat restoration" plan to convert vast areas of Delta farmland, some of the most productive agricultural land on the planet, into marshland so that drainage-impaired land on the west side of the San Joaquin Valley can continue to be irrigated by corporate agribusiness interests.

The campaign to build the peripheral canal is not the only program of the Schwarzenegger administration that Governor Brown has embraced. He has also decided to forge ahead with Schwarzenegger's widely-contested Marine Life Protection Act (MLPA) Initiative, a privately funded process to create so-called "marine protected areas" characterized by numerous conflicts of interest, institutional racism and the violation of numerous federal, state and international laws.

The Brown administration has also decided to allow record water export pumping out of the Sacramento-San Joaquin Delta this year, resulting in a massive, unprecedented fish kill at the state and federal pumps.

A horrific 8,966,976 splittail, 35,556 chinook salmon, 430,289 striped bass, 54,412 largemouth bass, 69,383 bluegill, 76,570 white catfish, 28,301 channel catfish, 233,174 threadfin shad, 264,171 American shad, 1,642 steelhead and 51 Delta smelt were salvaged in the state and federal water export facilities from January 1 to August 2, 2011, according to Department of Fish and Game (DFG) data. As if that isn't bad enough, the overall loss of fish in and around the State Water Project and Central Valley Project facilities is believed to dwarf the actual salvage counts (http://www.counterpunch.org/bacher08052011.html).

For more information, go to: http://www.restorethedelta.org.

How to solve the "budget crisis" in California?

Answer(s) from Patrick, Solutionist

http://answers.yahoo.com/question/index?qid=20110811235543AApH4zj

 

Voters and taxpayers should curtail their elected officials from enacting laws that borrow money with the use of General Obligation Bonds to "pay off" debt attributable to project(s) that were "sold to the voters" as project(s) that would "pay for themselves". Case in point, is the Golden State's ongoing budget and water crises. They are both directly linked to government officials barely getting voters' 1960 approval of a $1.75 billion General Obligation "Water Resources Development Bond Act".

Government records indicate that an estimated 30 percent of the $1.75 billion is still unpaid; in the interim period, government water contractors have reaped in billions of dollars in profits. More importantly, officials have successfully mislead voters to approve more than $19 billion in additional General Obligation water- and water-related bonds from 1996 through 2006. Governor Jerry Brown, along with supporters, plan to place another $11 billion General Obligation bond on the Nov. 2012 ballot. According to the state Director of Finance, it cost about one dollar in interst payment for every General Obligation bond dollar borrowed to continue to bailout the same government water project contractors. Instead, voters and taxpayers should have the water contractors and users "beneficaries" pay the cost. 

Californians should also look and see how the State of North Dakota successfully survived in the 1930's Great Depression, and how it is prospering today, even in the midst of what has been identified as a banking-institutions orchestration of the "Great Depression" as of late.

The Browns and 50-Years of GO Bond Debts

The Browns and 50-Years of GO Bond Debts

Part Two

By Patrick Porgans and Lloyd G. Carter

Editor’s Note: In Part One of this two-part series, Porgans and Carter showed how land-rich but water-short Southern California billionaires are pushing an $11 billion bond measure on the 2012 ballot to enhance their holdings.  Part Two examines the legacy of Gov. Edmund G. “Pat” Brown and his two children, current Gov. Edmund G. “Jerry” Brown and Kathleen Brown, and their connection to public bonds, budget deficits, the Bay-Delta Estuary conflict, and the November 2012 water bond measure.

You can count on Team Billionaire, which includes the actual billionaires, chambers of commerce, local water districts, banks, and all manner of Southern California real estate and development interests, to spend huge amounts of campaign contribution money to convince voters to approve an $11 billion water-related General Obligation (GO) bond measure on next year’s statewide ballot.

Based on the Team’s track record it has been very successful. In 2006, under then Gov. Arnold Schwarzenegger, himself a first string team member, voters were persuaded  to approve more than $40 billion in GO bonds, which will cost $80 billion to repay. According to the state’s Department of Finance director, for every dollar borrowed with GO bonds two dollars must be paid back for interest and principal.

Over time, that $80 billion will be repaid from the state’s deficit-ridden General Fund, and could trigger even more cuts of General Fund programs in future state budgets. However, Team Billionaire players are not telling that to voters as they stump for next year’s water bond.

This consortium of “team players” reincarnated an ingenious financing scheme that was first pushed back in 1960 by Gov. Pat Brown, and Ralph Brody, a former Brown aide and later general manager of the Westlands Water District.  Back in November 1960, Pat Brown narrowly succeeded in getting voters to approve a $1.75 billion General Obligation (GO) bond to fund the State Water Project (SWP). The project, including reservoirs and a massive canal, was designed to move huge amounts of Northern California water south to the industrial farms of the southern San Joaquin Valley and the ever-growing subdivisions of Southern California. 

Brown Sr., along with large landowners in the arid regions of the state, lending institutions such as Bank America, Wells Fargo, and others, successfully sold the SWP to voters under the false premise that it would pay-for-itself; it never has. It hasn’t even come close.

According to government records, about 30 percent of the $1.75 billion State Water Project bond authorized in 1960 remains unpaid. The money to repay that debt and other GO bond debt is derived directly out of the state’s so-called deficit-ridden General Fund, a portion coming from SWP contractors. According to the state Department of Water Resources (DWR),  capital costs for the State Water Project already exceeds $9 billion; and estimates to complete the project have been as high as $63 billion.

In October 1960, a report by consultant Charles T. Main, declared it was feasible to engineer the massive water works project, but gave qualified answers to the question of financial feasibility. It pointed out the probability that construction costs would escalate, questioned the future ability of agricultural water users to repay their share of the costs, and declared that the state must be prepared to assume the risk that it might not be completely reimbursed during the bond repayment period. Specifically, it stated that the Burns-Porter Act (enabling legislation) fell slightly short of providing construction funds on the basis of 1960 costs, according to a state Senate Committee report, issued during the SWP’s 1960s economic and financial crises.

Pat Brown, in a 1979 interview with a University of California-Berkeley Bancroft Library oral historian, said “We were questioning could we pass a bond act of $1.75 billion? We didn’t know exactly the cost of the project. We hadn’t priced it out to any exactitude.  As a matter of fact, we thought it would cost more than the $1.75 billion, probably in the neighborhood of $2.5 billion.”

During that interview Brown also confirmed the fact that what his financial and engineering consultants (Charles T. Main and Dillon Reed) told him back in 1960: the SWP would face financial and structural shortcomings, and the state should be prepared to cover future costs; cost directly attributable to the fact that it had been knowingly underfinanced from the start.

Former Gov. Ronald Reagan confirmed this in a San Francisco Chronicle interview, stating, “The project was underfinanced from the very start. It is not my intention to dwell on this, but people were allowed to believe that the original bond issue would cover the program [SWP] cost. This was never true.”

The records indicate that the SWP has and continues to go from one financial crisis to the next; however, that has not impeded the contractors’ ability to profit from the water and power they receive from the SWP.  In the process, government officials and SWP contractors have shifted a significant portion of the “reimbursable costs” of the project - which the contractors are required to pay – to the unsuspecting public in the form of GO bond debt.  Indeed, a 2007 study by the Public Policy Institute of California found that “some two-thirds of respondents admitted they knew very little or nothing about how the state pays for bond measures.”

 Department of Water Resources records indicate that SWP agricultural contractors include billionaire families including the J.G. Boswell heirs; Orange County land baron Donald Bren; Stewart and Linda Resnick, who own 200,000 acres of farmland in Kings and Kern counties; and the Catellus Corporation, which holds the largest private bloc of land in California in the Tehachapi Mountains.  In addition, southern San Joaquin Valley irrigation districts, and other major landowners, over the decades have been the recipients of hundreds of millions of acre-feet of water at cut rate prices (until recently), and have harvested billions of dollars of profits from the agricultural products made possible by the SWP.

Up until the mid-1980s, the SWP economic, financial and so-called water related shortages and related crises were dealt with in the low-key “government has it under control mode.”  A more accurate assessment of the SWP’s financial condition surfaced in the late 1980s and again in the mid-1990s, when Porgans & Associates produced a series of in-depth, fact-finding reports entitled “The State of The State Water Project.”

The facts contained in that series of reports were used in legislative hearing and within the regulatory processes to provide decision-makers with unbiased findings, prefaced on government data, reports and other official documents.  Irrefutable facts revealed that the SWP was not paying for itself as promised.  Instead, the unsuspecting public has been picking up the tab to provide SWP contractors with a more reliable source of supply. In some cases, the SWP contractors buy water cheap from the public and sell it back to the public at fat profits.

Here is an indisputable fact.  Between the years 2000 and 2010, $19.4 billion of outstanding water- and water-related bond debt was incurred, which amounts to about 25 percent of the state’s existing total authorized bond debt of $79.6 billion. Again, repaying bonds generally doubles the amount of money the bonds generated.

Ironically, Governor Edmund G. “Jerry” Brown, Jr., in his second go-around as governor, has once again inherited the financial shortcomings associated with the misleading promises made 50 years ago by his father. During Jerry Brown’s first administration as governor (from 1975 to 1983), he supported efforts to complete the already faltering SWP by supporting a 1982 ballot (Senate Bill 200, also known as Proposition 9), a measure to build a “Peripheral Canal” through the Sacramento-San Joaquin Delta region.

In the aftermath of voter rejection of the 1982 Peripheral Canal measure, Jerry Brown was quoted in the Sacramento Bee as saying it didn’t matter what the voters decided, that the peripheral canal would be built some day. In that same issue of the Sacramento Bee, it was reported that then Assemblyman Tom Bates, and his aide, Lenny Goldberg, used Porgans’ reports to require DWR and the SWP to repay an estimated $500 million in debt, with a  significant portion going back into the General Fund.

However, the real financial weaknesses of the State Water Project, as predicted by Porgans & Associates, came during the 1987-1992 drought. The Department of Water Resources conceded the SWP was short of cash and began issuing “commercial paper” for the first time in the project’s history, just to buy water so that its agricultural contractors would remain solvent, and the state’s credit rating would not go down the tubes.  This tactic raised questions about the legality of DWR issuing commercial paper, which is a type of loan.  

Now, there are indications that Jerry Brown is once again following in his father’s financing footsteps.   Brown Jr. recently appointed Jerry Meral to be deputy secretary of the California Natural Resources Agency in charge of the Bay Delta Conservation Planning Program.  

Meral served as deputy director of the Department of Water Resources during Brown's first administration in the early 1980s.  Prior to that, Meral worked for the Environmental Defense Fund (EDF), at which time he was anti-canal. After taking his position with DWR, Meral became an advocate for the failed 1982 Peripheral Canal ballot measure.  Critics now say Meral is again Brown's point man for implementing the so-called preferred Delta "fix", which could include a massive canal/tunnel to funnel Northern California around the beleaguered Bay-Delta Estuary and ship more water south.

Many of Gov. Schwarzenegger’s pro-canal appointees to the Delta Stewardship Council and other water agency positions have not been replaced by Brown.  And Brown has the same Director of Finance, Ana Matosantos, who served under  Schwarzenegger.  The move to reduce the budget and make room to issue more GO bonds also indicates that Brown and his supporters are paving the way to move more water south, duplicating his father’s efforts of half a century ago.

            Jerry Brown’s sister, Kathleen Brown, who served as state treasurer and ran for governor against Pete Wilson in 1994, has also played a key role in the California water bond phenomena.

            Kathleen Brown went to work for the financial institution Goldman Sachs in 2001 and became the head of its West Coast municipal bond operation.

According to the state Department of Finance (DOF), $79.6 billion of general obligation (GO) bonds which have been issued by the state, were managed, marketed and syndicated by financial institutions such as Goldman Sachs, Wells Fargo, Bank of America, and others.

Public records show that about 17 percent of the General Obligation bonds which have been issued by the state were underwritten or managed through Goldman Sachs, generating hefty profits.

            According to a recent report by Bloomberg, Kathleen Brown, has moved to a newly-created similar post in Goldman Sachs’ Chicago office now that her brother is governor again.

“Kathleen is taking on this new role because it broadens her client focus,” Goldman Sachs spokesman Michael DuVally said. “Had she continued to work with California municipalities, it might have created the perception of a conflict of interest.”

 Ms. Brown previously held positions at Bank of America and the mega-law firm of O'Melveny & Myers.

It has been more than 50 years since the SWP was authorized and there is no end in sight to the conflicts and costs to the taxpayers and the devastating impact that the project has had on public trust resources. The Bay-Delta Estuary is the hub of major government projects export vast amount of water to contractors in central and southern California. Government has repeatedly promised and failed to provide the protection provided by law to protect the delta. In fact, it is government’s inherent conflict as a water purveyor and regulator that is and remains at the heart and crux of California’s unrelenting water and financial crises. 

The beginning of the end for the Bay-Delta Estuary came about in 1994, when DWR and its contractors, along with local water agencies and the “major” environmental groups - such as the Environmental Defense Fund, the Natural Resources Defense Counsel and the Bay Institute – agreed to what is known as the Bay-Delta Accord.  This agreement provided for increased Delta exports. The Accord language, shepherded by Gov. Pete Wilson and billionaires Donald Bren and J.G. Boswell, prohibited listing of additional aquatic species as threatened or endangered, species which were being killed by government water exports.

Recently, government officials released yet another very expensive draft plan, espousing how they are going to protect the Bay-Delta Estuary. As long as water export proponents continue to hold key positions in water agencies, billion dollar plans for giant canals and tunnels to move rivers of water south will remain the state’s plan and the Delta will continue its death spiral.

The massive water bond debt, in part, caused State officials to make $115.7 billion in budget cuts from 2008 through 2011, paring programs for the poor, disabled and raising tuition for college students. At the same time, California officials issued $33.8 billion in General Obligation (GO) bonds, according to public documents obtained from the state Treasurer’s Office.  Payback for that ill-advised borrowing binge will cost taxpayers over $67 billion.

Gov. Jerry Brown’s latest bare bones budget cuts appear to be good news for bond syndicators and investors.  A bond rating company, Standard & Poor’s, gave an approving nod to the budget cuts, according to a San Francisco publication.

Recent op-ed articles in the state’s major newspapers by promoters of the 2012 water bond measure, currently estimated at about $11 billion, do not say that it will actually cost $22 billion to pay off the bond. Nor do they say that even more cuts in education, public safety and social programs for the disabled (now financed from the state’s General Fund) will occur so that big growers in the western San Joaquin Valley can keep irrigating and billionaire real estate barons can continue to grow subdivisions in the Southern California deserts with Northern California water.  Taxpayers will remain in bondage to bonds for decades.

Patrick Porgans and Lloyd G. Carter have both been writing about California water issues for 40 years. Porgans’ email address is pp@planetarysolutionaries.org.  Carter’s email is lcarter0i@comcast.net