SJR 107

Statements FOR the Proposed Amendment to Section 2A, Article VIII Constitution of the State of Idaho

• This amendment will allow schools, irrigation and water districts, cities, counties and other special purpose districts or political subdivisions to save taxpayer money when they have to borrow money or issue bonds.
• The amendment will allow local governmental entities who either have no access or who have limited access to the bond markets to obtain financing at rates that are less than they can currently obtain by borrowing on a stand-alone basis, resulting in savings to those entities and their taxpayers.
• Local governmental entities utilizing the bond bank authority are likely to be the smaller governmental entities who have lesser credit ratings or who borrow infrequently. To the extent that the state pledges additional revenues or other assets to support these bonds, the interest costs will be reduced because the financing will be viewed as more secure by the bond investors and they will accept a lower interest rate.
• Local governmental entities frequently have difficulty in getting bonds passed for new facilities and projects. This provision may aid in the passage of bond proposals since the costs to the taxpayer will be lower due to reduced interest payments on the bonds and other cost savings to be realized through the use of the bond bank authority.
• Local governmental entities will realize additional savings in transaction costs if a number of local bond issues are pooled together in one bond financed through the bond bank authority.

Statements AGAINST the Proposed Amendment to Section 2A, Article VIII Constitution of the State of Idaho

• The local governmental entities who will benefit most from this program are those with the worst credit and a limited ability to issue their own bonds at favorable rates. The large local governmental entities with good credit ratings from the bond rating agencies can issue bonds at favorable rates on a stand-alone basis. This amendment encourages the state to incur debt and risk its revenues to support those local governmental entities that are the least stable financially. Any losses to the state would have to be borne by all of its citizens as a whole with any corresponding benefits from the financing going only to certain localities.
• In allowing the state to incur debt on behalf of municipalities with higher risk bond issues, this amendment has the potential to dilute the good credit of the state of Idaho, resulting in lower overall bond ratings for the state and higher interest rates on the state’s tax anticipation notes.
• Generally local bonds in Idaho have a good market and selling local bonds is not an obstacle to local government financing. Any advantages from pooling bond issues will be of benefit only to those local governmental entities with the highest risk bond issues. The best-rated local issuer will be at the mercy of the poorest performing issuer and will gain little from being in the pool.
• There is a long standing constitutional prohibition against the state’s extension of its credit to municipalities. This amendment would set aside that prohibition and undermine a conservative fiscal policy that has served this state and its local governments well for decades.
• With the availability of the bond bank authority as a market for municipal bonds and a ready source of local financing, this amendment will encourage local units of government to incur debt and impose ever increasing burdens on the taxpayer.