The alarm the city sounded to Wall Street about Proposition A has been received and answered. If you recall, on May 22, the city disclosed information about Prop. A in its bond offering documents that said in part:

“…the State Legislature passed, and the Governor signed, a law that would prohibit the use of State funds on local construction projects where the local agency, including a charter city, prohibits the use of PLAs. If approved, Proposition A could cause the City to lose State funding for City construction projects.”

And according to the fiscal impact analysis for the ballot measure approved by the mayor’s office and Independent Budget Analyst, “Major State funding awarded to the City in fiscal years 2010 and 2011 was approximately $36 million and $158 million, respectively.”

Having access to this major funding has also allowed the city to save more than $70 million in interest since 2007, because it can borrow money from the state at a “low 2.0933% for a 20-year term.” This is the type of funding that is at risk if Prop. A passes.

On May 29, Fitch Ratings issued a press release about the city’s bond ratings that included information about Prop. A. It appears under the heading of “What Could Trigger a Rating Action.”

“POTENTIAL AREAS OF GENERAL FUND EXPOSURE: Additional general fund support for debt currently reimbursed by redevelopment monies, the city’s storm water program, and construction projects if state funding ceases due to possible voter approval of a ban on project labor agreements, could place downward pressure on the city’s bond ratings.”

Fitch also said:

“However, in terms of overall funding for the city’s capital needs, Fitch notes that voter approval of a June 5, 2012 ballot measure to prohibit project labor agreements could adversely impact the city’s receipt of capital grant funding from the state ($194 million over the last two years), thereby creating more need for general fund support of capital projects.”

But Fitch is not the only one weighing in on this. State Controller John Chiang has already made it clear that Prop. A would cost San Diego hundreds of millions of dollars. State Treasurer Bill Lockyer agreed stating: “If Prop A passes, San Diego will no longer be legally eligible to receive state grants or low-interest state loans that are essential to fund local infrastructure projects.”

And state Sen. Christine Kehoe made similar statements recently, even having one of her staff attend the May 22 City Council meeting to make the point that funding for city projects, including city wastewater and transportation projects, was at risk. So, the city, Fitch Ratings and state elected officials are taking this seriously, and their statements are instructive in helping educate the public about the financial risks associated with Prop. A.

But Prop. A backers say bringing information, such as the Fitch press release, to the public is a scare tactic to get the voters to oppose Prop. A. They want the public to stand up to the “bullies” in Sacramento by banning project labor agreements, even though the city of San Diego has never been a party to a PLA.

While I disagree with the backers of Prop. A, I understand their passion. They have made it clear that they want to pick a fight with Sacramento and watch all hell break loose if this ends up in court. What I don’t understand is why they insist on using taxpayer money, instead of their own, to do it.

Donna Frye is a former San Diego City Councilwoman.

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Dagny Salas was web editor at Voice of San Diego from 2010 to 2013. She was an investigative fellow at VOSD from 2009 to 2010.

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