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Statement: “Council has already approved lease revenue bonds, which don’t involve tax increase & don’t require voter approval. Has a plan for $500 mil.” Mark Kersey, a San Diego City Councilman, wrote on Twitter March 29.

Determination: True

Analysis: San Diego needs street, storm drain and other infrastructure repairs, and the latest city projections say the backlog stands at almost $900 million.

This year, the city created a new council committee dedicated to infrastructure problems. Ultimately the committee’s biggest question will be: How does the city pay to fix what’s broken?

Last Friday, Infrastructure Committee Chairman Mark Kersey held a Q-and-A on Twitter. San Diegan Andy Kopp asked Kersey whether it made sense to hold off on asking voters to approve a giant infrastructure loan, as city leaders have done. Shouldn’t the city go to the bond market as soon as possible to take advantage of low interest rates, Kopp asked.

Yes, Kersey replied. In fact, the city’s already borrowing a half-billion dollars even without the big bond, he said.

Kersey is right that the city wants to borrow lots of money in the coming years. The current plans call for almost $530 million in infrastructure loans from this year to 2017, though the city’s behind in issuing the bonds. It already has approved borrowing $110 million of that amount.

Kersey’s also right that the city’s borrowing plans don’t involve tax increases and don’t require voter approval.

The city will pay the loans back with money from its day-to-day operating budget, rather than with a tax hike.

It’s also figured a way around state rules that say voters need to approve borrowing money, even when there’s no tax increase involved.

To do it, the city needed to create a city-controlled financing authority. The city leases properties it owns to the financing authority for a nominal annual fee. Using those properties as collateral, the financing authority borrows the money. The city rents the properties back from the financing authority for an amount equal to the annual loan payment.

This system is known as a “lease-leaseback,” a method that school districts sometimes use to borrow money, and what Kersey meant when he called the loans “lease revenue bonds.”

This byzantine borrowing structure has its critics. Former City Attorney Mike Aguirre refused to sign off on a similar bond in 2008, saying it violated state debt laws. He recommended a voter-approved measure instead. But Aguirre’s successor, Jan Goldsmith, has had no problem with the loans and the city issued its first one for infrastructure repairs in spring 2009. It wasn’t challenged in court.

Kersey was right that the city already plans to borrow a half-billion dollars to pay for street, storm drains and other infrastructure repairs and those loans don’t involve a tax increase or require voter approval. He receives a True rating.

Kersey’s answer also provides a window into just how far the city has to go to fix its infrastructure problems and why officials are considering a big, voter-approved bond when it’s been borrowing money without going to the ballot box.

Even with all the loan money the city’s expected to spend over the next five years, it will still fall about $50 million short of keeping its streets, storm drains and facilities from getting worse, according to the city’s most recent projections.

That doesn’t include money for fixing other assets, such as sidewalks, or money to build new projects.

If you disagree with our determination or analysis, please express your thoughts in the comments section of this blog post. Explain your reasoning.

You can also e-mail new Fact Check suggestions to factcheck@voiceofsandiego.org. What claim should we explore next?

Clarification: This post has been updated to reflect that the city hasn’t yet borrowed $500 million for infrastructure repairs, but plans to. 

Liam Dillon is a news reporter for Voice of San Diego. He covers how regular people interact with local government.

Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.

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Liam Dillon

Liam Dillon was formerly a senior reporter and assistant editor for Voice of San Diego. He led VOSD’s investigations and wrote about how regular people...

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