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California in Brief / SACRAMENTO

Foes sue over prison bond sale

May 07, 2008|Michael Rothfeld

Opponents of state prison and jail construction filed a lawsuit Tuesday in Sacramento County Superior Court against the state's plan to build 53,000 more beds, arguing that $7.4 billion in borrowing without voter approval is illegal. But state officials say courts have already sanctioned the practice.

The plaintiffs, including a group called Californians United for a Responsible Budget and several taxpayers, contend that the borrowing mechanism -- so-called lease-revenue bonds -- that the legislature and Gov. Arnold Schwarzenegger approved last year in AB 900, the prison package, would waste $1.3 billion in current dollars because of high interest rates and fixed costs.

Unlike general obligation bonds, which are backed by the state government, revenue bonds don't require approval from voters. But the suit argues that those bonds are not appropriate in this instance because the state's general fund, and not income from prisons, will repay the debt.

"We think it's kind of an inappropriate end-around the voter approval requirement," said Thomas Nolan, a lawyer for the plaintiffs.

H.D. Palmer, a spokesman for the state Department of Finance, said interest rates were only marginally higher for lease-revenue bonds. And he pointed to other cases, including one in the same court last year also targeting the prison construction plan, in which judges had found that the use of revenue bonds did not violate the state constitution.

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