Home > News > News Articles > 2015 > August > State Makes Final Payment on 2004 Economic Recovery Bonds
News Feed

State Makes Final Payment on 2004 Economic Recovery Bonds

August 7, 2015
State Treasurer John Chiang announced on Wednesday, Aug. 5 that he had directed Department of Finance Director Michael Cohen to make the final payment on California’s 2004 Economic Recovery Bonds. Authorized through Proposition 57, the final payment of $929.7 million is another step in paying down the state’s wall of debt.
 
Voters approved Prop. 57 in 2004 to refinance accumulated budgetary debt. Bond payments on this debt total $14.2 billion principal, $4.8 billion in interest and administrative costs of $153 million. The 2014 Budget Act provided $1.6 billion from the Budget Stabilization Account so that the recovery bonds could be paid off in the summer of 2015, one year ahead of the previously scheduled payoff date. Because the debt is being retired earlier, finance officials estimate that the state will save approximately $60 million in debt service costs associated with a longer payoff period.
 
This commences “unwind” of the triple flip. CaliforniaCityFinance.com features a detailed analysis about how this will work and its implications. It is important to note that this relates to the sales-tax for property tax swap that is the mechanism to fund the state’s operating debt scheme under Proposition 57.  This is not the Vehicle License Fee (VLF)-Property Tax swap and has no effect on that policy. Property Tax in lieu of VLF payments are not affected and, in fact, are constitutionally protected.


 
© League of California Cities