SAN FRANCIS - A taxpayer advocate yesterday promised to fight passage of a June 1994 California ballot measure that would allow local general obligation school bonds to be approved by a simple majority rather than the current two-thirds voting requirement

The two-thirds thresholds is "a valid and important protection for taxpayers," Joel Fox, president of the Howard Jarvis Taxpayers Association, told more than 200 market participants during the California Public Finance conference, sponsored by The Bond Buyer.

Mr. Fox's comments signal the first shot in what is expected to be a tough fight for passage of Assembly Constitutional Amendment 6, a measure sponsored by Assembly-man Jack O'Connell, D-Santal Barbara.

Mr. O'Connell had introduced similar versions of the measure for the past six years, only to see them defeated by Assembly Republicans. The measure cleared the Legislature last month and the governor approved it, clearing the way for voters to make the final decision in June 1994.

Mr. Fox warned that the two-thirds requirement has a long history in California and should not be taken lightly, although he predicted that developers, schools, and bond market participants will work for passage of ACA 6.

"They want to use school bonds as a holy grail to open a gate in the castle wall that protects taxpayers, "Mr. Fox said. "It won't be long before others try to start the hole in the castle wall."

He said his taxpayer group lobbied to fight other bills this year. Such measures would have allowed simple-majority vote approval for GOs for housing, environmental, and health needs.

He noted that in the first six months of this year, out of 40 GO bond measures on the local ballots, 16 passed with a two-thirds approval vote. He said 42% of all local school bonds were approved. The map is clear. We know where the map leads - the destruction of Proposition 13" if majority-approval gains favor, Mr. Fox said.

Mr. Fox's group is named after the co-drafter of Proposition 13, the property tax-cutting measure approved by voters in 1978.

Advocates of ACA 6 say it could ease a portion of the dramatic funding crunch for school facilities. Supporters also say GO bonds are cheaper for school issuers to sell than other financing tools such as assessment or Mello-Roos Community Facilities District bond issues.

Mr. Fox also told conference attendees that certificate of participation issues should have voter approval. Currently, COPS and lease revenue bonds do not need voter approval. During the first day of the finance conference, issuers also discussed various derivative bond products and the benefits and pitfalls for issuers. Richard Dixon, chief administrative officer for Los Angeles County, warned issuers that "swaps are a way to manage risk, not avoid risk."

Mr. Dixon said that in utilizing the complicated financings, issuers should remember "we are trading one risk for another risk. " He said a key risk to consider is whether the swap counterparty with be in business with the same ratings during the term of the financing.

In another session, this one examining recent developments affecting Mello-Roos special tax bonds and other real estate-related debt, a rating agency official said "massive" credit difficulties are unlikely.

"But we do expect some, problems," said David Hitchcock, director of the western regional group for Standard & Poor's Corp.

In particular, Mr. Hitchcock focused on the housing cycle in California noting that a recent a sharp downturn in private housing starts is similar to those experienced in Colorado and Texas in the mid-1980s. It is hard to believe there couldn't be some problems" given that trend he said, especially since "real estate is just an inherently risky area.

Mr. Hitchcock stressed, however, that bond issues must be studied on a case-by-case basis because there are strong and weak credits within each state and local region.

Dennis Walters contributed to this article.

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