A new state law may make it easier for local governments in California to use general obligation bonds to fund the strengthening of older privately owned buildings against earthquake damage.

Gov. Pete Wilson recently signed Assembly Bill 1001, which makes it a public purpose to grant municipal bond proceeds to public agencies or private citizens for seismic retrofitting of unreinforced masonry buildings.

"This bill provides a mechanism that encourages private property owners to retrofit their buildings and keeps interest rates low," said Leslie Medina, director or policy for Assemblyman Willie Brown, D-San Francisco, who introduced the bill.

GOs for this purpose may be subject to federal taxation because of the private benefits involved, but the interest would be exempt from state taxes.

Mr. Brown orginally introduced A.B. 1001 to help San Francisco, but the bill received widespread support from other cities -- such as Montgomerey -- that suffered damages in the October 1989 earthquake.

San Francisco plans next June to place an estimated $95 million GO bond measure on the ballot for seismic strengthening of privately owned buildings.

The state Seismic Safety Commission estimates it would cost $4.2 billion to strengthen all buildings against earthquake damage.

Under state law, cities need two-thirds voter approval to authorize general obligation bond measures.

"To the extent that a city wanted to get a two-thirds vote, it's a great deal for them," said John H. Knox, a partner at the law firm of Orrick, Herrington & Sutcliffe.

Some California cities currently use special tax or assessment district bonds proceeds for private owners to finance seismic improvements.

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