LOS ANGELES - California public finance officials are lambasting an initiative that would require a two-thirds popular majority before a locality could raise taxes or issue any sort of debt.

Market participants said the proposed "Taxpayers Consent Act," drafted by the activist Citizens Committee, raises more questions than it answers.

"It's sort of the napalm bomb approach to their concerns [and would] create no end of problems," said Roger Davis, chairman of the public finance department al Orrick, Herrington & Sutcliffe.

The taxpayers group, which is headed by Paul Gann, wants to place the measure on the Nov. 2, 1994, ballot. On Friday the group filed a nine-page summary with the California attorney general's office.

William Carlson, executive director of the California Redevelopment Association, said the proposed initiative is "not very thoughtful in its approach." If the measure wins voter approval, Carlson believes the initiative "would severely damage redevelopment and potentially damage outstanding bonds."

Carlson said attorneys will have to look at whether debt payments for past issues would also need voter approval.

"Do we have to get a two-thirds vote to pay off outstanding bonds?" he asked. "I didn't find a section that necessarily protects outstanding indebtedness."

Stan Wolcott, a partner of Rutan & Tucker and president of the California Association of Bond Lawyers, said he sees the proposed initiative as "being prospective," not retroactive. If its drafters did intend the measure to apply to already issued debt, he said, that would "violate the contracts clause of the federal Constitution."

Davis of Orrick Herrington warned that, "as a practical matter," the voting requirement would keep local agencies from borrowing for capital improvements.

Forcing issuers to finance improvements on a pay-as-you-go basis "would pit in a very serious way capital expenditures against operating expenditures," Davis said. Such choices would lead to drastic trade-offs because "local government in California is pretty thin now."

Wolcott said the proposed initiative "would wreak financial havoc in California."

The proposed initiative "fundamentally expands constitutional debt limits beyond its present form to special districts," Wolcott said. Right now the state constitution applies those limits only to counties, cities, and school districts.

"Although they are significant participants in the public finance marketplace, special districts never previously have had to comply with a constitutional debt limit," Wolcott said. Limits on special districts are imposed by the state Legislature, he said.

Dave Oppenheim, senior revenue and taxation analyst for the California State Association of Counties, said the proposed initiative would be "another intrusion into allowing elected officials to make financial decisions for the people they represent."

Oppenheim said the taxpayers group is misguided. "Even though the folks may think they are streamlining government, they are making it more inefficient by making every single issue be voted upon by the people," he said. "Any time you allow voters to vote on anything that affects them financially - whether a fee, assessment, or bond - there is a tendency for them to disapprove it."

Daniel J. Wall, a lobbyist for the counties association, said he expected the association to oppose the initiative, as it did legislation introduced earlier this year that would have required a popular vote to establish special assessment districts.

The legislation was initiated by another taxpayers group, the Howard Jarvis Taxpayers Association, and sponsored by Sen. Bill Leonard, R-Upland, and Assemblyman Charles Quackenbush, R-San Jose. Their bills stalled in separate committees last June and might be resuscitated when the Legislature returns in January.

"There's no way to make government work if you have no control over expenditures or revenue," Wall said. "Right now, county government is able to make local decisions on only about 10% of their expenditures." The proposed initiative would "put vote requirements on things dealing with revenue. That means representative government would cease to function.

If we want to have [continuity] and responsibility on elected officials, we can't run some sort of auto-pilot system," Wall said. "We have got to permit them to succeed - which means if they fail, we vote them out of office and vote someone else in. But the logic of tying off the revenues and expecting that will magically bring these expenditure-side problems under control has not been proven."

One market participant, who asked not to be identified by name, said he believes the proposed initiative's attempt at requiring a public vote for tax anticipation notes would not pass legal muster.

"By definition, [tax anticipation notes] can only be paid off from revenues within a given fiscal year," the participant said. "That being the case, a tax anticipation note would not run afoul of a constitutional debt limit."

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