May 22, 2012

The Honorable Tony Young President, San Diego City Council 202 C Street MS 10A San Diego, CA 92101 Re: Proposition A Impact on San Diego City Finances and Municipal Bonds Dear President Young and Members of the City Council: During my public service for the people of San Diego, I have worked diligently to improve the Citys economic vitality through the development and construction of important infrastructure projects that improve the quality of life for all residents. With this commitment in mind, I write to express my strong concerns regarding the significant negative impact Proposition A will have on the Citys finances. There remains a great need to build and modernize existing infrastructure statewide. Balancing pressing budgetary needs with infrastructure investment is required to address the pressures of the economic downturn. Agenda items 332 and 334 on the docket for the May 22 City Council meeting caught my attention. Specifically, the Preliminary Official Statement Approval (POS) discloses the potential and significant negative impact Proposition A would have on the interest paid for municipal bonds used for a wide variety of local construction projects. The language reads as follows: A ballot initiative, Proposition A, on the June 5, 2012 primary ballot, would ban the use of socalled Project Labor Agreements (PLAs) on most City construction projects. Subsequent to Proposition As qualification for the ballot, the State Legislature passed, and the Governor signed, a law that would prohibit the use of State funds on local construction projects where the local agency, including a charter city, prohibits the use of PLAs. If approved, Proposition A could cause the City to lose State funding for City construction projects; however, the City cannot quantify the potential impact from Proposition A on the cost of City construction projects.

POS prepared by the City of San Diego (Page 26): The Citys bond offering documents must disclose information to bond markets regarding material and financial risks to the City if Proposition A is approved by voters. The issue is not about whether or not the City Council supports project labor agreements. It is entirely about the potential financial setbacks created by Proposition A. If passed, it will significantly increase taxpayer costs for local construction projects and halt the Citys ability to fund infrastructure projects such as wastewater treatment, safe and clean drinking water, road repair and mass transit. State Controller John Chiang has weighed in on Proposition A and is helping educate the San Diego electorate about the financial impacts and risks for the City and taxpayers. Under State law, San Diego will be prohibited from receiving State construction grants if this initiative passes. According to the City of San Diegos Independent Budget Analyst, in 2011 San Diego received $158 million in construction grants from the State. This funding will no longer be available if Proposition A passes. As you contemplate these issues, I respectfully urge the Council to educate voters and make them aware of the high costs to taxpayers and immense risk to the Citys general fund Proposition A will cause. Thank you for your consideration. Sincerely,

CHRISTINE KEHOE Senator, 39th District