Opinion: The Ass-U-Me in Proposition 1

By Timothy Hoy | November 3, 2014 | Let’s all reassume the assumptions that are made in only the ‘Fiscal Effects’ section of “Pro...

By Timothy Hoy | November 3, 2014 |

Let’s all reassume the assumptions that are made in only the ‘Fiscal Effects’ section of “Proposition 1; Water Bond, Funding for Water Quality, Supply, Treatment and Storage Projects.” It states the assumptions noted below:

1.       Assume the interest rate for the bond would average just over 5 percent
2.       Assume the bonds are bought at that interest rate over the next 10 years
a.       Reassume the interest rates for the bonds at 10 percent due to inflation
b.      Reassume the bonds will be bought over the next 20 years because bonds are now less desired financial investments
3.       Assume that they will be paid over a 30 year period
a.       Due to other re-assumptions, reassume that they will be paid back over the next 60 years
4.       Based upon these re-assumptions the costs to taxpayers to repay the bonds would average greater than $720 million dollars annually over the next 40 years.
5.       Based upon that re-assumption the total costs to the tax payers would be greater than $50 billion dollars.
6.       Assume that redirecting 425 million in unsold bonds from previously approved measures would not increase the state’s anticipated debt payments.
a.       Re-assumption that the people who wrote this bond have no idea how the 425 million in unsold bonds will affect the state’s debt payments. If they did they wouldn’t have to assume.

My revised assumptions are probably the worst case possibilities. But they are possibilities.

Their assumptions are probably the best case possibilities.

Let’s put this into something we can all better understand.

According to the Figure 1 chart on page 8 of the ‘Supplemental California General Election for Tuesday, November 4, 2014 the distributed bond funds of approximately 7.5 billion dollars:

Under the pamphlet’s stated assumptions the tax payers of California would be paying back 14.4 billion dollars.

Under the re-assumptions there is no way to project the actual costs to the taxpayers.

Now stay with me here… regardless of which, if any of the state’s assumptions are incorrect, the tax payer’s liability can only go up and never go down.

Now go back and change the word re-assumption to reality.

Let me close with this. Under the Ass-U-Me approach to just the fiscal effects section of Proposition 1,  ask yourself this. “Who profits most if the assumptions in the bill are incorrect? The ass that wrote it or me?

Timothy. Hoy, Elk Grove, Calif. . 

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