'Voter-less bonds' get city backing
By Barbara Arntsen
Published in News on August 23, 2004 2:02 PM
Goldsboro City Council members are supporting an amendment to the state's constitution that would allow local governments to issue bonds without a vote from the people.
Leslie Coman, vice president of governmental affairs for the North Carolina Citizens for Business & Industry, told the council that it was a way to bring jobs to the area.
"This would give you an additional tool for financing," she said. "And economic development needs every tool it can get."
The proposed constitutional change, called "Amendment One: Self-Financing Bonds," will be on the Nov. 2 ballot and is supported by The League of Municipalities, the N.C. Association of County Commissioners, ElectriCities of N.C., N.C. Citizens for Business and Industry and other groups.
Ms. Coman said that the proposed amendment had been rejected twice by voters, but she thought that was because the public didn't understand it.
"There was no active campaign the other two times," she said. "It's a complex issue for the general public, and the public doesn't change its constitution lightly. If they don't know or understand the issue, they vote no."
The proposed self-financing bonds could be used by cities and counties to pay for public improvements associated with private development. The improvements could include streets, water and sewer lines, sidewalks, or public meeting facilities.
Private developers could then build new manufacturing plants, renovate abandoned or vacant facilities, build affordable housing, or create commercial development in inner-cities.
The bonds would be paid back with the tax revenues from the increased value of the property.
The city or county would first identify a certain area as a "development district."
Property owners in the area would get a chance to voice their opinions at a public hearing, but the final decision on creating a district would be up to local government.
Once a development district has been picked, the city or county submits a development plan to the Local Government Commission. The commission evaluates the plan to see if the proposed project is necessary and feasible, what the current debt is for the local government, whether the private development would occur without the public part of the project, and if the bonds could be sold at a reasonable interest rate. The commission would also conduct a financial feasibility analysis.
Once the bonds were approved, the project could begin. After the project was completed, the property would be reassessed, resulting in greater value for each piece of property in the district. The money to pay off the bonds would then come from property owners in the development district.
Though taxes won't be increased, property owners within the district would be paying a larger amount because their property would have gone up in value.
"There's been no organized opposition to the amendment," Ms. Coman said. "There have been some against it, from the John Locke Foundation. They believe you shouldn't approve financing without a public vote."
Chad Adams with the John Locke Foundation says the issue comes up every 11 years, and voters have defeated legislative measures calling for such financing. It's "simply another way to raise government debt without specific voter approval."
He says people wanting the policy change realize that voters probably won't support anything with the word "tax" in it, so they changed the name to "self-financed bonds."
"You will now hear growing support for 'Amendment One,'" he says. "This sounds innocent. But in all honesty, if they have to change the name twice, it's probably still a bad idea."