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In Fiscal Year 2012 NC Local Governments Plan to Borrow Nearly $750 Million, Most Without Voter Approval

Taxpayers Would be the Borrower and the Lender in Some of the Loans

At a time when many people are calling for a cut back in government spending local governments are telling North Carolina lawmakers they are making plans to borrow and spend almost three quarters of a billion dollars. This information is being provided because of a new state law requiring all local governments to tell the Joint Legislative Committee on Local Government how much they intend to borrow for certain projects. The rule applies to loans over $1 million.

Between July 22 and October 6 the committee received reports showing cities, towns and counties are looking to borrow a total of $749, 969,577. Nearly $670 million of that would require no voter approval.  Many are revenue bonds that would be issued by a city or county. Investors would be promised proceeds from local revenue produced by projects, such as water systems.  Other debt would be through installment loans worked out with a financial institution. In those cases some or all the property being built or expanded would be used for collateral.

Over $112 million – or 15 percent – of the total local debt would result from borrowing funds from the federal government. $40.1 million of the federal loans being requested would come from the Drinking Water Revolving Fund set up in 1996 by Congress to fund public water systems. President Obama’s administration set aside $65 million in stimulus funds for communities in North Carolina, but for loans not grants. The interest rate on these federal government loans could be anywhere from zero percent to the market rate depending on the financial state of the local government. In some cases the state could be required to put up 15 percent of the funds for small communities. Another $71.9 million in federal loans are being sought from the U.S. Department of Agriculture. Such transactions merely represent one government borrowing tax dollars from another government and those who paid the taxes may see no benefit from the projects.

Just $82 million or 11 percent of the borrowing would come from General Obligation Bonds, which do have to be approved by tax payers. Those type of bonds carry the full faith and credit of the government and are the lowest risk to investors.

Type of Debt $ total Percent of Total
Debt Needing Voter Approval $82 M 11%
Debt Not Needing Voter Approval $670 M 89%
Total Federal Loans $112 M 12%
     From Federal Drinking Water Revolving Fund $40.1 M  
     From U.S. Agriculture Department $71.9 M  
Total Local Proposed Debt $749,969,577  

Even those numbers don’t tell the whole story because they don’t include the interest rate the localities would have to pay. A 20-year revenue bond, for example, currently has an interest rate of nearly four percent. For example: at that rate, a 20-year, $20 million bond, will require roughly an additional $10 million in interest payments from taxpayers.

Many of the local projects involve water and sewer improvements. Some would fund hospitals or build housing. Other projects involve airport improvements, recreation facilities, land acquisition for parks and street improvements.

In one case the Nash County Healthcare System wants to issue $75 million in revenue bonds for a hospital expansion, buying equipment and other capitol needs. The hospital won’t have to ask the citizens to approve the debt, largely because the debt is slated to be repaid by new revenue generated by the hospital.

The Local Government Commission in the State Treasurer’s Office will have to review and approve most of the requests. However, that is not necessarily the case for the localities seeking installment loans through financial institutions. Over $110 million of the planned borrowing would be such installment agreements. The Joint Legislative Committee on Local Government does plan to review all of the borrowing plans. If members question certain projects they will ask local leaders to appear before the panel. The committee, however, does not have the power to approve or reject the plans.

This is just a small snapshot of local government borrowing, much of it with little or no input from taxpayers.

The link below will let you browse the proposals.

List of proposed local borrowing submitted to Joint Legislative Committee on Local Government (PDF)

This article was posted in Budget & Taxes by Matt Willoughby on October 12, 2011 at 4:48 PM.

© 2011 The Civitas Institute. Visit us on the web at www.nccivitas.org.
This article can be found at http://www.nccivitas.org/2011/in-fiscal-year-2012-nc-local-governments-plan-to-borrow-nearly-750-million-most-without-voter-approval/

Comments on this article

  • 1

    Tom Harmon
    Tom Harmon Oct 19, 2011 at 8:17

    Again irresponsible government spending, why is it that 89% of the money does NOT have to be approved by the taxpayer. Isn’t this OUR MONEY?

    These people DO NOT CARE about us, they just spend and spend.

    They need to go into REHAB and learn to say NO to some of these requests.
    Why should the taxpayers of Carteret County send there dollars to another county and get nothing in return for there money?

    ITS CRAZY!!!

  • 2

    V. Eiland
    V. Eiland Oct 19, 2011 at 8:27

    Time for a major government overhaul. Time
    for people to be more responsible and find the
    time to engage in this overhaul. Time for
    a BIG history lesson for everyone. The subject:
    World History and Governments.

  • 3

    Anne U. Carty
    Anne U. Carty Oct 19, 2011 at 9:53

    So – why vote? It is apparent that the citizens have no say-so in anything in our government -local, state or federal. We think we are voting for a candidate who will do the honest thing and it NEVER turns out that way. I do not plan to vote again.

  • 4

    Frank Deatrich
    Frank Deatrich Oct 19, 2011 at 11:51

    My answer to Ms.Carty’s question: Why Vote? If one does not vote, then the opposition wins. Prime example: Wake County School Board Elections. No our system does not always work! However, its better than the system the left wants us to use.

  • 5

    Thomas Cain
    Thomas Cain Oct 19, 2011 at 12:15

    Honest politician –oxymoron
    Crooked politician –FACT OF LIFE

  • 6

    GLADYS B. BEADLING Oct 19, 2011 at 15:47


  • 7

    PJ Lofland
    PJ Lofland Oct 19, 2011 at 20:34

    This is precisely the reason we need to get rid of as many Democrats and left leaning Republicans as possible..Ann..I’ll take you to the polls..you know you’re going to vote against Obama!!

  • 8

    John Lacava
    John Lacava Oct 28, 2011 at 17:44

    Did anyone notice that Harrisburg, Pa. just declared bankrupcy? Can Nash County be far behind?

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