Yesterday the House Finance Committee approved legislation sponsored by Rep. Rayne Brown (R-Davidson) to repeal a loophole that allowed state government to issue billions in debt without voter approval. The bill is scheduled to be voted on by the full House next week.
The provision, on the books since 2003, allowed for the creation of “special indebtedness” debt. Special indebtedness debt is commonly issued through what are called “certificates of participation” (COPs). Since the constitution only requires that debt financed through traditional bonds be approved by voters, COPS have allowed state and municipal governments to finance capital projects without seeking voter approval. As of 2009-10 UNC System had authorized $2.7 billion in capital construction via certificates of participation.