One of the big stories of the FY08-09 State budget is the General Assembly’s authorization of a staggering $523 million in Certificates of Participation (COPs) to finance UNC construction projects. The numbers push the boundaries of the debt affordability model. The economic realities have also spawned some creative future financing provisions. Included in this year’s budget is language (Section 27.7B(a)) that amends existing statutes (Chapter 116-29 (5) and appropriates from the General Fund to UNC, $172 million in 2009-10 and $45 million in 2010-2011 for completion of the of Biomedical Imaging Research Center (BRIC) at UNC-Chapel Hill. The provision expires if the Legislature provides by June 30, 2009, “sufficient debt financing” to complete the BRIC project. No doubt the provision is intended to show strong support for the project. However, as one General Assembly cannot bind another, the provision has little practical value. Someone in the know about UNC capital financing tells me you’d have to go all the way back to the early part of the twentieth century to see a similar provision.
The Biomedical Imaging Center is a huge project ($255 million). And, my guess is the remainder of the project will ultimately be financed through COPs. The growing use of this non-voter approved borrowing should outrage voters, as should the view — common among many lawmakers — that UNC capital projects are jobs programs. We’ll be paying for this building binge until the capital planning process is overhauled and limits are placed on COPs financing. We can’t start soon enough.