Robert Orr, former state Supreme Court justice, and executive director of the N.C. Institute for Constitutional Law, recently penned this article for the Raleigh N&O regarding the city’s plan to skirt voter approval to issue debt to finance their proposed new safety center and other remote operations facilities.
Some of his main points include:
The state constitution has contained for years a limitation on the power of local governments (as well as state government) to go into debt by pledging the faith and credit of the governmental unit. That constitutional limitation is the guarantee that voters in that locale have the right to vote to approve or disapprove bonds for the proposed debt.
Unfortunately, a 1991 state Supreme Court case approved a carefully worded method for skirting that constitutional requirement and allowed governments to incur the bonded debts without allowing the voters to decide.
That bond funding vehicle, known generically as Certificates of Participation or COPS, allows the government to pledge property such as schools, the courthouse or the Public Safety Center as collateral for the bonds, rather than the “faith and credit” of the governmental unit. This court-made distinction is mere form over substance, in that banks lending the money fully understand that a governmental unit is not going to sit by and let government facilities such as schools or jails be foreclosed on because of a default on the bonds.
The use of COPS since 1991 in North Carolina has resulted in an explosion of bonded debt that state and local governments have run up without ever getting the people’s approval through bond referendums. The total amount that state and local governments have borrowed using COPS undoubtedly is in the billions of dollars, although the exact amounts are not easily available for review.
On that last point, readers might find this research helpful.
And on a similar note, the last time that North Carolina lawmakers allowed voters to decide on the issuance of new state debt was 2000. Since that time, state per capita debt has shot up more than two and a half times. Without a check of taxpayers – the ones who will actually have to pay back the debt – politicians can’t control themselves.
Lastly, in regards to Raleigh’s situation, city officials claim that it is a sense of urgency prompting the avoidance of voter approval. They claim that the city simply can’t wait for an election to authorize the debt, it needs to be done as soon as possible. But a city memo dating back to May of 2009 shows plans for the new city buildings already well under way, complete with debt model projections. There would have been plenty of time to get the bond referendum on the city’s ballot last fall. Fact is, the time urgency excuse is a smokescreen designed to conceal the fact that city officials don’t care whether or not Raleigh taxpayers approve of the new debt burden, and never had any intention of asking.