While reading through this article in the Greensboro News-Record about a county commissioner’s push to increase their local sales tax, this specific passage jumped out at me:
"Guilford County voters this month approved $651.4 million in bonds for schools, GTCC and a county jail. And after the vote, many commissioners said the only option to pay for the debt would be through property tax rate increases. On that same day, a quarter-cent sales tax failed by a 3-to-1 vote."
The fact that bonds are approved by voters so routinely while local tax increases continue to be defeated by wide margins provides more evidence to a theory of mine: many voters simply are not aware of what it means when they approve a bond. I believe many of them do not understand that they are authorizing an increase of their local government’s debt. A debt that will have to be repaid – with interest – using their tax dollars.(For many years, I was one of those people) This lack of understanding explains, in part, why voters approve bonds so frequently while rejecting tax increases – they don’t realize that approving a bond will put upward pressure on their tax burden.
Another factor, I believe, is that the bonds are always sold to the public as paying for something specific like schools or parks, so citizens are made to feel guilty about "rejecting" such projects.
How can we fix this disconnect? How about some "truth in lending" practices on bond referenda, one of our recommendations in our Budget & Taxes Blueprint:
"The state should mandate that “responsible lending” language be included on bond referendums. Specific details about the total amount required to repay the debt, including a breakdown of principle and interest, should be required in the ballot language. Voters should also be clearly informed that the spending of bond funds is above and beyond the current operating budget and thus constitute a new spending burden. Finally, the ballot language should clearly explain that the debt will be repaid using tax dollars and that a tax increase might be required to finance the debt."
I would be very curious to see the approval rate of bonds if government became more transparent about the debt they are issuing.