To “protect” consumers, the Federal government passed the “Truth in Lending” act in 1968. A major part of this act was for lenders to disclose to borrowers a complete payment schedule of the loan – including principle and interest payments. Anyone with a mortgage knows how much interest payments can add to the total payment schedule.
Unsurprisingly, however, state and local governments here in North Carolina do not provide such “protections” to taxpayers when offering voters a chance to vote for or against a bond referendum – a loan that the taxpayers will be forced to pay back with interest. (Of course, state and local lawmakers have decided to make it exceedingly rare to even get voter approval before issuing debt, but that is a separate issue unto itself.)
But thanks to HB 315, that might soon change. The bill, currently referred to the House Finance Committee, would require language on the ballot of a bond referendum itemizing the total impact to taxpayers of the new debt: principle plus interest.
When state or local bonds come up for a vote, the debate and coverage is focused primarily just on the size of the principle of the loan. Many in the public may be mislead to think that is the total debt burden of the bond. Furthermore, many less informed voters may not realize that approving a bond issue actually increases the debt totals of their local government unit. Some believe that it merely is an effort to direct already budgeted funds to a specific purpose. The ballot language required by HB 315 would clarify that issue for many voters, enabling them to clearly understand that voting in favor of a bond referendum means increasing government debt – a debt they will be required to pay back.
It seems only fair that governments would provide the same kind of “consumer protection” to taxpayers making decisions on their debt levels as are applied to mortgage applicants.