Thursday, October 6, 2022

Local Government Commission OKs $1.7 Billion Guilford School Bond Approves Nearly $750 Million in School Bonds for Durham, Union, Watauga Counties

Approves Nearly $750 Million in School Bonds for Durham, Union, Watauga Counties
Raleigh, NC
Oct 6, 2022

(Raleigh, N.C.) – The Local Government Commission (LGC) has approved applications for nearly $2.5 billion in school bonds for four counties. That includes $1.7 billion for Guilford County that had sparked a delay so that commissioners could get more information about it.

Commissioners also approved a host of other financing applications for transportation, water and sewer, parks and recreation, and government buildings that were on the agenda for the meeting on Tuesday, Oct. 4.

The LGC, chaired by State Treasurer Dale R. Folwell, CPA, and staffed by the Department of State Treasurer (DST), has a statutory duty to approve most debt issued by units of local government and public authorities in the state. The commission examines whether the amount of money units borrow is adequate and reasonable for proposed projects and confirms the governmental units can reasonably afford to repay the debt. It also monitors the financial well-being of more than 1,100 local government units.  

LGC members tabled Guilford County’s application for a general obligation bond last month due to commission members’ desire for more information about the enormous amount of financing just two years after approval of a $300 million bond for schools. A general obligation bond is not tied to a specific revenue stream, but backed by the full faith and credit of the government issuing it.

Treasurer Folwell, who abstained from the vote, voiced concerns about Guilford County putting off necessary capital improvement projects for so long, and the timing of the application.

“We are now in a period in which interest rates are higher than they have been in decades, construction costs exceed anything we’ve seen for decades, and taxpayers are going to be hit with higher property taxes to pay for this massive bond. That disproportionately affects lower-income residents and people on fixed incomes,” said Treasurer Folwell, who previously served eight years on the Forsyth County Board of Education.

Guilford County has conducted two studies that identified the need for three new school buildings, to demolish and build 19 schools, fully renovate 12 schools and invest about $363 million in safety and technology upgrades including failing roofs, plumbing and HVAC systems. No tax hike is expected, but the county does not plan to lower its property tax rate to a revenue-neutral level even though a revaluation raised the amount of revenue that will be collected.

Treasurer Folwell and other LGC members assured the Guilford County contingent of officials at the meeting that the heightened scrutiny the bond issue received was mathematical, not emotional or political. The LGC, they said, is the last line of defense helping to assure that governments are making good fiscal decisions and their constituents do not suffer financially from ill-advised actions.

The General Assembly established the LGC in 1931 to help address the problems in local government finance caused by the Great Depression. In 1933, 62 North Carolina counties, 152 cities and towns and some 200 special districts were in default on the principal, or the interest, or both of outstanding obligations.

Durham County received LGC approval for a $550.2 million in general obligation bond. Of that, $423.5 million will be used to build, remodel, enlarge and reconstruct school buildings and plant facilities, and to acquire land for future use. Another $112.7 million will be used to expand and improve facilities for Durham Technical Community College, to build two new school buildings and to purchase land for future use. Plans are to use $13.9 million to expand meeting space and improve exhibits at the N.C. Museum of Life and Science. 

Union County will use a $167.1 million general obligation bond approved by the LGC to acquire land, and to design and build a new Forest Hills High School and East Elementary School due to rapid growth. Part of the money will be used to acquire land, build additions, renovate, improve and equip aging buildings at South Piedmont Community College.

Watauga County plans to build Valle Crucis Elementary School with a $32 million of limited obligation bond the LGC approved. The school will replace one built in 1937. New construction is more cost-effective than repairing and renovating the aging structure. A limited obligation bond is payable from revenue generated by a specific tax. No new tax increase is expected, although a previously enacted tax of 3 cents per $100 of property valuation is helping to pay the costs.

Gastonia officials say consistent growth of the city was behind its successful request for a $75 million general obligation bond to control traffic flow and improve safety. The money will be used to build, extend, widen, resurface and improve streets and pedestrian walkways, add streetscape, traffic signals, lighting, bridges, overpasses, curbs and gutters and to acquire land for rights-of-way.

Revenue Bonds

The Gastonia Housing Authority received LGC approval on three bonds totaling $76.6 million for multifamily housing projects where units will be rented to tenants making less than the area’s median income. This type of bond finances revenue-producing projects that guarantee repayment. Up to $39 million will be dedicated to a loan to build a 200-unit housing development. Another $23.1 million will be for a 139-unit housing development, and $14.5 million to acquire and build a 120-unit rental housing development.

Inlivian, Charlotte’s housing authority, plans to use its approval of $17 million to build a 106-unit affordable housing development for low- and middle-income renters.

The LGC approved an application from Princeton (Johnston County) for $310,000 to combine with $840,000 in U.S. Department of Agriculture grant funds for water and sewer systems upgrades and rehabilitation.

Revolving loans

With approval of a $26.5 million loan in hand, Pittsboro (Chatham County) will build a new pump station and add other infrastructure to the Wastewater Treatment Plant to accommodate the town’s growing service area for the next 20 years. Revolving loans allow a borrower to pay back and re-borrow money.

Laurinburg (Scotland County) will conduct two sewer projects now that the LGC approved $18.7 million in financing. Of that, a $10.3 million loan will include a previous $7 million loan and an increase of $3.2 million made necessary by bids being higher than expected. A separate $8.4 million loan is for sewer line work to combat excessive infiltration and inflow that cause numerous sanitary sewer overflows and environmental violations due to spills reaching surface waters.

Dunn (Harnett County) officials got LGC approval of $3.6 million for a variety of infrastructure and equipment improvements at its Black River Wastewater Treatment Plant.

Conover (Catawba County) will replace various components of its Northeast Wastewater Treatment Facility now that the LGC gave the go-ahead to $1.2 million in financing.

Louisburg (Franklin County) will replace aging infrastructure with new water lines to enhance water flow with $764,000 in financing approved by LGC members.

Other items

Kings Mountain (Cleveland and Gaston counties), won approval of a $6.9 million installment contract for a new electric substation and transmission lines, and natural gas infrastructure improvements. An installment contract allows payments to be made over time instead of all up front. The commission set aside a vote on the item at the September meeting to await additional information on the city’s policies and future plans regarding transfers from the electric fund.

The LGC gave a green light to North Topsail Beach (Onslow County) for an $8.3 million special obligation bond to renourish and maintain the town’s beachline, which was damaged by Hurricanes Florence (2018) and Dorian (2019). A special obligation bond is payable from a pledge of future revenues other than locally levied taxes, in this case Federal Emergency Management Agency grants.

Knightdale (Wake County) plans to build a new fire station to increase fire coverage and public safety. The LGC approved a $6.6 million private installment contract for the work.

The town of Woodfin (Buncombe County) successfully requested the LGC to sell a previously approved $1.5 million general obligation bond to build parks, recreation facilities and greenways through a private rather than public sale.