by Anna Manning
The Build NC Bond Act of 2018 will add $3 billion in state debt for transportation projects. Disregarding multiple warnings from state Treasurer Dale Folwell, the legislation has gone through both House and Senate committees with bipartisan support.
Despite it’s name, the borrowing will not be in the form of a bond but instead “special indebtedness”. Carolina Journal’s Dan Way reports –
Highway projects typically are funded with general obligation bonds secured with the full faith and credit of the state. They have lower interest rates. The bonds must be approved in a statewide public vote. Folwell favors that approach. Critics and even some backers of the plan also note that rising commodity prices, fueled in part by President Trump’s trade policies, could force taxpayers to pay more for the projects.
Special indebtedness is not backed by the state’s General Fund, so interest rates and costs are higher. The Build NC Bond Act pledges payback from future Highway Trust Fund revenues generated from fuel and car sales taxes along with state Department of Motor Vehicle driver license fees.
Folwell said during his monthly Ask Me Anything teleconference with reporters Tuesday morning the legislation contradicts Republican principles.
Treasurer Folwell takes issue with the proposal because debt will be substantially increased, without the say of voters.
“The Build NC proposal that’s currently on the table, if my calculations are correct, has the potential of increasing the state’s debt by over 50 percent without the approval of the voters,” Folwell said. Bond rating agencies are reviewing the state’s AAA credit rating this summer. They might frown on new special indebtedness.
Read the rest of Dan’s piece here for more information and commentary on the Build NC Bond Act from various Representatives and Senators.