News: CJ Exclusives

$3 billion transportation bond introduced as separate bill

Bill may be bargaining chip to urge Cooper to sign budget; treasurer still opposes, saying voters should authorize new debt

North Carolina taxpayers will foot the bill for a $3 billion transportation bond and won’t have a say in being saddled with the debt if House Bill 1010 passes.

Reps. Frank Iler, R-Brunswick; Michelle Presnell, R-Yancey; John Torbett, R-Gaston; and Phil Shepard, R-Onslow introduced the Build NC Bond Act on Monday, May 28. Many speculated the debt would be included in the budget, but that fizzled when House and Senate budget writers couldn’t agree.

The House Select Committee on Strategic Transportation Planning and Long Term Funding Solutions drafted the bond legislation in April. Money from the state Highway Trust Fund would pay back the debt.

Gov. Roy Cooper also is pushing for a $3 billion transportation bond, which he included in his budget proposal.

The knock against including the bond in the budget was that lawmakers would approve it without giving the public a chance to vote on it in a public referendum. General obligation bonds typically follow that public process.

Republican state Treasurer Dale Folwell became a vocal opponent of the bond legislation when it was rumored to be part of the budget. Folwell said the people should vote on any new debt. Deputy Treasurer Frank Lester said Wednesday afternoon that Folwell’s position has not changed, even though the bond is in a separate bill. Folwell also says a debt affordability study needs to be done before taking on any new debt, along with greater transparency about the projects to be funded.

Joe Coletti, a senior fellow at the John Locke Foundation who researches tax and fiscal policy, noted the state Debt Affordability Advisory Committee also said new transportation debt should be voted on by the people. It also should be backed by the full faith and credit of the state.

“Debt of this kind is rated less favorably than the state’s overall AAA rating, which makes it more expensive. The good news is the bill would require the treasurer’s approval before issuing new debt, and would keep the amount below the recommended target set by the committee, but that does not offset the broader direction” of the legislation, Coletti said.

“On the other hand,” Coletti said, “the advertised $3 billion is more than current debt availability, which suggests the General Assembly may not intend to actually use the full amount authorized.”

David McLennan, a political science professor at Meredith College, said it seemed awkward Republican lawmakers would buck Folwell’s advice because he is perceived as a good steward of the state’s resources. But transportation is an issue that plays well with voters.

“If this were not an election year, I think the state treasurer’s voice would probably carry a lot more weight,” McLennan said. “But this looks like the legislature and the governor may be on the same page, and the treasurer is on the other page.”

McLennan said it’s possible Republicans advanced the transportation bond as a bargaining chip to dissuade Cooper from vetoing the budget.

“The governor wants this to be one of his signature issues, and if he were to get a big transportation bond done, [he might] think twice about vetoing a budget bill if the transportation bond would be in danger,” McLennan said.

While pushing a transportation bond might be a good election year tactic in good economic times, if the economy sours it could complicate debt payments down the road, McLennan said.

The bill says, beginning in fiscal 2019-20, no more than $300 million in bonds yearly can be issued over a 10-year period. Toll projects could not be part of the package.

The bond money would be divided between the N.C. Department of Transportation’s legally defined “division needs projects” and “regional impact projects.”

Division needs projects involve NCDOT’s 14 transportation divisions, which are local groupings of counties. Projects are scored based 50 percent on data, and 50 percent on rankings by local planning organizations and the NCDOT transportation divisions.

Division needs projects are scored on five criteria:

  •  Congestion (15 percent)
  •  Benefit/cost (15 percent)
  •  Safety (10 percent)
  •  Freight and military (5 percent)
  •  Accessibility/connectivity (5 percent)

Regional impact projects compete for funds in regions comprising two NCDOT transportation divisions. They’re scored based 70 percent on data, 30 percent local rankings. They use the same five criteria, weighted differently:

  •  Congestion (20 percent)
  •  Benefit/cost (20 percent)
  •  Safety (10 percent)
  •  Accessibility/connectivity (10 percent)
  •  Freight and military (10 percent)