RALEIGH – In 2004, a slight majority of North Carolina voters approved Amendment One, which altered the state constitution to allow localities to issue bonds without a public vote for economic-development projects.
North Carolinians were told that the new “self-financing bonds” wouldn’t cost existing taxpayers anything, because increased property-tax revenue from and around the projects would pay the debt off. They were told that North Carolina would have “some of the strongest safeguards in the country to ensure self-financing bonds are used for good purposes.” They were told the bonds would create jobs.
They were misinformed.
There has been exactly one completed use of the new borrowing authority. It is a colossal embarrassment. As I relate this story, keep in mind that I’m not kidding. This is not a parody.
In 2005, the city of Roanoke Rapids created a tax-increment financing district and issued $21.5 million to build the Randy Parton Theater, intended to be part of a larger Carolina Crossroads entertainment complex off I-95 in Northeastern North Carolina. Later that year, a slightly more famous Parton sibling, Randy’s sister Dolly, was on hand in Roanoke Rapids along with a host of state and local dignitaries to celebrate the groundbreaking.
Of the $21.5 million in bond proceeds, only $12.5 million was actually spent on the theater building. It is complete – a 35,000-square-foot, 1,500-seat facility that remains in excellent condition on account of the fact that it has yet to be, uh, used.
So where did the rest of the $21.5 million in bonds go? Some has been set aside to pay underwriting costs and debt service on the bond issue, an arrangement that only M.C. Escher could adequately illustrate. And then there is a $3 million “reserve fund” used to guarantee the annual $1.5 million “artist fee” of Randy Parton, apparently hard at work not scheduling any acts. Indeed, Randy Parton has yet to schedule Randy Parton to play at the Randy Parton Theater. My head hurts.
Because there are no actual revenues yet, it appears that some of the bond money has already been committed to pay Parton’s compensation. Although supporters go to great lengths to deny this, “self-financing” bonds are essentially financed by existing taxpayers. If the value of developed property within the bond district fails to rise in value – say, because an empty theater tends to draw small crowds – then there is no additional increment of taxes with which to pay the debt. Would a local government be more likely to let the bonds default, or pay them off with other tax revenue? On the other hand, if the district values do rise, that must mean that lots of people are shopping in, traveling to, and working at the development in question – all activities that necessitate the provision of additional levels of government service such as road capacity or public education for the children of the new workers. Because the additional property-tax revenue has been sequestered to pay off the bonds, someone else must pay. Guess who?
If it seems comical that Roanoke Rapids has issued 20-year bonds in part to pay a couple of years of exorbitant compensation to a nobody with a famous surname, you ain’t seen nothing yet. One of Parton’s partners was Rick Watson, who at the time was serving as head of the Northeast Partnership, a state-funded regional economic-development agency that helped recruit Parton to Roanoke Rapids in the first place. Watson was, in effect, negotiating with himself. Not surprisingly, he and his partners got a good deal.
But the story didn’t end well for Watson personally. After his repeated conflict of interests became widely known, thanks in part to reporting by my Carolina Journal colleagues Don Carrington and Paul Chesser, Watson got the boot from the Northeast Partnership. Part of the problem may have been too much truth in labeling. You see, Watson was inappropriately moonlighting from his state-funded job to take equity interests in the business prospects he was recruiting. And he and Parton made off like bandits in the theater negotiations.
The name of their company? Moonlight Bandit. I kid you not.
What the voters were told about Amendment One back in 2004 was garbage. The Parton Theater shows clearly that there are neither sufficient safeguards nor guarantees that the bonds will be used for viable, job-creating enterprises.
What’s even worse is what North Carolina voters were not clearly told about Amendment One – that it would take away their right to vote on such bond issuances. Fortunately, the N.C. Institute for Constitutional Law has challenged the legality of the Amendment One campaign in court. Unfortunately, whatever the courts ultimately decide, Randy Parton will have made off with a big chunk of public money.
Someone should write a musical comedy about all this. A suitable venue for its premiere is available for cheap just off I-95.
Hood is president of the John Locke Foundation.