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Wednesday, 20 January 2016 15:41

Infrastructure bonds garner bipartisan support

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coverOn March 15, North Carolina voters will be asked whether they support borrowing $2 billion to fund a backlog of infrastructure projects throughout the state.

SEE ALSO:
Bond could give higher education an influx of funds
Community colleges also stand to benefit from bond passage 

The $2 billion Connect NC Bond proposal includes funds for earmarked projects in 72 out of 100 counties for universities, community colleges, state parks, National Guard facilities, agricultural research, water and sewer upgrades and more.

Republican Gov. Pat McCrory developed the bond proposal but it has garnered overwhelming support from legislators on both sides of the aisle. It’s unusual for Democrats and Republicans to reach consensus on spending legislation in the General Assembly, but lawmakers representing the western region all agree this bond is crucial for North Carolina’s infrastructure needs. 

Rep. Joe Sam Queen, D-Waynesville, and Sen. Jim Davis, R-Franklin, fall on fairly opposite sides of the political spectrum, but both agree the bond is the best way to begin catching up on a long list of needs the state budget hasn’t been able to handle. 

“This is an opportunity for all North Carolinians of both parties to help their state. This bond is balanced, it’s modest — some would like it to have more and some would like less — but it’s fair across the state and it invests where we need to invest,” Queen said. “All of our major needs have been on the backburner since the recession. This bond will will create tens of thousands of jobs and meet the critical needs of our growing state.”

 

Needs or wants?

Legislators say the projects earmarked in the bond are not pie in the sky wants —they are crucial capital projects needed to grow the state’s top industries — agriculture, tourism, health care, defense and technology. 

McCrory has been across the state lobbying hard for the bond proposal since last May when he unveiled the plan at Western Carolina University. WCU stands to gain $110 million from the bond, which is the largest single project included in the bond proposal. 

But McCrory will only see a fraction of his original bond proposal on the March 15 primary election ballot. His original plan included $1.3 million for highway projects, but the highway projects didn’t make it through to the final bond issuance. 

Davis said he was against borrowing money to complete highway projects. Though the projects are sorely needed, he believes there will be funding available in the Highway Trust Fund to start completing them without a bond. 

“This budget year is the first in a long time where we haven’t transferred money out of the Highway Trust Fund to the general fund,” he said. “We’ve put an end to that finally and we believe by not taking $250 million a year out of the trust fund we’ll be able to do the projects with current money.”

What remains is $2 billion for new construction and renovations for universities, community colleges, state parks and zoos, agriculture and public safety. The bond also sets aside $312.5 million for water and sewer projects. Rural county and municipal governments will be able to apply for that funding if the bond is passed.  

Davis said he is taking every opportunity to tell people about the benefits of voting yes on the bond in March. He said he worked closely with all the community colleges in his district to make sure their most pressing infrastructure needs were met in the bond as well as getting WCU a new science building. 

“Western is having incredible enrollment numbers for nursing and pre med and engineering and the science building is critical to the entire university because everyone has to take classes in that building to graduate,” Davis said.  

As it stands now, he said the 50-year-old building with shaky floors is not conducive for science classes in which scientific measurements are being taken. 

“When I visited Western, Chancellor (David) Belcher said the building was obsolete, but I say it was obsolete when it was built,” Davis said. 

Queen said the WCU science building project was absolutely critical given the need for an educated workforce in the western region. Areas of growth in this area include health care, engineering and other high-tech industries, and Queen said he wants to make sure those types of jobs stay in the region. 

“It’s a focused investment for the future of our university system,” he said. “We really we worked hard to get it in the general budget in other ways but there was no other way.”

WCU may have the largest project, but Queen said some of the other projects are just as critical to the region and the state as a whole. He said money going to fund infrastructure projects at state parks and zoos and to build new National Guard facilities would create hundreds of thousands of jobs and also get the state caught up on capital needs that have been on the backburner since the recession hit in 2008. 

 

Good time to borrow?

Connect NC is the largest borrowing packages residents have voted on since 2000 when voters overwhelming approved $3 billion for universities and community colleges. The state could have its debt nearly paid off by 2026 if the new bond wasn’t added, but the new bond would add a few more years to retiring that debt.  

Even though the Federal Reserve recently increased interest rates by a quarter of a point, rates are still at a historic low. The interest rate on the bond could be between 3.5 and 5.75 percent, according to data on Connect NC’s website.  

Davis said passing the bond wouldn’t result in raised taxes and wouldn’t increase the state’s debt service long term because the state is paying off older debt at a fast rate. 

“I’m not one for borrowing money, but if we’re going to do it, now is the time to do it and these are critic needs in the state,” he said. 

Queen said the bond should pay for itself in about five years because of the current debt being retired quickly and because he anticipates these new projects will generate new revenue for the state that can be used to pay back the bond. He added that the new bond shouldn’t affect the state’s AAA credit rating, which is the highest rating given to state governments. 

“It actually improves our position because part of maintaining a triple A rating is having the infrastructure in place to sustain the economy, but we haven’t invested in infrastructure since the recession,” Queen said. “This is a wise investment — it will build jobs, build revenue and it will have a solid return.” 

 

Could it be derailed?

Even with bi-partisan support among legislators, some worry about the fate of the referendum. Davis and Queen say they haven’t heard much negative feedback on the bond, but only time will tell. 

One concern is that the bond referendum will be on the primary ballot instead of the general election ballot in November, which could result in lower voter turnout. Another concern is that the bond campaign team hasn’t had a lot of time to rally support. The bond was approved by the General Assembly in November just before the holidays so the campaign team is just now hitting the ground running to drum up support across the state. 

Proponents of the bond have expressed concerns over the bill being able to pass during a primary election. With a hotly contested Republican presidential primary, pundits worry that conservatives who are against government borrowing could shut it down at the polls. 

 “You always worry about that, but this is a bipartisan issue that wouldn’t have passed without bipartisan support,” Queen said. 

Davis said the primary election wasn’t an ideal placement but time is of the essence to get a low interest rate nailed down and get to work on these projects. He thinks the primary will garner enough interest on both ides of the political spectrum.

“The reason it’s on the primary ballot is to get it done sooner,” he said. “In view of the fact we have a lot of interest in the national election, I think we’ll have a good turnout in the primary.”

The state political parties haven’t taken an official position on the bond referendum. The Democratic Party has only come out to warn McCrory that it would be inappropriate for him to be the face of the bond campaign because it would benefit his re-election efforts. 

Dallas Woodhouse, executive director of the North Carolina Republican Party, said the party has not taken a position either way with the bond and he doesn’t anticipate it will do so. 

So far there has only been a small group of opponents to the bond — a website Agaisntthebond.com with an accompanying Facebook page — NC Against the Bond that had 432 likes as of this week. The group recently filed the paperwork need to become an official referendum committee. 

Rep. Mark Brody, R-Monroe, was one of few who voted against the bond proposal. He said he would like to see the state debt-free before undertaking all these projects. 

He said the state has $6 billion in debt and pays off about $700 million in principal and interest on that debt every year. 

“That’s $700 million we pay that takes away from other priorities just to fund the current debt — imagine what we could do with $700 million in the budget?” Brody said. 

If the bond is approved and the state adds $2 billion more to the debt, Brody said that would be a grand total of $1.1 billion the state would have to allocate each year from the budget to pay it off in six years. 

“I feel like we’re about four election cycles away from being debt free if we don’t borrow any more and that’s my number one argument against the bond,” he said. 

He also disagrees that the bond will be an economic driver since the highway projects were taken out of the proposal. While transportation projects may move the economic needle, Brody said building new buildings does not. 

“If you really want to move the needle, you pay down debt first,” he said “If the state were debt free we’d be a good example for the federal government to follow.”

When asked if he was surprised that even the most conservative Republicans are backing the proposal, Brody said, “Nothing surprises me anymore. I’m at the end of my second term, but maybe I would have been at the beginning. Politics is a strange game sometimes.”

 

 

Connect NC bond overview

• $2 billion of targeted, long-term investments.

• Projects in 76 counties.

• Infrastructure investments are vital to NC's competitiveness.

• Connect NC will pay for assets that will last for 50 years.

• Interest rates are historically low.

• Connect NC will not jeopardize state’s strong credit rating.

• There will be no new taxes or tax increases because of Connect NC.

Breakdown of funds

• National Guard and Public safety — $78.5 million (4 percent)

• Parks and zoos — $100 million (5 percent) 

• Agriculture — $179 million (9 percent)

• Water/sewer and local parks — $312.5 million (16 percent)

• Community colleges — $350 million (17 percent)

• UNC System — $980 million (49 percent)

Total: $2 billion

Western region highlights

• Western Carolina University Science and STEM Facility — $110 million

• Improving Chimney Rock State Park — $1.5 million

• Improving Gorges State Park — $2.5 million

• Haywood Community College — $2.83 million

• Southwestern Community College — $7.17 million

• Asheville-Buncombe Technical Community College — $5.5 million

• Tri-County Community College — $4.5 million

• Blue Ridge Community College — $2.9 million

Source: http://connect.nc.gov/

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