guilford County Considers Additional Debt Through “Two-Thirds Bonds”
Guilford County is weighing the use of “two-thirds bonds” - a financing mechanism allowing the county to borrow money without voter approval - as it faces increasing financial obligations. While county officials often characterize this practice as a standard method for funding smaller projects between large, voter-approved bond issues, critics contend it circumvents taxpayer oversight.
The potential for additional borrowing comes at a time when Guilford County is already burdened with its largest-ever long-term debt, including a $3.1 billion commitment for school bonds. This existing debt requires a significant annual payment, impacting the county budget before funds can be allocated to other priorities like vehicle purchases or new hires.
Furthermore, the current $3.1 billion school bond may prove insufficient to cover all planned projects due to rising inflation,prompting discussions about a future,even larger bond request. Despite higher current interest rates - meaning increased borrowing costs – county officials have expressed interest in potentially taking on another $45 million in debt next year to address pressing capital projects.
The process for issuing these ”two-thirds bonds” is relatively straightforward. County staff identifies eligible projects, such as elements of the new parks master plan (including a proposed $2 million treehouse), and the Board of Commissioners votes to authorize the debt. the proposal then undergoes review by the Local Government Commission (LGC) in Raleigh, which assesses the county’s ability to repay. if approved by the LGC, the county sells the bonds to investors and utilizes the funds.
A key distinction between these bonds and traditional general obligation bonds is the lack of voter involvement. Unlike general obligation bonds, which require a public campaign, hearings, and a referendum, “two-thirds bonds” are decided solely by a majority vote of the nine county commissioners.
Proponents of the method argue it provides necessary flexibility to maintain and improve county facilities without lengthy waits for bond referendums, asserting that voters have already placed their trust in the elected commissioners. Opponents, however, maintain that this trust necessitates limitations and that the ballot box remains the appropriate venue for significant financial decisions.
Each new bond issue, regardless of its approval method, contributes to Guilford County’s overall debt service obligations, stretching repayment schedules for decades. Increased debt carries potential risks,including reduced financial flexibility and heightened vulnerability to economic downturns or further interest rate increases.
Historically, both Democratic and republican-led Boards of Commissioners have utilized “two-thirds bonds” during periods of budgetary constraint, a pattern observed over the past two decades. The article suggests that approving general obligation bonds, while seemingly specific in purpose, can ultimately pave the way for additional, non-voter-approved borrowing for other capital projects prioritized by the Board.
