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In October of 2015, Governor Pat McCrory signed into law the Connect NC Bond Act, giving voters across the state the opportunity to approve a $2 billion bond during the primary election. The bond referendum that will be on the March 15 primary ballot.
The bond has also received a good deal of popular support in the state. A High Point University poll conducted earlier this year found that two-thirds of those surveyed favored the bond. A recent Civitas Poll shows that a majority of likely Democratic voters and a plurality of likely Republican voters support the bond referendum: 66% of those surveyed said they would vote for the bond, with 14% saying they would vote against it and 19% saying they either didn’t know or needed more information.
Tomorrow, North Carolina voters will be asked to approve billions in debt — in the form of a bond — to pay for what amounts to a grab bag of expensive projects around the state — some of which have already jumped the gun and are under construction in anticipation of being rescued by the voters.
The $2 billion that will be secured with this bond indebtedness will go into a “Connect NC” fund overseen by a committee composed of politicians: 66% of this bond indebtedness will be doled out to the state’s university and community college facilities and hundreds of millions more will go to parks and zoo improvements, agricultural “research” and other political pet projects across the state.
What was originally sold to the public as $2.8 billion “infrastructure and education” bond (that’s why it was called “Connect NC”) was actually stripped of all the original funding earmarked for highways, roads, and bridges. In fact, in its current form, the bond will not pay for a single transportation project. Instead of the money actually connecting anything with roads, we are now told the bond “will connect North Carolina to the 21st century.” Confused voters may be left wondering: why the switch?
CLAIM: The bond will not require a tax increase
Let’s be clear: a bond is debt and it’s your debt and it’s long-term debt. And, as you may have noticed in your own home, debt does not pay for itself. There is no debt fairy that will suddenly wish it all away. This is massive debt that we, our friends, our families, our businesses and our future generations must pay in the form of taxes. The state has no money that it has not first extracted from its hard-working, property owning citizens.
The state will a take on a debt service obligation of over $100 million every year by adopting this bond proposal that must necessarily be repaid by future tax payments. Any repayment of this $2 billion in debt in the future is taxation deferred. The Connect NC Bond should really be referred to as a stealth tax and ought to be so stated on the ballot measure. It is a way to spend big now and kick the repayment responsibilities down the road to future generations.
Furthermore, we’ve all heard these “no new taxes” whoppers before. There is no guarantee in the bond proposal that a tax increase will not be imposed to pay off the debt incurred. In fact, history has proven otherwise. When politicians in the past have promised not to increase taxes to offset bond debt for similar purposes — namely for “higher education” — a tax increase is exactly what we got. That is what happened that last time North Carolina adopted a General Obligation Bond in 2000. What followed was a tax increase in 2001.
Liberal Democrats are already calling for a tax increase. “I will vote ‘no’ on the Connect NC bond issue in March,” said Ned Gardner of Apex, a retired Wake County public school teacher. “Do I support the higher education and state parks capital expenditures that the bond would fund? Most definitely. But I reject Gov. Pat McCrory’s ‘no tax increase’ shell-game bond financing. If we support new expenditures for education and parks, we should create a clear revenue stream to pay for it: increase taxes.”
If approved by the voters, the bond would be backed by the full faith and credit of the citizens of the State of North Carolina, which ensures there would be no default on the bond debt service. “Full faith and credit” is a phrase used to describe the unconditional guarantee or commitment by one entity to back the interest and principal of another entity’s debt. It expresses the commitment of the issuer (the State) to repay the bonds from all legally available funds, including a good faith commitment to use its legal powers to raise revenues to pay the bonds.
Bond proponents brag that on balance this is a good deal. Indeed. There is no thief that did not see his larceny as a good deal for someone.
CLAIM: The state is in the middle of a “Carolina Comeback”
Proponents says that North Carolina’s business and economic environment has improved and are declaring this evidence of a Carolina Comeback.
It’s true that the state’s economy is performing well enough to support additional debt. North Carolina Treasurer Janet Cowell said a statement released in January that the state’s General Fund has the capacity to absorb $210 million a year in new debt for the next 10 years. “Our findings,” she said, “demonstrate that North Carolina has maintained a conservative posture on debt and has the ability to responsibly invest in its future—and keep the ‘AAA’ bond ratings if the Connect NC bonds are approved.”
The Triad Business Journal reports that North Carolina’s real gross domestic product increased at the fastest pace in the Southeast in the third quarter last year, making this state the fastest-growing large economy in the nation in the third quarter.
Though these figures reflect positively on the North Carolina economy, they are a trailing indicator, reports the Journal. More recent figures show a more anxious attitude of the future. A survey by the American Institute of CPAs reports that more than one-third of top financial executives at American businesses are pessimistic about the U.S. economy over the next 12 months, the bleakest outlook in more than three years.
CLAIM: The bond will pay for critical infrastructure projects
The Connect NC Bond Act contains a section entitled “reallocation” [Section 1 (f)(3)] which will enable legislators to change the bond money allocations after the bond is passed. Placing such a provision in the Act means that voters are really given no guarantee that the so-called infrastructure projects targeted are an accurate reflection of the projects that will be funded. North Carolina’s history with the gas tax being diverted to purposes other than roads should remind us that we need better guarantees over allocation before signing off on a blank check.
In the end, this taxpayer-funded debt, plus interest over 25 years, amounts to little more than an open-ended slush fund that can be used by lawmakers in any way they can persuade others to reallocate it so future candidates can bring home the pork.
As ConnectNC campaign finance reports for the referendum committee begin to trickle out, the voting public is finding out, just days before the election, that a fair amount of monetary support for the bond seems to be coming from its direct financial beneficiaries. This includes not only recipients of the bond funding, but also a chorus of consultants offering their service in exchange for a ticket on the gravy train. This has led some critics to dub the ballot measure “The Crony Bond.”
A high level breakdown of the spending designated for the Connect NC Bond can be found at the advocacy website Connect.NC.gov.
CLAIM: The bond will go to educating a professional workforce
True enough. The bond may very well go to train a professional workforce for the future. But whose workforce? There is no guarantee, nor can there be any, that the professional degree students educated and trained in expanded facilities paid for with long term taxpayer debt will stay in North Carolina. They may stay and contribute to a revitalized economy, they may not.
Spending taxpayer money to educate what would be a global and mobile workforce cannot reasonably be marketed to the North Carolina taxpayers as a sound return on investment. What happens in North Carolina doesn’t necessarily stay in North Carolina.
Vote No on Imprudent Bond Proposal
Although the Connect NC Bond Act passed with bipartisan support, legislators are split on the bond issue. And if it’s any indication, the left-wing Budget & Tax Center wholeheartedly favors the bond proposal.
“My disapproval is based upon sound principle,” writes Representative Chris Millis. “I was willing to consider short-term bonding (approved by the citizens) for essential state government functions…Unfortunately, that’s not what this referendum addresses. Instead, voters have been offered a menu of potentially unneeded university projects; unspecified community college projects; and millions of dollars for parks and the zoo, which are far from the state’s highest priorities at this time.”
The Connect NC Bond provides legislators with a way to spend enormous sums of money now on grandiose projects without honestly declaring the ‘de facto’ spending increases as part of the state’s operating budget. No harm, no foul.
Campaigning against a tax-and-spend culture is precisely what propelled conservatives into power after a long and damaging period of such a culture in the state house. Now that we have dug ourselves out of crippling debt, this is no time to invite disaster under new management. Now is the time to stay out of debt and reject those whose eyes are bigger than their wallets. North Carolina needs to be prudent with its spending dollars no less than any individual, family household or business.
Neither the state nor the nation can give us reason to believe that a golden age of perpetual prosperity lies just around the corner. Yes, as Governor McCrory has noted, North Carolina is experiencing a “Comeback.” But, for goodness’ sake, let’s get there first without sending the state bouncing back to where we came from.
As in any risky business transaction, may the buyer beware (caveat emptor). In March, North Carolina voters will be given the opportunity to avoid spending beyond their means on questionable big-ticket items.
To learn more about the Connect NC Bond and organized opposition to the bond proposal, visit the website AgainstTheBond.com.
I opposed the bond proposal and I urge you to vote NO on the Connect NC Bond ballot measure on March 15th.