RALEIGH – Tuesday morning the House Finance committee passed the House’s bond package, a plan that would fund $4 billion in state projects if voters approve it in a referendum in November. Rep. Dean Arp (R- Monroe), who was responsible for the heavy lift in getting the package ready, visited the Democrat’s closed-door caucus last night to share the details of the bond and answer questions.
The plan would provide money toward fixing roads, bridges, water and sewer systems in small towns, and provide capital improvements for community colleges, universities and K-12 schools. It uses a combination of cash in the budget and bonds that would be paid off by 2021.
The House expects that the state can get an interest rate of around 3.5 percent because of its AAA bond rating. Bond market analysts say they expect that interest rates will go up as the economy improves.
“Does anyone here think that the cost of construction is going to go down? Does anyone here think that the cost of borrowing money is going to go down?” said Rep. Dean Arp, who put the package together. “Every tick of the interest rate, every quarter percent, costs $7.8 million. The decision on this rightly belongs with the people and we want to put a referendum in front of them as soon as possible.”
The bill keeps the six-year plan under 4.75 percent debt affordability limit. If interest rates climb to 5.75 percent over the life of the plan, busting that debt limit, then future General Assemblies would have to proactively vote to continue borrowing for the projects. The targeted “shovel-ready” transportation projects are already in the pipeline under the Strategic Transportation Initiative.
The school and water and sewer projects are all matching grants, since they would traditionally be financed by local governments. The matching requirement for school building improvements did not sit well with a few members of the Finance Committee.
“I think the state government should take this on 100 percent given the tight budgets that counties are facing with schools,” said Rep. Dave Lubke (R-Durham).
The package was introduced in the Rules Committee with big support from Gov. Pat McCrory last night and now heads to Appropriations. If passed, the bond would be on the ballot in November for approval from voters and bonds would be issued in 2016.