Town officials back bond proposal

Despite some opposition, most local officials say they support an amendment to the state constitution that would give them more flexibility in local development.

North Carolinians will vote on the proposal, known as Amendment One, on Nov. 2.

If it is passed, Amendment One will allow municipalities to sell bonds that would fund public works without voter approval.

The idea is that the projects would attract private developers, whose property tax revenue would pay for the new infrastructure.

The Chapel Hill Town Council approved by a 8-1 vote a resolution supporting the amendment at its Sept. 7 meeting.

Aaron Nelson, executive director of the Chapel Hill-Carrboro Chamber of Commerce, said the bonds are not intended to become obligations to taxpayers, as they will be paid for by the development they encourage.

"It is a public infrastructure investment for the sole purpose of leveraging private economic development," Nelson said.

Self-financing bonds would be issued to fund roads, water and sewage lines, and telecommunications lines in areas earmarked for development, he added.

The question of whether taxes will be raised to finance the bonds has been a point of contention between officials on both sides of the issue.

Mark Kleinschmidt was the only council member who voted against supporting the amendment. He said no one can say with absolute conviction that taxes would not increase if the amendment were passed.

"Even if everything goes right and the property taxes are paying off the bonds, the town is still having to increase other services," he said, adding that those services would be funded by taxpayers.

North Carolina and Arizona are the only two states that do not have legislation allowing self-financing bonds. The issue has been defeated twice at the polls in North Carolina under the name "tax-increment financing" in 1982 and 1993.

Harvey Schmitt of N.C. Citizens for Business and Industry said renaming the bond "self-financing" is an accurate depiction of how the program works.

"The bondholders take the risk," Schmitt said. "It is not a tax increase."

If the amendment is passed, it could have an effect on current development plans.

For example, although the town as of now has no plans to use self-financing bonds in the development of downtown parking lots 2 and 5, they could be added to the project later.

Kleinschmidt said the town was presented with a program that utilizes other sources to finance the development.

"We're offering land leases, not ownership to the developer, which gives us room to maneuver," Kleinschmidt said. The development will rely on increased tax revenue but not on self-financing bonds, he added.

Still, Mayor Kevin Foy said, the town would like to leave its options open, as many other municipalities do, if plans change.

But council member Jim Ward said he does not think many voters understand the issue.

"I think that it's one of those items on the ballot that people will have seen for the first time as they are walking into the poll," he said.

Foy said he hopes citizens will take time to understand the issue.

"I think that people need to educate themselves on this, because there's a lot of hyperbole."

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