McCrory's road, building bonds would go to statewide vote

by Craig Jarvis and Bruce Siceloff, News and Observer, February 5, 2015.

Anyone who has listened to him over the past two years knows it’s the little things that bug Gov. Pat McCrory: dry fountains, broken elevators, traffic jams.

He was still talking about it in his State of the State address on Wednesday night.

“We can no longer afford a culture of neglect and apathy,” the former Charlotte mayor said, invoking decrepit government buildings in Raleigh and bottleneck highways across the state as offensive to his sense of civic pride.

Now he has put a dollar figure on cleaning things up: He wants to borrow about $2.5 billion for transportation and building projects.

That will require the General Assembly to agree to put bond measures on a statewide ballot – something that Republican leaders have not yet embraced, especially since the administration hasn’t disclosed specific projects so far.

Rep. David Lewis, who represents Harnett County, on Thursday reiterated that his party wants to be sure the state finds all the savings it can through making government more efficient before committing to major projects that add debt.

Sometimes bonds can be approved by the Council of State without going to a public vote, but there is little enthusiasm for that.

“The challenge will be finding the right set of projects that will appeal to the majority of voters in all parts of the state to get them behind it,” state Treasurer Janet Cowell said in an interview Thursday. “I will say that will probably be a bigger challenge in some ways than in 2000 because we’ve had six or seven years now of antidebt sentiment, where debt has become a bad word.”

The last time there was a bond issue this large was in 2000, when voters approved $3.1 billion higher education bond. The most recent bond was $503 million for public improvements in 2007.

Debt rating unaffected

More importantly, bonds in the amount McCrory proposes are a debt the state can handle, a report Cowell issued on Monday found. If approved, they would keep the state below its historic “watermark” of 4 percent of all revenue that is used for debt service.

Since the state has not issued new debt service since the recession in 2007 and has been paying off previous debt, the state has the capacity to take on something the size of what the governor proposes while protecting its AAA bond rating, she said.

The study recommends putting bonds for capital projects before voters. “If you’re going to undertake significant debt, we’d like to see a vote of the people, more buy-in by the public, whose taxes are paying for this,” she said.

Cowell says the state actually has little choice but to leave it up to voters. Legislation passed in recent years calls for three-fourths of outstanding debt to be general obligation bonds, with only a small minority not being voter-approved, she said.

Democrats on Thursday sounded much more receptive to the governor’s bond proposals. At a news conference the House Democratic caucus called to criticize McCrory’s overall agenda, veteran Rep. Mickey Michaux of Durham said he thought the bonds were a reasonable request.

Tentative projects 

There are few specifics on the building revitalization plan the governor has dubbed “Project Phoenix.” A study of downtown Raleigh buildings is underway, which includes looking at ways to add retail and residential uses to the government complex there.

Transportation projects, on the other hand, are tentatively lined up already.

Transportation Secretary Tony Tata said the $1.2 billion in highway bonds would be spent to build new projects that fell just short of the cutoff mark when the state Department of Transportation applied McCrory’s new Strategic Mobility Formula to set the top priorities for road construction over the next 10 years. These projects would qualify for bond money only if DOT has secured the necessary environmental permits.

“What that would allow us to do is get construction going on 19 or so projects that have those documents done, that are next in line,” Tata said at a meeting of the state Board of Transportation.

DOT provided a draft list of projects likely to benefit from the bond money. Like other construction money, the funds would be divided among projects of statewide significance (40 percent of the money), regional (30 percent) and local DOT division (30 percent).

In the Triangle, DOT’s draft bond list includes $60 million for Wake and Franklin counties, to finish the four-lane widening of U.S. 401 between Raleigh and Louisburg. The biggest single project on the list is the Interstate 74 eastside bypass in Winston-Salem, costing $300 million.

When McCrory first proposed transportation bonds in September, he included many projects that had scored near the bottom in his new rating system. Critics said he was tainting the decision process by letting political considerations overrule objective ratings.

Calls to raise funds

Business groups have called on state leaders in recent weeks to find new money – from additional taxes, fees or other sources – to step up spending for road and bridge construction and maintenance. McCrory backed away Wednesday from a pledge he’d made over the past two years to recommend new funding sources to shore up the state’s anemic gas tax revenues.

The state’s chief source of road money, the 37.5 cents-per-gallon tax on gasoline, is scheduled to drop by as much as 6 to 8 cents in July, according to a legislative formula, unless the General Assembly takes action to change the tax law. That would reduce DOT revenues by $300 million to $400 million a year, a healthy share of the department’s $4 billion budget.

N.C. Go, a nonprofit group that lobbies for transportation improvements, says the legislature should increase the state’s 3 percent tax on car sales and take other measures to bring in more money for roads, bridges and transit.

“A $1.2 billion bond is a good first step to jump-start projects,” Mark Finlayson, N.C. Go’s chairman, said in a news release. “However, it is borrowing money against future revenue … that is already uncertain due to projected decreases in gas tax revenue.”

Cowell said the study committee took the declining future gas tax revenue into consideration when it calculated the debt capability.