State Government

Also: New Law Allows Counties to Cooperate on Projects

Everybody's Doing it Except North Carolina
Across America, in states big and small, communities are using a self-financing tool to build public facilities that help attract jobs and development and increase property values. But not in North Carolina. It’s one of only two states that have failed to implement local option project development financing.

“Local option financing is a winner for everyone involved,” said Richard Wiley, president of the North Carolina Economic Developers Association (NCEDA). “The financing turns marginal property into a moneymaker for communities and produces jobs without risk to the public.”

With solid bipartisan support, North Carolina’s General Assembly agreed. It passed legislation this summer to establish local option financing in the state. The next step is to earn the support of voters in a referendum in November 2004. That’s a big step. In 1993 and 1982 voters turned down similar proposals.

Supporters are optimistic this time. “The last two times North Carolina hadn’t lost 150,000 jobs in a little over two years. The last two times the foundation of our traditional manufacturing and farming base in the majority of our communities wasn’t crumbling,” said Ellis Hankins of the North Carolina League of Municipalities. “We think people will realize that we need every tool that we can get that will produce jobs.” The League, NCEDA, County Commissioners Association, NCCBI, and chambers of commerce are among those supporting the measure.

In the past the primary objection has been that local government could issue the bonds without voter approval, which is required for general obligation bonds.

Hankins believes the public now is much more used to communities successfully using existing financing tools that do not require a public vote. Also the proposed measure includes significant opportunity for the public to register its opinion, including a mandatory public hearing. In addition the Local Government Commission must give its approval to the financing.

How does local option project development financing work?

The municipality or county decides to invest in infrastructure that will make a piece of property more attractive to development, such as water and sewer, street improvements or storm drainage. For example, before those improvements are made property taxes collected on a parcel might be $50,000. After the public investment attracts private investment the property taxes collected might be $120,000 annually. The $70,000 difference is used to pay off the bonds. Once the bonds are paid off that extra $70,000 goes into the city coffers. helping to pay for other services and hold down taxes.

Will property taxes be raised to finance a new development?

No. Property taxes for everyone else will remain at the rate prior to the purchase of the bonds. Only the specific property that is being improved and developed will see its rates go up to pay for the bonds.

What happens if the project fails? Do taxpayers bear the financial burden?

No. There are safeguards written into the legislation to protect taxpayers. Investors who purchase the bonds assume all financial risks.

What types of property will be eligible to benefit from this economic development tool?

The law is written to give local governments maximum flexibility. In other states the financing has been used for new industrial site development, redevelopment of existing industrial and brownfield sites and to restore blighted areas.

What type of jobs will be created through this financing?

Projects offering quality, well-paying jobs will be targeted. The legislation requires manufacturing jobs associated with this financing to be above average and meet specific wage and benefit requirements that the  Department of Commerce must certify.     — Steve Meehan


New Law Allows Counties to Cooperate on Projects
For years adjoining counties have backed off undertaking joint economic development projects, such as developing an industrial park. Existing laws made it difficult for them to share the additional property or sales taxes that development would bring. 

The 2003 General Assembly has removed those barriers with passage of the Multi-jurisdictional Revenue Sharing Bill. The act authorizes local governments to enter into inter-local agreements that spell out the respective shares of additional tax revenues from a new development. 

The new law will be particularly beneficial to smaller counties that have been stymied in building the infrastructure to attract economic development because they couldn’t afford it alone. The bill also authorizes the joint efforts to include local option project financing.

For the five counties involved in the Kerr-Tar Hub, the legislation will make it easier to deal with the challenges of sharing ownership, costs and benefits, according to Rick Seekins, economic development planner with the Kerr-Tar Regional Councils of Governments.

“We needed something like that,” he said. “This gives us the flexible authority to create a joint governance group.”

Vance, Person, Granville, Warren and Franklin counties and economic development agencies are in the planning stages to jointly develop a technology park that will include linkages to the Research Triangle Park, RDU airport and other amenities.

Return to magazine index