Recent changes to North Carolina election laws restrict a local government’s ability to hold referenda on general obligation (“G.O.”) bonds. The main takeaway is this: G.O. bond elections now can be held only on dates when all the voting precincts in the jurisdiction are otherwise required to be open. This essentially restricts counties to holding bond elections only in even-numbered years on the primary or general election dates, while municipalities can choose those dates or their own primary and general election dates in odd-numbered years. There are, of course, some limited exceptions.
Prior G.O. Bond Referendum Process
Under the prior law, if a general obligation referendum was held on a day besides a primary election date or a general election date, it had to be held greater than 30 days before or 30 days after all other elections in the unit seeking to hold the referendum. Some types of referenda had additional timing requirements: bond referenda did not.
Changes to the Referendum Statute
The new law amends N.C. Gen. Stat. § 163-287 to require that referenda be held only on the day of a regular primary or election. This effectively removed special elections for all bond (and other) referenda. Some of the reasons for the policy decision were the cost savings: rather than have elections solely for bonds or other referenda, all of the election items would happen in either the primary election or the general election. More importantly, the idea was that restricting the election dates would tend to produce higher turnout and thereby produce a broader sense of the community on the referendum question.
The general rule, as stated in the preview to this post, is that general obligation bond referenda may only be held in even-numbered years and on general election or primary dates, unless a.) a municipality is seeking a G.O. referendum in an odd-numbered year (with the exception of High Point) or b.) there is an election in an odd-numbered year requiring all of the precincts in the county to be open.
As Professor Bob Joyce of the UNC School of Government notes, Burke and Mecklenburg Counties hold school board elections in odd-numbered years and appear to require that all precincts in the county are open (Wake is another odd-numbered election county, but has districts and does not require all precincts to be open), meaning that the general election in an odd-numbered year could also allow for bond referenda.
The new law does allow for special elections for GO bonds to finance health and sanitation systems, so long as the governing body of the local government adopts a resolution stating why the special election is needed at a time other than a general election or primary election in an an even-numbered year. The other provisions surrounding the general obligation referenda process did not change.
What are the Implications?
Essentially, all units of government looking to issue general obligation debt need to know that their timing of bond referenda must be centered around general and primary elections in even numbered years. Municipalities (and the exceptions above) have a little more flexibility by being able to put G.O. bond referenda to voters during odd years as well. Again, we’ve noted some exceptions; there may be other jurisdictions with unusual election schedules. This new law will also apply to limit the dates for other local option referenda, such as county referenda on local option sales taxes or liquor-by-the-drink and similar ABC-related elections.
With a smaller number of available dates for bond referenda, local governments need to be especially diligent in planing ahead for projects that they want to finance with general obligation bonds. The formal process takes longer and has to be completed earlier than most people think. Typically, for a November referendum, the formal process has to start at least by June and be finished by mid-September to be on a November ballot. The informal process (i.e. determining the projects to be financed and the amount of the bonds) has to be worked out prior to beginning the formal process of getting the G.O. referendum on the ballot. Some local governments also wish to engage in a public information campaign to educate the public on why the bonds are necessary prior to the vote.
As always, see our disclaimer and please consult with your friendly neighborhood bond attorney when thinking through your referenda process. Call or email us if you want to discuss this issue further or want to see a sample calendar of events for your bond referendum.