North Carolina local governments are all too familiar with FEMA’s role in reimbursing local government costs of natural disaster remediation. We know that FEMA is good for the reimbursement payments (so long as you follow their rules), but it can take years to receive reimbursements.
What can you do in the meantime?
North Carolina’s existing and common means of local government financing can be tailored to meet your need for funds in advance of reimbursements.
- You can use revenue bonds to pay for damage to water and sewer systems;
- Installment financing under 160A-20 can fund other acquisition and improvement costs, say for damage to a government building;
- And we even know of one local government that held a bond referendum for costs that were subject to reimbursement.
Following a template used in other states, we could ask lenders for 5-10 year loans where the borrowing is prepayable from FEMA reimbursements, and with the repayments structured to reflect the expected schedule for reimbursements. These loans are subject to LGC approval, so the LGC will likely want to know your Plan B, as well as your plan to cover your own share of the costs – but all of this can be done within our existing frameworks.
North Carolina could go further and match other states in facilitating financing in anticipation of reimbursements. For example, the State could expand the authorized uses of special obligation bonds to resolve a number of collateral and other security issues. The legislation could even be expanded to allow borrowing for non-capital costs in cases where the normal flow of governmental revenues is disrupted or the government incurs additional operating costs as a result of the disaster.
Our local governments have the credit and borrowing capacity to carry these loans, and we’re lucky to have lenders who will lend to local governments. The General Assembly would do a service by making these transactions easier.
This post was inspired by this blog post by Friend of the Firm Adam Parker of the Butler Snow firm.
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