Earlier this year, the authority of North Carolina local governments to issue special assessment revenue bonds lapsed. We are sorry to see it go. This type of financing has been very popular in other parts of the country, but it never got a foothold here. There were a few reasons for that:
- We don’t have a tradition in North Carolina, and we didn’t have a structure in that law, to create limited-powers special purpose districts to issue debt for the property development infrastructure for which these bonds were intended. The “special district” model is what is often used in other places.
- That meant that the bond issuers had to be counties, cities and towns.
- Which meant in turn that our friends at the LGC could point out, correctly, that if the unit wanted to build the public infrastructure in question, there were easier ways to do so.
- In addition, since the issuers were general purpose governments, the LGC wanted to make it pretty certain the assessments would be able to pay the bonds without counting on increases in property values through development. The LGC’s guidelines for these bonds therefore only allowed for leveraging property values at a level far below that which is allowed in other jurisdictions.
Maybe someday the stars will align and SARBs will make a comeback under legal and administrative provisions that will make them more useful for land development. Even under the strict rules we had, SARBs could be precisely the right tool for a particular project. We worked on two of these deals, and the financings for Hillsborough and for Richmond County have been two of our favorite projects. We hate to see a local government financing tool fall by the wayside, even if it wasn’t a common technique.
Click here for our disclaimer, click here to commiserate with us about the demise of SARBs or ask a question, and click here to learn more about our public finance practice.