This is the next installment of our series spotlighting the different ways communities across North Carolina are tackling their housing needs.
Here, we are highlighting the use of General Obligation Bonds for affordable housing projects.
In North Carolina, local governments are authorized to borrow money secured by a pledge of the taxing power—that is, the local government borrows money and promises that it will raise and collect taxes as necessary to pay back the money. This is done through General Obligation Bonds (GO Bonds). GO Bonds generally require approval by the voters at a referendum, but you can issue two-thirds GO Bonds without voter approval. We’ve written several blogs about GO Bonds before and the referendum process, including a recent FAQ post.
State law authorizes cities and counties to issue GO Bonds to provide housing for low- and moderate-income persons. Many places do this by using Bonds to fund an Affordable Housing Trust Fund, which can then be used to participate in privately developed affordable housing projects, or for any other legal purpose.
You will need LGC approval to place a bond question on the ballot. To get their approval they’ll want to see a plan that supports the amount of bonds you’re looking to authorize. So, if you want $5 million for affordable housing, they want to see a documented need for at least $5 million and a tentative funding plan. Don’t worry if you don’t have a specific project in mind — you do not need to commit to specific projects or amounts to be funded to put the question on the ballot. You’ll need that when you get ready to issue bonds – then you’ll need to have identified specific projects in specific amounts.
Why we like it:
- This approach tests public support for affordable housing in the community
- If voters say “yes”, then you can be comfortable ramping up funding and a “yes” vote also provides a little cover to elected officials – that is, they can be more comfortable that the community will support a tax increase related to affordable housing because they just voted for it
- And, if voters say “no”, that’s ok too!
- GO Bond funds give the locality a larger chunk of funding than using fund balance or dedicated tax increment such as a penny for housing. This in turn allows a locality to participate in bigger ways and in bigger projects than it might otherwise be able to.
- GO Bond questions tie the discussion of benefits of these projects to related costs.
- The ballot questions themselves require information on the expected impact of the bonds on residents’ tax liability. This can help voters see more clearly the link between the broad public benefit and their personal cost.
Local governments across North Carolina have received voter approval for GO Bonds for housing. For example, we’ve worked as bond counsel on successful referenda for Orange County and Chapel Hill.
Let us know if you’re interested in discussing this idea further or if you’d like our help exploring funding mechanisms for affordable housing.
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