North Carolina rejects county's $228 million bond request

The North Carolina Local Government Commission failed to approve Cabarrus County’s requests for bonds totaling $228 million Tuesday — although the panel’s staff recommended approval — with some on the board saying the bonds should face a voter referendum before the commission considers them.

Some commission members objected to the county’s use of bond anticipation notes and would have preferred it only take out debt for projects once the projects’ cost is finalized.

The county sought $186 million 20-year limited obligation bonds to take out variable rate 2022B bond anticipation notes and $42 million to acquire a building for a human services center and land for a regional behavioral health center.

Chairman of the North Carolina Local Government Commission Dale Folwell said he was skeptical of Cabarrus County’s use of bond anticipation notes.

The county’s limited obligation bonds are rated Aa1 by Moody’s Ratings and AA-plus by S&P Global Ratings and Fitch Ratings.

The 2022B BAN funded part of an expansion and renovation of a courthouse as well as several other county projects.

Jennifer Wimmer, LGC deputy secretary, said she and her staff had told the county it disliked the use of BANs before final project costs were available.

Commission Chairman Dale Folwell, the North Carolina state treasurer, said he was concerned the county had taken on more costs by using the BANs, since interest rates and construction costs have gone up since 2022, and he’d prefer the bonds be brought as general obligation bonds so voters could decide.

But County Manager Mike Downs said he wasn’t sure the county’s approach was going to add to costs and was efficient since without BANs, the county would need to issue bonds five or six times a year. Further, he said “all the major issuers in the state” use this approach, a claim Folwell contested.

Two LGC staff members noted some cities, rather than counties, were using similar financing approaches.

Wimmer, when asked, said if the $186 million bond wasn’t approved the county would have to use general fund money within five years to repay the BANs.

Downs told Folwell he would look at the numbers to determine if the county lost money by using BANs.

Board Commission Member Jessica Holmes said she was unaware of “many situations” where limited obligation bonds were used to finance the things Cabarrus County planned.

Folwell said he’d get the commission staff to provide “direction” to the county.

“County officials are continuing to work with the LGC to determine when these matters will be placed on an upcoming agenda,” the county said in a statement to The Bond Buyer on Friday.

Earlier in the meeting the LDC approved $226 million in revenue bonds for three municipalities in the Research Triangle Region.