Debt Study (Insider)
North Carolina has “substantially exhausted” its ability to issue more General Fund-supported debt for the next two years, according to a debt affordability study issued by State Treasurer Janet Cowell. The annual study recommends that legislators consider issuing general obligation bonds, rather than special indebtedness like certificates of participation, in the near future. As already authorized but as yet unsold COPs go to market, North Carolina’s amount of special indebtedness will no longer be in line with other states enjoying a triple-A bond rating, the study found. The report, approved by a nine-member committee, continued to show disagreement between Cowell and Gov. Beverly Perdue over a special financing plan for a portion of the I-485 loop around Charlotte. The report called for the General Assembly to clarify whether projects like the contractor-financed proposal being considered by the Perdue administration is allowed and for legislators to set specific financing amounts and terms.
Perdue’s budget director Charlie Perusse and Revenue Secretary Ken Lay, both members of the committee, objected to the recommendation, according to a notation in the report. The study found that the state could only issue $9 million in additional General Fund-supported debt in each of the next five years and stay within self-imposed limit intended to protect the state’s bond rating. That limit is based on spending no more than 4 percent of General Fund revenues each year to repay debt. By increasing debt payments to a ceiling of 4.75 percent of General Fund revenues, the amount of debt issued in each of the next five years could rise to $575 million, the report said. The state currently has about $6 billion in authorized General Fund-supported debt. About $1.9 billion has yet to be issued, or sold. The report assumes that debt will be issued over the next four years. Roughly half of the state’s debt has gone to support university construction.
