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Amendment One has support of local government leaders
By Carey King
North Carolina residents will cast votes on three constitutional amendments this year, and many government and business leaders are hoping they'll say "yes" to Amendment One.
That proposal, the North Carolina Project Development Financing Act, has generated much more discussion than the two other potential changes listed on the ballot.
The second proposed amendment would allow state revenue collected through penalties, fines and forfeitures to be used for maintenance of public schools, while the third would change magistrates' two-year terms to an initial two-year term followed by subsequent four-year ones.
However, it's Amendment One that's made news headlines recently, garnering the backing of former governors Jim Holshouser, Jim Hunt and Jim Martin, plus the N.C. League of Municipalities, N.C. Citizens for Business and Industry, N.C. Economic Developers Association, N.C. Metropolitan Coalition, N.C. Rural Center and N.C. Association of County Commissioners.
Jackson County Commissioners passed a resolution Sept. 21 in support of the proposal, and Sylva leaders voiced their support Oct. 7.
"It's a tool you can use if you want to make a public improvement in a particular area," said Sylva Manager Richard McHargue.
If passed, Amendment One would allow local governments to issue "self-financing bonds" to pay for public improvements such as streets, sidewalks or water and sewer service in specifically-designated "development districts." Government leaders would work with private developers and landowners to create the districts in economically-distressed areas for projects including construction of affordable housing or industrial parks, or the transformation of abandoned factory buildings into new uses.
As improvements are made, the bonds would be paid off with the additional tax revenue gathered as property values in the development district increase. The existing property tax rate in both the community and the district would stay the same.
"It's a site-specific way to pay for an improvement," McHargue said. "Say Neighborhood X wants to put in a water and sewer line. Their taxes are going to be what is used to repay the bond."
Once improvements were completed and property values in the district increase, the "extra" tax revenue, called the "tax increment," would pay off the bond. For example, if a building owner paid $500 per year in taxes before the improvements and $600 after, the $500 would continue to go into the town's general fund, while the $100 difference would go toward the bond.
The idea of "tax-increment" financing began in California in 1952. Every state except North Carolina and Arizona currently has such a plan: Tar Heel voters rejected similar proposals in both 1982 and 1993.
In states where the bonds are in use, they are most commonly used for projects government leaders feel can't wait for a public vote. Because the bonds don't apply to the entire community, a referendum is not required.
What would be required before a municipal or county government could designate a development district is the approval of the state Local Government Commission, a nine-member group based in the N.C. treasurer's office that also includes the state auditor and secretary of state. The commission would review a local government's development plan – checking to see that the bonds could be repaid and that the government is in good financial shape. Projects would also have to meet environmental requirements, pay above-average wages, and prove they couldn't be completed without the program's assistance.
In Jackson County, the bonds might be used for the Whittier Industrial Park or the Cashiers Commercial District, said county Manager Ken Westmoreland. The plan could also be useful at the currently-under-construction county government complex in Webster, provided private investment is involved, Westmoreland said.
Bond dollars would be most useful in Sylva, McHargue said, for water and sewer projects, roads and sidewalks.
North Carolinians for Jobs and Progress, a coalition of Amendment One supporters, say on their Web site – www.amendmentone.org – that the measure is needed to "attract jobs, revitalize communities and neighborhoods, and increase property values." With 185,000 jobs recently lost in the state, the group says, North Carolina needs such a financing tool to attract new development.
Opponents including the N.C. Libertarian Party, the National Federation for Independent Business, and two think tanks – the liberal Common Sense Foundation and the conservative John Locke Foundation – say the move takes away voters' power, forcing them instead to finance "corporate welfare."
Cary town councilman Michael Joyce has launched a Web site – www.noamend mentone.org – on which he calls the amendment a "smokescreen" that would deplete a municipality's general fund should the development district's future tax revenues fall short of projections and the government be left unable to pay back the bond.
In addition, critics say, development efforts would likely raise property valuations not only for new owners, but for those who owned homes and businesses in the area before the district was created – thus increasing their property taxes even if the tax rate remained stable.
To that, amendment supporters say that North Carolina would have some of the nation's most rigorous standards for use of self-financing bonds, and that no bond approved by the Local Government Commission in the past 50 years has defaulted.
"The commission is going to have some really stringent requirements for approving a bond. If there's a chance you're not going to be able to repay it, they're not going to let you do it," McHargue said. "They're not going to let that happen."
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