BRIEF HISTORY OF THE CURRENT BOND PROCESS
During the last few years, the Alamance-Burlington School System (ABSS) and Alamance Community College (ACC) assessed their current and future capital needs. On January 8, 2018, the Trustees of Alamance Community College passed a resolution to ask the Alamance County Board of Commissioners (Board) to consider approving a bond referendum for expansion and improvement of their facilities in the amount of $39.6 million dollars. On February 28, 2018, the ABSS Board of Education also passed a resolution requesting Commissioners to consider a bond referendum in the amount of $150 million dollars for school construction and repairs.
At the March 19, 2018 Commissioners’ meeting, the Board approved a resolution to move forward with the first step of the bond process. The resolution limited bond amounts not to exceed $150 million for ABSS and $39.6 million for ACC and set the maximum expected property tax impact to be 7.88 cents. The Commissioners then held a special meeting on March 26 where they were presented with a plan from County Management that provides options to adequately fund the proposed bond projects.
A public hearing for the bond referendum was held on Monday, April 16 at 7pm at Southern High School in Graham. That evening the Board approved the bond order authorizing up to $150 million dollars in school bonds to be used for ABSS needs. They also approved the bond order authorizing up to $39.6 million dollars in bonds to be used for ACC needs. The Board then voted in favor of a resolution that allows a special bond referendum for each of these bonds to be included on the November 6, 2018 ballot.
The Board also approved a resolution calling for a special advisory referendum pertaining to a one-quarter cent county sales and use tax. If approved by the voters in November, the Board specified the funds be used for education and training programs, including debt service on facilities.
BASIC BOND INFO
What is a bond?
A general obligation bond is long-term borrowing in which the County will pledge its full faith and credit (taxing power) to repay the debt over a specified term. A bond issue is one way that enables the County to borrow money to finance major capital projects which are new buildings or improvements to existing buildings that would extend their useful life for 10 years or more.
Why issue bonds?
Bond financing provides the most inexpensive source of borrowed cash to fund major projects that are above and beyond the scope of the annual operating budget. Bonds are issued to build major projects since most counties have few reserve funds set aside for major capital projects. Bonds also have a longer financing period than an installment loan.
What is a bond referendum?
A bond referendum gives voters the power to decide if the County should be authorized to issue general obligation bonds to finance new buildings and facility improvements.
Are bonds the only way to finance capital projects?
No, bonds are usually the least expensive way to fund capital projects, but the County can also use alternative sources of revenue or use traditional borrowing methods to cover the costs.
How is the debt on bonds repaid?
Increased property taxes can repay the debt on bonds or increased sales tax can be used if approved in a referendum. The repayment of bonds occurs in installments over time, so costs are shared by current and future taxpayers.
Are there additional financial implications?
In addition to actual costs associated with the payment of bonds, new facilities must have funds for staffing, maintenance, and operations. The increased costs to Alamance County have been estimated as follows:
• ABSS operating costs for the new high school are estimated to be $1.5 million annually
• ACC operating costs for new facilities are estimated to be $421,500.00 annually
What is the procedure for a bond issue?
As of April 16, 2018, the first three steps have been completed.
1. The Commissioners set priorities based on citizen concerns and recommendations from school entities. They then select bond issues and amounts.
2. The County then files an application with the NC Local Government Commission for the authority to issue bonds.
3. The Commissioners hold a public hearing to receive citizen input on the proposal to issue bonds. Based on citizen comments, Commissioners may remove items or lower dollar amounts.
4. A bond referendum is held for citizens to vote and decide on each of the specific issues on the bond ballot. If the voters reject a bond issue, the project may not be funded as planned. If voters approve one or both of the bond referendums in November of 2018, the County can move forward with funding proposed projects.
Is it possible that the projects identified for the referendum might change?
Yes, Commissioners have the authority to make changes to the projects that will be funded with referendum bonds as long as those changes conform to the description in the bond orders and are within the authorized dollar amounts.
Can I vote for some bond issues but not others?
Yes, there will be two separate bond issues. According to North Carolina General Statutes, they will appear as two separate questions on the ballot.
Who will administer the bonds?
The Board of County Commissioners will administer all bonds. Bond proceeds are “public monies” and must be administered in the same manner as other county funds. County Commissioners are required by North Carolina General Statutes to adopt project budgets authorizing the expenditure of the bond proceeds. Funds cannot be spent on projects outside of the Bond order not approved by the County Commissioners.
How much would the County issue in bonds?
If citizens vote in favor of the two bond financing questions on the November ballot, the county will have the authority to issue up to $189.6 million dollars in general obligation (G.O.) bonds. Although the county is not required to issue all $189.6 million in bonds, this is the maximum allowable amount.
What happens if the bonds do not pass?
The Board of Commissioners still have the authority to approve payment for capital needs without the issuance of bonds. While bonds are the county’s most inexpensive option for borrowing money, the Board could decide to increase revenue to pay for projects or use other traditional borrowing methods.
BASIC SALES TAX INFO
What is the Article 46 One-Quarter Cent (¼ cent) County Sales and Use tax? Counties have the option to increase the sales tax by one-quarter of a penny, provided the public approves via a referendum.
How much additional sales tax will be generated?
The additional one-quarter cent sales and use tax will be one penny for every four-dollar purchase. Alamance County Government estimates, based on current sales tax figures, that this Article 46 Sales and Use Tax would generate approximately $4.8 million dollars annually. The additional quarter cent sales tax would go to the county (not state or cities) to be used for education and training, including debt service on facilities.
What is the current tax rate for Alamance County?
The current sales tax rate for Alamance County is 6.75% or six and three quarters of a cent for a $1.00 purchase. Sales Tax is collected by the vendor and remitted to the NC Department of Revenue who is responsible for distributing sales tax revenue to each county and municipality. Of the 6.75% sales tax, 4.75% is held by the State and 2.00% is distributed to the County and cities when applicable. If passed by voters, the new rate would be 7%.
Are there items exempt from the sales tax?
The new Article 46 one-quarter cent sales tax will apply to purchases on items such as clothing, household supplies, electronics as well as prepared food and drinks (restaurant or stores). Gas purchases and unprepared food (i.e. groceries) are exempt from the tax. For a full listing, see North Carolina General Statute 105-164.13.
How is sales tax different from property tax?
Property taxes are calculated based on the value of the property owned and are only paid by those who own property in Alamance County. Sales tax is calculated by the goods and services purchased and are paid by anyone buying in Alamance County including tourists and visitors.
Will the Article 46 Sales Tax be used to pay back bond debt?
While state law does not restrict how Article 46 sales tax is used, the County Commissioners approved a resolution on April 16, 2018 that directs the funds be used for education and training, including debt service on facilities.
If the sales tax passes, does this mean property taxes will not be increased?
Based on current estimates, a quarter cent sales tax could reduce a property tax increase by 3.62 cents.