Legality of  WHS bond issue debated

By Scott Nicholson

nicholson@wataugademocrat.com

While a petition circulates calling for a bond referendum to go before the public to pay for a new high school, no one is sure whether the petition would actually have any effect.

The petition, promoted by a group called Citizens for a Right to Vote, has been circulating for several weeks. The group cites a state statute which it says grants authority for the petition.

The cited statute says the petition must be signed by at least 10 percent of the total number of voters in the issuing unit, in this case Watauga County.

Watauga County finance director Doris Isaacs said the county had been discussing using a “certificate of participation” to fund the new high school.

Isaacs said such funding mechanisms had become more popular in the last decade, though the county has never funded a project through that method.  A school bond referendum in the early 1990s helped renovate and build several schools, but a referendum to build two new high schools failed in the 1980s.

David Lawrence, a local government specialist with the Institute of Government in Chapel Hill, said there were only two methods for funding such a major project. One is through bonds and the other is certificates of participations. Bonds typically require the county to set up its taxing authority as collateral to the lending institution.

With certificates of participation, Lawrence said, the security isn’t as sound for the lender, because the county would be offering the building and property as collateral instead of future tax revenues.

If the county defaults, the lender would take control of a school building that it would then have to generate money from.

Lawrence said certificates of participation are usually more expensive because of higher lending rates, as lending institutions see them as riskier investments. However, other factors come into play, such as the financial health of the county. He said certificates of participation are being used more often by local governments because they are required by statute to provide adequate educational facilities even though such choices might not be popular with the public.

“The security isn’t as good,” Lawrence said, with certificates of participation.  “The best security a county can give is its taxing power.”

Lawrence is familiar with Watauga’s high school funding situation and believes the petition is invalid. He said assuming a successful petition would force a bond referendum and put the decision in voters’ hands was “a misreading of the statute.”

Lawrence said he didn’t believe the county government would be bound to it and could still issue certificates of participation and that there was no mechanism to force the county to purchase bonds instead. He said voters had recourse by choosing their candidates in elections.

In July, the county commissioners announced a plan to buy 85 acres of aggregated properties in the Perkinsville area of Boone and build a new high school and possibly a public recreation facility. The property, site preparation and construction were estimated at $65 million total. The commissioners presented a plan at the meeting which they said would pay for the school without an additional tax increase.

The plan would carry forth a four-and-a-half cent tax increase adopted in 2005. This year, the increase was rolled back in the wake of revaluation to a revenue-neutral rate of just above three cents per $100 of property value.

The Watauga County Board of Elections issued a statement saying the State Board of Elections said “the citizenry could not place a general question on the ballot, but that it would have to come from the General Assembly.”

“However,” the local board wrote, “the petition that is currently circulating is a legitimate petition, pursuant to North Carolina General Statute 159-60, as it is a petition for a referendum on a bond issue, not a general question of government. A petition to place a bond referendum on a ballot is a legitimate petition.”

A phone call to the county attorney’s office was not returned as of press time. Members of Citizens For A Right To Vote who corresponded with the Watauga County Board of Elections regarding the petition did not respond to requests for comment.