LAURINBURG — UNC School of Government professor Bob Joyce said residents are unable to force a referendum on the limited obligation bond that Scotland County Schools is pursuing to finance the final step in school consolidation.
Despite that, Laurinburg Mayor Matthew Block insisted that commissioners had participated in underhanded dealings. He said a referendum would that would allow the county to get the lowest interest rate on the loan.
“What it confirms is that the county commissioners are choosing a way around correct government,” Block said. “There’s enough difference and division in this community about whether or not this $25 million school is a good idea and that the statutes does give them the authority to hold a referendum.”
Law of referendums
Joyce told the audience of about 40 that he was there to explain the “law of referendums” in North Carolina and how it applied to the issues raised in Scotland County. He explained that the School of Government was an impartial and nonpolitical body that worked with local government to help ensure that local leaders followed the law.
He spent part of the time rehashing ideas that have been discussed on both sides and bolstering the county’s claim that it does not need a referendum to finance the new school.
“The rule of referendums in North Carolina is, no referendum may be held unless there is a specific authorization in law allowing it to be held,” Joyce said.
He gave an example of how the rule worked. In 1969, a county in North Carolina had an ambulance service that encountered local opposition. The county commissioners wanted to hold a referendum to decide whether or not to continue to have a county ambulance service. The North Carolina Attorney General applied the rule of referendums and determined that no referendum could be allowed.
“The attorney general told that county, ‘No. No matter how good an idea you may think it would be for there to be a referendum on this question, you just can’t do it,” Joyce said.
The rule, according to Joyce, applies to many types of referendums, including borrowing money.
“If a county wishes to have a referendum on borrowing money in a particular situation it must be able to point to an authorization in law to authorize that referendum,” Joyce said. “What if a county wants to borrow money for a particular circumstance like school construction? May it hold a referendum on the question of whether to borrow money for that particular project? The answer is, yes, but only in one specified situation. In all other situations it may not hold such a referendum.”
The one situation is if the county is issuing a general obligation bond. GO bonds are issued when a county or municipality is pledging “the full faith and credit of the county to repay the bond” and raising taxes in order to cover the payments. If a GO bond is sought counties are required to put it to a vote under state law.
The exception is that a county may issue another general obligation without voting if it is taking on a debt less than two thirds of the debt it has retired, or paid off, on current GO bonds.
“But there is a provision in law that says in that circumstance where you’re doing what are called these two-thirds bonds you can do it without a referendum except there is a statute GS 159-60 that says… people in the county might think that’s not a good idea. They can get up a petition and if 10 percent of voters in the county sign the petition, that forces a referendum on these new general obligation bonds,” Joyce said stressing the words new general obligation bonds.
Joyce explained that a county might take on a limited obligation bond, or instalment financing, and not have a referendum.
“You look to the law on installment financing and there is no authorization,” he said. “There is simply no authorization for referendum with that kind of borrowing, so what that means is according to the rule of referendums, without the authorization, you cannot have the referendum.”
Joyce told listeners that it didn’t matter how much people felt like it was a good idea to have a vote it was “not an option.” Revenue bonds, special obligation bonds also fell under the umbrella of bonds that are not required to be voted on.
He addressed the idea that the county is trying to subvert the will of the people.
“My understanding is that you all are in the process of installment financing limited obligation bonds…for school construction and some folks would like to have a referendum,” Joyce said. “May the county have a referendum? The answer is, no. It’s not that the commissioners don’t want to have a referendum or the commissioners are trying to duck a referendum it’s that the law prohibits a referendum.”
He reiterated the fact that the rule of referendums did not apply to limited obligation bonds because it was not giving taxing authority.
Joyce also upheld the commissioner’s assertions that even if a referendum were held on a GO bond, the issue would only be about whether to allow taxing authority to issue a bond and not whether or not to build a school.
The session was then opened to questions from the commissioners, press and public.
Commissioner Carol McCall asked if it were possible to take the money that had been earmarked for the school and spend it on other projects rather than building a school as some in the public have claimed. Joyce was not familiar with the situation and could not answer her question.
Joyce explained that whether a referendum was needed on a given issue came down to whether the General Assembly has set it aside as a requirement and it was done as a means not to undermine local governments.
“When we elect our representatives onto that county commission, onto city council, onto the school board, we give them the power to make laws on our behalf. If we don’t like the laws that they pass, the option is to vote for somebody else next time,” he said.
The laws on referendums differ from state to state at the discretion of each legislature.
Block spoke up to challenge Joyce’s and the School of Government’s interpretation of the laws.
He wanted to know why a county would issue a limited obligation bond, which he maintains would have a higher interest rate, than a general obligation bond.
Joyce responded that the question was one he could not answer. Block persisted twice more rephrasing the question each time. Joyce still did not answer.
County Manager Kevin Patterson said that an interest rate on a GO bond might be lower currently, that may not be the case in the future.
“If you could choose when you go GO bond and when you go installment and you compare them at the same time, yes, a GO bond is better,” Patterson said. “However, we can go to the LGC and do an installment bond now. Interest rates are lower.”
Block also talked about his email to state Sen. Tom McInnis whose office told Block that he could petition to force a vote under GS 159 – 60 saying that the statute “makes no reference of what type of bond.”
“It just says a petition demanding a bond order, now it’s in a chapter that discusses general obligation bonds, but nowhere does it say that this is all referring to general obligation bonds,” Block said.
Joyce said the statue was difficult to understand.
“But I can tell you from … those folks who know this stuff and know it in a way that I don’t, that this statue does not authorize any kind of petition with respect to bonds except the two thirds general obligation bond,” Joyce said.
Block challenged Joyce demanding to know with whom he had consulted and then asked if there was case law to support the School of Government’s interpretation.
Block continued to push his point saying that although the county was issuing a limited obligation bond, it was still placing the tax burden on the residents because the payments would have to be met regardless of whether or not the property was being used as collateral.
“That’s why I think there’s the theoretical justification for saying that any type of bond should be able to be petitioned,” he said.
Block maintains that a majority of counties in the state have used GO bonds to finance other building projects.
An analysis of debt from the Local Government Commission of the state’s 100 counties 55 had issued general obligation bonds while 99 had at least some kind of installment financing. In counties with a population between 25,000 and 49,999, 10 had issued GO bondsand 21 had installment financing projects.
McCall called the meeting “worthwhile” and was pleased with how the information was accessible.
“He presented very clear concise information and he answered our questions to the best of his area of expertise. I’m satisfied with how this meeting went,” she said.
Reach Beth Lawrence 910-506-3169