FAQs Bond Referendum Process –
Frequently Asked Questions
What is a bond referendum? above and beyond the scope of the annual operating budget and are for facilities/ A bond referendum is a voting process that gives infrastructure that will be used for many years in voters the power to decide if a municipality the future. should be authorized to raise funds through the sale of bonds, for specific purposes. A general The use of bonds makes capital projects more obligation bond (GO Bond) is long-term affordable and put less stress on the Town's borrowing in which a municipality pledges its full budget. By using bonds to finance these projects, faith and credit (taxing power) to repay the debt we can pay for them in installments over time over a specified term. GO Bonds are the least rather than needing all the money at the outset costly financing option available to the Town to and yield better interest rates depending on an finance major capital projects. agency’s credit ratings.
What authorities provide for bond What is the purpose of a bond referenda and general obligation referendum? bonds? The bond referendum asks voters whether they authorize local governments to use GO Bonds as a In accordance with state statutes, the issuance of financing tool for a general category of projects up GO Bonds by the Town for public improvements to an amount specified on a ballot. Under North must be authorized by the North Carolina Local Carolina law, a local government holding a Government Commission (LGC) and by voters in referendum for issuing GO Bonds must identify a referendum. Voter approval authorizes a these general categories of capital projects for maximum amount, by purpose (such as public which bond proceeds may be used. At the time, safety, parks and recreation, streets and the categories may identify specific projects that sidewalks), and authorizes the levy of any are intended to be funded by the bond proceeds – necessary property tax to pay principal and the “bond package.” However, they may change interest on the bonds. over time simply due to the lengthy process involved with identifying, designing, and Why issue bonds? implementing projects, as well as the lack of detailed cost and other project information available at the time of the bond referendum. There are three primary ways to finance the Ultimately, the projects constructed must fall within construction of major capital projects - use current that general category and purpose identified at the revenues, capital reserve funds (setting aside time of authorization. money over time), and the issuance of debt
(bonds or installment financing). Bond financing is often used for major capital projects that are
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FAQs
When are bond referenda held? How long does the Town have to issue the GO Bonds if the referenda The Town may only hold a bond referendum on pass? one of the following dates, in order to encourage the highest possible voter turnout: Once GO Bonds are authorized by voters in a • Referendums may be held for municipalities referendum, the Town may issue them at any time only at time of even-year primary and general during the seven-year authorization period (can be elections or at the time of that municipality’s extended to by three years before expiration). Pay general election in odd-number years. back of bonds occur within 20 years after funds (footnote: 2014 GS amendment GS 163-287) are borrowed. • Morrisville plans to hold a bond referendum with the November 2, 2021 election. When are bonds issued? What is the procedure for a bond referendum? The schedule and amount of bonds issued is dependent upon project timetables, economic
conditions and resources, including tax increases, • The Town Council sets priorities based on needed to fund capital projects and related citizen concerns and selects bond issue operating costs. The Town Council may move categories such as the ones currently forward or delay bond issues based on these proposed: Streets & Sidewalks, Public Safety factors. and Parks & Recreation. Related purposes
may be combined, but unrelated purposes may not be combined. What happens if voters don’t • The Town then files an application with the NC Local Government Commission for the approve the bonds? authority to issue bonds. • A public hearing to receive citizen input on the If bonds do not pass, some projects may be proposal to issue bonds is held. Based on postponed or eliminated. If the projects are citizen comments, Council may remove items critical, then Town Council could decide to fund or lower dollar amounts. them through alternative means to meet the • A bond referendum is held for citizens to vote need. and decide on each of the specific bond issue purposes on the bond ballot. If the voters How is the debt on bonds repaid? reject a bond issue, the project cannot be funded using GO Bonds. If the voters approve a bond issue, the Town can move forward The repayment of bonds is spread out over a with borrowing funds to finance. number of years, so costs are shared by current and future taxpayers. This provides for more equitable funding by all taxpayers who will benefit from the bond projects. When bonds are issued, taxes may be increased for property owners to pay the debt.
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