It’s no secret that North Carolinians will elect a governor and a goodly number of other candidates next month. But few of those voters know they’ll also be asked to weigh in on three proposed amendments to the state constitution.
Although these have mostly flown beneath the radar, they could have significant effects on communities across the state. Here’s the lowdown on the trio, in the order in which they’ll appear on the ballot.
Amendment I would grant local governments the authority to issue “self-financing” bonds (also known as “tax-increment financing”) to pay for public improvements associated with private development projects within a defined development district created by the local government. Money from these bonds could be used for such local improvements as water and sewer service, redeveloping abandoned industrial areas, and developing industrial or commercial land, airports, museums or parking facilities.
What’s different about self-financing bonds is that the money to pay them off comes not from general tax revenues but from increased property-tax revenues resulting from the very improvements funded by the bonds. What’s controversial about them is that, unlike general-obligation bonds, they don’t require voter approval.
Amendment One has won endorsements from a lengthy list of organizations: the N.C. League of Municipalities, the N.C. Association of County Commissioners, a host of individual cities and counties (including both Asheville and Buncombe), and such business-oriented groups as the N.C. Association of REALTORS, the N.C. Economic Developers Association and the Asheville Area Chamber of Commerce.
Chamber President/CEO Rick Lutovsky says his organization went on record in favor of this proposal about two years ago, inspired by an intercity visit the Chamber organized in 2002. Fifty-five local people — including most Asheville City Council members and Buncombe County commissioners — traveled to Portland, Ore., in search of good ideas. There, they learned about such projects as the $600 million worth of new housing constructed in that city’s central business district. About $500 million of it was funded by self-financing bonds; the rest was privately funded.
“None of it would have been possible without this vehicle,” said Lutovsky. He’d known about tax-increment financing from time spent in Illinois during the ’80s, noted Lutovsky, adding that 48 states now allow this economic-development tool. North Carolina and Arizona are the lone exceptions.
Not everyone supports this initiative, however. The Raleigh-based John Locke Foundation, a well-known conservative think tank, has been reminding voters that similar N.C. amendments were defeated in 1982 and 1993. John Locke columnist Chad Adams calls the bonds “simply another way to raise government debt without specific voter approval.” He cites a recent Iowa State University study that found “virtually no evidence of broad economic or social benefits in light of the costs,” according to researcher David Swensen.
Adams also questions the potential ramifications for taxpayers. “You are commingling the success of one or more companies with paying back taxpayer debt,” he argues. “What it means is that if the companies that benefit from [the bonds] go under, the local government is still responsible for the bond payment.”
The N.C. Budget & Tax Center cites both advantages and disadvantages for this form of financing but maintains that the amendment includes overly broad definitions and weak reporting requirements. In the past, notes the nonprofit, the increased tax revenues associated with such development were “used to pay for the normal operating expenses” (such as police and fire protection, wastewater treatment, roads and schools). But if those revenues are used to pay off the bonds, other funding must be found to cover the indirect costs.
Sharing the wealth
Amendment II is essentially an attempt to tidy up a long-running situation involving civil fines and forfeitures. The state constitution specifies that any such moneys collected by state agencies must be delivered to the public schools in the county where the fines are levied.
The amendment would require that these collections be distributed statewide on a per-pupil basis. The amendment’s sponsor, Sen. Walter Dalton of District 46 (Cleveland/Rutherford), explained the rationale this way: “It’s not always fair — if you have a polluting industry that’s fined, oftentimes the water that’s polluted goes downstream and affects the people downstream more than it does at the site of the pollution. Same thing with air.”
Eight years ago, said Dalton, the General Assemby established a school technology fund to collect such fines and redistribute them proportionately. “The courts held that was improper, that [the funds] would have to go back to the county in which they derived. So that’s the reason we need the constitutional amendment,” he said. “If it passes, it’s fully anticipated [these moneys] will go back into the school fund to be distributed across the state.”
At the local level, however, Buncombe County Schools Communication Director Stan Alleyne voiced a different perspective. “We feel that the process is OK the way it is now. If money is collected here, we feel that money should stay here. We feel this is another example of the state taking away local control.”
Terms for magistrates
The third proposed amendment would change the length of service for magistrates, who now serve two-year stints by appointment. The amendment would leave initial appointments at two years, but reappointments would be for four-year terms.
Magistrates are judicial officers of the District Court who have jurisdiction over certain elements of both criminal and civil cases. Historically, they assumed many of the duties formerly assigned to a justice of the peace (an office that North Carolina phased out in 1968). According to the N.C. Magistrates Association, these officials represent the “court of the people,” and they’re not required to hold a law degree. Magistrates may: handle misdemeanors or infractions involving alcohol, issue search or arrest warrants, perform marriages, issue domestic-violence protection orders, conduct bond hearings, issue subpoenas, decide small-claims cases and perform a host of other duties.
There are 14 appointed magistrates in Buncombe County’s Judicial District 28. Bob Christy, the clerk of court for District 28, explains that because the position of magistrate is established by the state constitution, a full-blown constitutional amendment is required to change the terms. The Superior Court clerk submits at least two names per position to the resident Superior Court judge, who then makes the appointments. Once appointed, however, magistrates serve under the supervision of the chief District Court judge.
“It’s the most complicated system you’ve seen in your life,” said Christy. And though he offered no opinion one way or the other on the amendment, he did note that appointed officials, like elected ones, hold their position for the duration of the term. “Nobody can fire them,” he noted.
What to look for
Here’s how the three proposed amendments to the state constitution will appear on the ballot:
I. Constitutional amendment to promote local economic and community development projects by (i) permitting the General Assembly to enact general laws giving counties, cities, and towns the power to finance public improvements associated with qualified private economic and community improvements within development districts, as long as the financing is secured by the additional tax revenues resulting from the enhanced property value within the development district and is not secured by a pledge of the local government’s faith and credit or general taxing authority, which financing is not subject to a referendum; and (ii) permitting the owners of property in the development district to agree to a minimum tax value for their property, which is binding on future owners as long as the development district is in existence.
II. Constitutional amendment to provide that the General Assembly may place the clear proceeds of civil penalties, civil forfeitures, and civil fines collected by a State agency in a State fund to be used exclusively for maintaining free public schools.
III. Constitutional amendment to provide for the first term of office for magistrates of the General Court of Justice to be two years and for subsequent terms to be four years.