The North Carolina Local Government Commission recently declined to approve Cabarrus County’s bond requests totaling $228 million. This decision came as a surprise, especially considering that the panel’s staff had recommended approval. However, some members of the commission raised concerns about the county’s use of bond anticipation notes and questioned whether the bonds should undergo a voter referendum before receiving approval.
One of the main sticking points for some commission members was the county’s reliance on bond anticipation notes. They argued that the county should only take on debt for projects once the final costs are determined. Cabarrus County requested $186 million in 20-year limited obligation bonds to replace variable rate 2022B bond anticipation notes. Additionally, they sought $42 million to purchase a building for a human services center and land for a regional behavioral health center.
It is worth noting that Cabarrus County’s limited obligation bonds are highly rated, with Aa1 from Moody’s Ratings and AA-plus from S&P Global Ratings and Fitch Ratings. Despite these solid ratings, Commission Chairman Dale Folwell expressed concern about the county’s use of bond anticipation notes. He worried that the county had incurred additional costs due to rising interest rates and construction costs since 2022. Folwell advocated for the bonds to be presented as general obligation bonds to allow voters to weigh in on the decision.
County Manager Mike Downs defended the county’s approach, arguing that using bond anticipation notes was efficient, as it allowed them to issue bonds multiple times a year. He also pointed out that other major issuers in the state employ a similar financing strategy, a claim that was disputed by Folwell. Jessica Holmes, a board commission member, expressed skepticism about the use of limited obligation bonds for the county’s proposed projects, highlighting a lack of precedent in similar situations.
If the $186 million bond request were not approved, Cabarrus County would have to use general fund money to repay the bond anticipation notes within five years. This could potentially strain the county’s finances and lead to budgetary challenges in the future. The commission staff pledged to provide guidance to the county on alternative financing options, signaling a need for a more sustainable and transparent approach to funding county projects.
Despite the setback, county officials are actively working with the Local Government Commission to address the concerns raised and determine a path forward for their bond requests. The county remains optimistic about the possibility of resolving these issues and securing approval for their financing initiatives. In the meantime, the commission also approved $226 million in revenue bonds for three municipalities in the Research Triangle Region, underscoring the complex and competitive nature of municipal financing in North Carolina.