The Greensboro City Council is looking for more money to spend.
At the first session of the two-day City Council virtual retreat on Thursday, Feb. 11, the City Council discussed issuing $16 million in two-thirds bonds in 2022, putting a $120 million bond referendum on the ballot in November of this year, and to pay for all that by raising property taxes by 3 cents.
The City Council hasn’t issued two-thirds bonds in a while according to Mayor Nancy Vaughan, who said, “We don’t typically do two-thirds bonds.”
Deputy Director of Financial Services Marlene Druga said, “It’s been 20 years or so.”
The way it was discussed, it was as if the city had not issued two-thirds bonds due to an oversight.
However, the reason the city doesn’t issue two-thirds bonds is because it became a major campaign issue and those who campaigned against issuing two-thirds bonds were elected, which the City Council at the time considered a good indication that the voters of Greensboro didn’t like the idea of two-thirds bonds.
The way two-thirds bonds work is that the city can issue bonds for two-thirds of the principal paid off the previous year. For example, if the voters approve a bond referendum for $100 million, and the first year the city pays off $10 million of the principal, the City Council can – with no additional voter approval – issue bonds for two-thirds of that amount, if no additional bonds were sold.
So, by paying off $10 million one year the city could in the next year issue an additional $6.66 million in bonds with no additional voter approval. By paying off principal one year and issuing two-thirds bonds the next year the $100 million in bonds can be increased pretty much without limit, because the city can issue new two-thirds bonds by paying off the principal of current two-third bonds.
So, the reason the city has not issued two-thirds bonds in decades is because the message from the voters was that, when they voted for a $100 million bond, they expected the city to borrow $100 million – not $166 million or more over time.
Even if the City Council does not issue the $16 million in two-thirds bonds that it could in 2022, it is still considering a 3-cent tax increase to pay for the $126 million in bonds approved in 2016 and the $120 million bond it is considering for November 2021.
It is also worth noting that, so far, the city has spent less than half of the $126 million in bonds passed in 2016. So far, the city has spent or encumbered $59.6 million of the $126 million.