Two-third bonds are confusing, and many people don’t fully understand these special types of after-the-fact bonds. However, local government leaders across the state – not just in Guilford County – understand that financial vehicle very well, because it can be a useful tool when officials need to find money for projects that might not win voter approval.

All of this is why voters who approve large bond referendums need to understand exactly what they’re voting on.

The $2 billion in school bonds was presented as a $2 billion referendum – which it was. But what often doesn’t get emphasized is that the total repayment will be far higher. With interest, that $2 billion will likely cost taxpayers more than $3.2 billion over time, depending on interest rates.

But that’s only part of the story.

State law also allows counties to borrow additional money using what are called “two-thirds bonds.” After a county begins paying down its voter-approved debt, it can then borrow back up to two-thirds of the amount it paid off the previous year – without going back to voters.

And it can continue doing that time after time.

One way to understand two-thirds bonds is that they don’t provide a one-time, fixed pool of money like the county’s roughly $2 billion school bond package does. Instead, they create a recurring borrowing mechanism tied directly to how much existing debt is being retired.

For example, if Guilford County is paying down hundreds of millions of dollars in principal over time, that could translate into something on the order of $200 million in additional borrowing authority through two-thirds bonds. But here’s the thing: that $200 million doesn’t come all at once. It becomes available gradually, year by year, as older debt is paid off.

Just as important, two-thirds bonds don’t have a built-in end date unless the county chooses to stop using them.

If county leaders issue new two-thirds bonds whenever that authority becomes available, the county can remain in a rolling cycle where old debt is continually replaced with new debt. In that sense, while voters never approve an “infinite” bond all at once, the structure of the law allows borrowing to continue indefinitely.

Unlike the school bonds – which are a defined amount with a clear payoff period – two-thirds bond borrowing could, in practice, go on forever.

Over time, that means the total amount borrowed through this mechanism could become extremely large. Not because it happens all at once, but because it continues, time after time, as long as officials choose to keep using it.

The only way it stops is if the county decides to stop issuing new two-thirds bonds and allows the remaining debt to be fully paid off.

Hopefully, even this current group of spend-happy commissioners would never do something so extreme as to treat multibillion-dollar school bond referendums as a continuous line of, say, a century of revolving debt.  But the authority the Board of Commissioners has from that school bond debt is quite frightening – and county officials have made it clear that they intend to use some two-thirds bonds in the coming years, which is going to push that $3.2 billion school bond debt to even higher levels.

Who knows, the voters who checked yes on the last two school bond referendums that add up to $2 billion, may have unknowingly cast a vote for many many millions more.

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