USE OF AFFORDABLE HOUSING BOND FUNDS IN CHAPEL HILL
How are the affordable housing capital projects for the referendum selected? Is there a plan?
As with previous bond orders, specific projects have not yet been submitted to the Town for review or approval prior to approval of the bond referendum. The Council will establish a schedule for issuing requests for proposals, evaluating and approving potential projects.
On February 21, 2018, the Council approved an Affordable Housing Investment Plan to guide our efforts in meeting the Town affordable housing goals. The five-year goals for the investment plan include development of 400 new affordable housing units and preservation of 300 units.
The priorities of the plan, as described below, will guide the selection of projects. The Town Council has final approval of all affordable housing projects.
Priority Areas for Capital Investment
- Preservation & Development of Rental and Homeownership Housing
- Eligible Activities
- a. Acquisition
- b. Home Repairs
- c. New Construction
- Rental housing serving households less than 60% AMI
- Rental serving vulnerable populations
- Long-term affordability
- Located near transit services
- High leverage from other sources
Are there projects in mind for use of bond funds?
Based on the guidance provided by the Investment Strategy and priority areas, there are preliminary ideas for use of bond funds. Here, you will find more information about potential projects. The Town has identified projects on Town-owned land that would create mixed-income housing communities. The sites identified include several of the Town’s public housing sites and 2200 Homestead Road. These projects are in the planning stages and it is anticipated that the 2018 AH referendum bonds would fund a major portion of the cost associated with these projects. We also anticipate selecting projects to be developed by outside partners. Town has surveyed needs the needs of our current housing providers and they have preliminarily identified potential projects. The final decision on all projects will be based on an evaluation process and approval by the Town Council.
Is it possible that the potential projects for the referendum might change?
The Town Council has the authority to make changes to the projects that will be funded with referendum bonds as long as those changes conform to the description in the bond order and are within the authorized dollar amounts.
What is the Town doing now to support affordable housing in the community
The Town is committed to monitoring our performance and communicating about our progress with achieving the Council’s affordable housing goals. Please see our Affordable Housing Quarterly Report and interactive dashboard tool to find out more about recent initiatives. Also, please visit our affordable housing website for more information about our initiatives.
General Questions About Bonds
What is a Bond Referendum?
The issuance of long-term debt supported by the full faith and credit of the Town requires the approval of residents through a public vote or “referendum.” Through this process residents decide whether the Town should use General Obligation Bonds supported by the Town’s taxing power to finance certain public improvements.
What is a “bond order”?
General Obligation Bonds are authorized through the adoption of “bond orders.” Bond orders specify what purpose bonds can be used for and the total amount that can be issued. Each bond order covers a specific category of public improvement and each bond order is voted on individually. The Affordable Housing Bond referendum has just one bond order in the maximum amount of $10 million. The text of the Affordable Housing Bond Order is as follows:
BOND ORDER AUTHORIZING THE ISSUANCE OF GENERAL OBLIGATION BONDS FOR HOUSING FOR PERSONS OF LOW AND MODERATE INCOME IN THE MAXIMUM AMOUNT OF $10,000,000, SUBJECT TO VOTER APPROVAL
The Town Council of the Town of Chapel Hill, North Carolina has stated its proposal to issue general obligation bonds to pay capital costs of providing housing for persons of low and moderate income.
The Town has applied to the North Carolina Local Government Commission for its approval of those bonds, and the Commission has accepted the Town’s application.
BE IT ORDERED by the Town Council of the Town of Chapel Hill, North Carolina, as follows:
1. There are hereby ordered to be issued general obligation bonds of the Town to pay capital costs of providing housing for persons of low and moderate income, together with related financing and other necessary or incidental costs.
2. The maximum aggregate principal amount of the bonds issued for such purpose will be $10,000,000.
3. Taxes will be levied in an amount sufficient to pay the principal of and interest on the bonds so issued.
4. A sworn statement of debt prepared by the Town’s Finance Officer has been filed with the Town Clerk and is open to public inspection.
5. This Bond Order will take effect when approved by the Town’s voters in the manner provided by law.
Will a tax increase be needed to repay the bonds?
Yes, our projections show that a tax increase of approximately 1 penny per $100 of valuation will be needed to repay the bonds. The existing capacity in the Debt Management Fund will be needed execute the existing capital plan. In order to accommodate both the affordable housing debt and debt needed for other major projects, such as the Municipal Services Center, additional revenue will be needed in the Debt management Fund.
Timing of the tax increase will be dependent on when the bonds are issued. It is likely that this will be in two or more installments over the next five years.
What is the Debt Management Fund?
Town Council created the Town’s Debt Management Fund in 2009 as a funding source for governmental debt service payments. A portion of the property tax (8.2 cents per $100 value) is dedicated to the Debt Management Fund. As the Town pays off existing debt, additional capacity is created in the fund to pay new debt. However, the Town’s planned capital projects will use all of the existing capacity in the Debt Fund through FY25.
When is the referendum?
The referendum is scheduled for November 6, 2018. The last day to register to vote in the referendum under the election laws now in effect is Friday, October 12, 2018. For more information concerning procedures for the referendum, including information on voter registration, polling places and voting hours, contact the Orange County Boards of Elections at 919/245-2350 (or by email to email@example.com). For Durham County residents of Chapel Hill, contact the Durham County Board of Elections at 919/560-0691 (or by email to firstname.lastname@example.org).
When will the bonds be issued?
If the voters approve the bonds, the Town has seven years from the date of the election to issue the bonds. The Local Government Commission can approve a three-year extension of issuance authority if requested by the Town. We anticipate issuing the bonds in at least two installments over a period of about 5 years. It is likely that we will issue the first installment within one year of the referendum. The Town Council must approve the issuance of bonds approved in the referendum in a separate action. At that time staff will provide detailed information regarding the expected timing and costs of individual projects being funded through the issuance of the bonds.
What will the Ballot look like?
Voters will have the opportunity to vote on the bond order that describes what the bonds can be used for and the maximum amount that can be issued. In addition, the ballot question states the potential for additional taxes to be levied to pay for the bonds. As described above our calculations indicate that a 1 penny tax increase will be needed to repay the affordable housing bonds. The ballot question for the Affordable Housing Bonds will be as follows:
TOWN OF CHAPEL HILL
AFFORDABLE HOUSING BONDS
Shall the order authorizing Chapel Hill general obligation bonds in the maximum amount of $ 10,000,000 plus interest to pay capital costs of providing housing for persons of low and moderate income and paying related costs, and providing that additional taxes may be levied in an amount sufficient to pay the principal of and interest on the bonds, as adopted by the Chapel Hill Town Council on May 23, 2018, be approved?
Why are we planning on using voter approved (General Obligation) debt to pay for these projects?
Voter approved general obligation bonds, backed by the full faith and credit of the Town, generally provide the lowest cost of borrowing for the Town. While General Obligation bonds are not as flexible as other financing methods, due to the lead time needed to organize and execute a public vote, they also give an opportunity for voters to confirm that the Town’s plans for public improvements reflect community priorities.
Why borrow money for capital projects?
There are three major reasons for the Town to use debt financing for major capital projects.
- Debt financing allows the Town to spread costs over a long (10-20 years) period of time eliminating spikes in the Town’s budget that could create the need for temporary tax increases whenever the Town undertook a major capital project. Using debt to even out the spikes and valleys in our capital costs helps to match the Towns revenues with our capital costs.
- By spreading the payments for public improvements over time, it is more likely that the people paying for the improvements (taxpayers) are the same people that will enjoy the benefits of those improvements. If the Town were to pay for major public improvements from funds accumulated over time, essentially saving up funds over multiple years, many the taxpayers who paid for the improvements may not be around to enjoy the benefits of those improvements.
- The Town’s cost of borrowing is very low because the Town’s credit rating is the highest available to municipalities (triple A). Also, most of the Town’s bonds are tax-exempt. In other words the holders of the Town’s bonds do not pay taxes on the interest payments from the bonds and therefore are willing to accept a much lower interest rate (rate that the Town pays) when buying the Town’s bonds.
When can I vote on the bond referendum?
The election will take place on November 6, and early voting begins on October 17. The last day to register to vote is October 12. For more information about voting, contact the Orange County Boards of Elections at 919-245-2350 or email@example.com. For Durham County residents of Chapel Hill, contact the Durham County Board of Elections at 919-560-0691 or firstname.lastname@example.org.
When was the last Bond Referendum in Chapel Hill?
The last bond referendum was held in 2015 and included the following bond issues (ballot questions):
Sidewalks & Streets: $ 16.2 million
Trails & Greenways: 5.0 million
Recreation Facilities: 8.0 million
Solid Waste Facilities: 5.2 million
Stormwater Improvements: 5.9 million
Total: $ 40.3 million
All five ballot questions were approved.