North Carolina adds infra to primary ballot

As the US draws closer to naming the two candidates who will run for president in November, North Carolina is one of five states people will be watching closely on Tuesday to see which contenders win the most delegates.

Unlike the four other states, however – Florida, Ohio, Illinois and Missouri – North Carolina will also be deciding whether or not it will issue Connect NC, a $2 billion general obligation (GO) bond that will fund infrastructure.

“If approved, the voters' decision will signal a national shift toward GOs and away from appropriation-backed lease revenue bonds and, potentially, indicate how voters in the state may prioritise infrastructure funding,” Fitch Ratings said in a note on Monday.

With tax-supported debt of about $7.5 billion as of 30 June 2015, the state's debt levels will remain relatively low if the $2 billion bond is approved, the ratings agency believes.

The majority of the proceeds, however, will go towards capital improvements at the University of North Carolina and community college campuses. The remainder would fund water/wastewater projects, parks, the North Carolina Zoo and the National Guard and Department of Agriculture.

Those opposing the bond claim that none of the proceeds would go towards addressing North Carolina's pressing infrastructure needs as identified by the American Society of Civil Engineers (ASCE). According to the ASCE's report card for the state (the most recent was issued in 2013), the state's surface transportation, as well as its water/wastewater sector scored a C (mediocre), while dams and aviation were given a D, which indicates poor condition.

However, ASCE Fellow and Region 4 Governor Bob Cagle, told Infrastructure Investor that the ASCE North Carolina section supports the bond referendum.

“The university and community college projects are geared towards health and STEM [science, technology, engineering, mathematics] education,” he said. “You're looking at STEM facilities, engineering buildings, nursing school investments. These are things that will help improve quality of life in North Carolina,” he added, referring to one of the objectives included in the ASCE's vision statement.

“We look at this as a very positive step forward,” Cagle continued, noting that by investing in these educational facilities, the state is investing in its young people preparing future generations of engineers who are needed to build new infrastructure projects. “Is it the be-all, end-all answer? Absolutely not,” he responds, “but it's a good step in the right direction.”

According to Fitch, if North Carolina voters decide against the authorisation, it could pursue other infrastructure financing, such as revenue bond offerings, or P3s. However, based on the figures provided by the ASCE and which Fitch cites in its note – the state's water systems will need $10 billion over 10 years to comply with new regulations and replace aging systems, as well as $4 billion for the wastewater sector and $8 billion for education – the $2 billion bond can only be part of the solution.

The state has already employed the P3 model for the delivery of an infrastructure project. In April 2014, the North Carolina Department of Transportation (NCDOT) selected a private consortium to design, build, finance, operate and maintain the I-77 Express Lanes project. Once complete, the scheme will add 25.9 miles of dynamically priced, high-occupancy toll lanes to existing toll-free road capacity in order to alleviate traffic congestion in Charlotte's metropolitan area.