RALEIGH — A $700 million bond sale that will aid the N.C. Department of Transportation was approved at the Oct. 6 Council of State meeting.
The bonds approved by the Council of State are part of the $3 billion “Build NC” transportation bond package. The bond package, Senate Bill 758, was passed by the North Carolina General Assembly in June 2018.
The funds from the bonds will help the N.C. Department of Transportation (NCDOT) to pay for projects that have a regional impact.
Repayment of the Build NC Bonds will come from the Highway Trust Fund, which has three primary revenue sources: highway use tax, motor fuel excise tax, and title and registration fees.
House Speaker Tim Moore (R-Kings Mountain) issued a statement on the Council of State vote.
“These transportation funds will meet immediate road construction and repair needs in North Carolina communities, serving regions that have faced real uncertainty about the future of projects that are critical for their schools, businesses, and neighborhoods,” Moore said in a statement on Tuesday.
“We continue to prioritize infrastructure needs with powerful budget funding and critical reforms to help move North Carolina forward as our state continues its rapid growth,” said Moore.
Moore also cited the state’s “AAA” credit rating as a sign of the legislature’s reforms creating fiscal stability even amid the pandemic and that rating will “ensure low interest rates for the infrastructure bonds”
This action will greatly pave the way toward full recovery of many delayed projects across our state hampered by loss of revenue as we ready the state for the tremendous economy, we are working for you and your children’s future. I would like to say thank you to the council members for their support,” Rep. John Torbett (R-Gaston) said in a statement spanning several tweets.
Torbett serves as the Chairman of both the House Transportation Appropriations Committee and House Select Committee on Strategic Transportation Planning and Long Term Funding Solutions.
In his press release, Moore cited House Bill 77, which authorizes the state treasurer to issue $700 million in Build NC Bonds for Department use on currently existing projects. The measure passed with wide bipartisan support in both chambers and passed into law without Governor Cooper’s signature.
The bill restructured the Board of Transportation by increasing the board membership by one seat and giving lawmakers six appointments. Previously, all 19 voting members were chosen by the governor.
House Bill 77 also addressed concerns raised by N.C. State Auditor Beth Wood about the fiscal management of the NCDOT. The bill directed annual NCDOT state audits as well as balanced the department’s budget, certain reporting of fund balances and made modifications to the department’s cash balance thresholds.
An audit of the NCDOT released in May showed the NCDOT had far outspent its budget by $742 million.
During hearings held at the General Assembly following the audit’s release, Wood called out a lack of oversight and monitoring by the NCDOT’s chief engineer’s office and that the agency’s spending plan was not based on actual cost estimates of specific projects.
“When I look at the number — $742 million — I’m in shock,” said Sen. Warren Daniel (R-Burke) during hearings over the audit in June. Daniel went on to say that “Seven million dollars is a scandal. This is a federal government type of number.”
N.C. State Treasurer Dale Folwell said the bond issuance is important because it highlights that the NCDOT had been spending money they didn’t have to the “tune of $2 billion.”
That $2 billion refers to the NCDOT’s financial issues that started making headlines in Oct. 2019. At that time, it was announced that NCDOT had spent $7 billion dollars – which is $2 billion beyond the agency’s revenue stream of $5 billion. The NCDOT’s overspending pushed the department close to its statutorily required cash balance of between $282 million and $1 billion.
“What this announcement [of the bond] represents is a final coming together to the satisfaction of lawyers and people who actually issue bonds that the DOT has a better grip on where their revenue is going to come from, where their cash flow is going to come from and more importantly, what they are doing to rectify the situation that auditor Beth Wood exposed,” said Folwell.
A May audit revealed the NCDOT had projected $5.94 billion in spending but overspent by around $724 million. Budget shortfalls from overspending exacerbated by the lack of gas tax revenue receipts due to COVID-19 travel restrictions put in place by the governor caused rolling layoffs at the NCDOT in June.
A second audit in July alleged that the NDCOT had made improper salary adjustments. The audit said the salary adjustments exceeded the pilot program’s “two-percent-of-payroll-expense limit” and resulted in $39 million in overspending. There were also other problems cited such as salary irregularities and longevity pay issues.