05/05/04 — State delays city's annex funding plan

View Archive

State delays city's annex funding plan

By Barbara Arntsen
Published in News on May 5, 2004 2:11 PM

Goldsboro's plan to pay for annexing subdivisions north of the city is in limbo because of a potential lawsuit.

The city was scheduled to sell $7 million in general obligation bonds on May 11, but the state's Local Government Commission has told the city that the bonds may not be issued now, according to City Manager Richard Slozak.

"Because of the potential lawsuit, the Local Government Commission and the bond attorney spoke to me and said it was being pulled from the schedule," city Finance Director Richard Durham said. "They won't allow us to sell them now."

Durham explained that the Local Government Commission oversees debt issues for municipalities and won't allow a city to sell bonds and simply hold the money without a project under way.

That is a problem because the city's authority to issue the bonds expires next year.

"We have to have a signed contract or be close to starting the project," Durham said. "And we don't know when that will be."

In 1998, Goldsboro voters approved $28 million in sewer and street bonds. The sewer bonds passed by a margin of 5-1 and the street bonds by 6-1.

The city had planned to use the $22 million in sewer bonds to expand its wastewater treatment plant, make improvements in the sewage system and meet environmental regulations designed to reduce pollution in the Neuse River.

But the city opted not to issue the bonds for the improvements in the sewage system. Instead, it received a $15 million low-interest loan and a $3 million loan from the Clean Water Revolving Loan Fund. The interest rate on the state loans was about half what it would be from the sale of the city bonds.

The city then decided to use $7 million of the sewer bond money for extending sewer lines to the annexed area.

Durham said that the sewer bond proposal had been written broadly because at the time city officials did not know the specifics of the project. That is how bond money is often used for annexations.

But as long as the legal fight with residents of the recently annexed area continues, the city can't get the money from the bonds.

State law says that bonds must be issued within seven years of voter approval. That gives the city until 2005 to sell these bonds, unless it receives an extension from the state. The extension would be for no more than three additional years.

If the city can sell the bonds, it is set up on a 19-year repayment program.