I’ve wondered about this aspect of the latest 485 financing plan since it was announced. Does the state of North Carolina have the authority to guarantee the debt of private contractors? It would essentially turn the contractors into government sponsored enterprises a la Fannie Mae or Freddie Mac. And we all know how well that turned out.
Well turns out State Treasurer Janet Cowell has been wondering the same thing. She went public with her concerns, prompted a hurried alls clear from Bev Perdue’s office. But that is far from enough.
The state would be taking on final responsibility for $50m. worth of debt, at a minimum. Beyond that the relationships are unclear. Say Contractor A goes to get a $10m. loan from a bank for the project. Would the bank require anything from the state regarding plans for the state to repay the contractor for the loan? What interest rate would the contractor get from the bank? One could imagine 9 percent if the state remains out of the deal, maybe 6 percent if it becomes party to it. But if it does the latter, doesn’t that loan instantly count against the state’s overall debt burden?
See, nothing about this is easy or clear or even smart. Same as it ever was for 485.
Update: Fascinating. Look who dropped by WBT to issue additional support for the GSE approach. State Rep. Becky Carney — who has never faced a general election opponent — and former Matthews Mayor Lee Myers — serial defender of felon Jim Black. Both added some interesting info, but probably not in a the way they intended.
First, Carney confirms they is much squawking in the Triangle about Charlotte getting this “magic” mode of road building while Wake gets a toll road. So much for there being consensus in Raleigh to finish 485. There is not. Second, Myers let slip that the General Assembly will quite likely have to change state law to permit the GSE mode to advance. Gee, wonder how much that will cost state taxpayers? Be afraid people.