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2007-11-14 / Opinions

Road bond proposal presents problems

Dear Editor,

One proposal by the Mark Tubbs campaign [Oct. 24] deserves much closer scrutiny than it has received thus far: "reduce the county budget by $50 million and leverage it for $500 million in bonds for transportation."

There are a number of problems with this proposal. First, while there is no doubt the county budget deserves much closer scrutiny, reducing it in this manner and for this purpose also reduces the county's borrowing capacity. Currently, the county policy is to limit borrowing to no more than 10 percent of expenditures. Reducing the budget by $50 million has the effect of also reducing borrowing capacity by $5 million.

Second, this type of leveraging is more commonly associated with revenue bonds, where there is a dedicated revenue source that is restricted to the costs associated with issuing and repaying the bonds, such as tolls, wastewater fees and the like. This proposal mixes, or should I say confuses, general obligation and revenue bond financing. General obligation (G.O.) bonds are issued under the full faith and credit of the county. The repayment of G.O. bonds comes from unrestricted general fund revenues, not restricted revenues associated with the issuance of a revenue bond.

Third, restricting general fund revenues to repay this type of financing would limit the county's ability to respond to emergencies and the board's ability to adjust property tax rates resulting from increased assessments, as the revenues necessary to repay these bonds would be "restricted," limiting their use to the repayment of the bonds.

Fourth, it does not appear to be permitted in either the Virginia Constitution or general law embodied in the Virginia Code. As a "Dillon Rule" state, local authorities are derived from the General Assembly. Where such authority is not stated, it does not exist.

Fifth, the board may approve revenue bonds by resolution. G.O. bonds must be approved by the citizens of Chesterfield County in a referendum. A proposal such as this would give the board the authority to issue another $500 million in bonds, raising the outstanding indebtedness to over $1 billion (per 2006 CAFR) with citizen input limited to a public hearing as opposed to a referendum.

There are other sources of financing for transportation purposes that have been employed by other, fast-growing counties. For example, Prince William obtained funds from the Virginia Resource Authority (VRA) to construct the Prince William Parkway. The VRA is just one potential source of revenue for Chesterfield County to consider.

Revenue bonds, properly structured with a dedicated, restricted source of revenue, may be one of the many options available to Chesterfield County to address its transportation needs, particularly the extension of the Powhite Parkway. Funding to the degree embodied in this proposal, however, deserves more thoughtful consideration than it has been given thus far and should be submitted to the voters for approval.

What may make a good "sound bite" or quote in a newspaper, after full evaluation, may not be the wisest course of action; or, as in this instance, may not even be permitted in the Virginia Constitution or legal under existing Virginia law.

Bob Herndon

Chesterfield

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