Charlotte: If bonds are passed, will there be a tax increase to pay?

CHARLOTTE, N.C. (WBTV) - Voters in the city of Charlotte have a lot to decide on when they go to the polls on election day, including $226 million in bond issues. The bonds address several important categories: housing, neighborhood improvements, and transportation.

We wanted to know if the bonds are passed, will there be a tax increase to pay? The answer is “no”, according to the City of Charlotte.

There’s a FAQ on the city’s website regarding the bonds and it says, “If the bond is approved, will my taxes go up? No. The financing costs for these bonds are included in the current city budget. No additional property tax increase will be required to pay for these bonds.”

But even though the city says there will be no additional property tax increase, the bond description on the ballot reads at the end: “…additional taxes may be levied in an amount sufficient to pay the principal of and interest on the bonds…”

Technically, that means the city could at some point levy a tax to pay for the bonds. According to Adam Bernstein, a consultant for a group supporting the bonds, the city didn’t write that part.

Bernstein says that’s language the state legislature requires municipalities to use in bond proposals. It’s basically a failsafe if something unforeseen were to happen down the road that would strain the budget and prevent the city from funding bonds through the current budget. For example, if there were a major disaster, such as a tornado or flooding, that would force the city to divert funds to recovery.

On the other hand, there are those who argue that we actually pay more taxes if bonds are passed. In a column for Forbes magazine, Mike McShane writes: “No tax increase bonds actually do increase your taxes. If the district didn’t issue new bonds after paying off the existing ones, your tax bill would go down. But it doesn’t. That is a tax increase.” James V. Shuls is with the Show-Me Institute, a conservative think-tank based in Missouri that monitors economic policies. He writes: “…a ‘no tax increase’ bond issue is a lot like a home equity loan. Your mortgage company can refinance your loan to give you access to cash right now. Often, they are able to do this while holding your payment the same but extending the length of your repayment. So instead of your payments ending in 10 years, they may be extended to 30 years. Whether you refinance or not, your monthly payment remains the same. Bonds work in much the same way and school districts can “refinance” to extend the term of the bond. They market this to the public as a “no tax increase” bond issue and claim that your payment will not go down or up whether the issue passes or not. Your tax payment will not change, but you will be paying for a longer period of time. There is no getting around it, paying the same rate for a longer period of time is a tax increase.”

Here’s the bottom line: Although the City of Charlotte says there won’t be a tax increase to pay for the bonds on the ballot, you’re still paying for them. The financing costs for the proposed bonds are included in the current Charlotte city budget. That budget is made up of money you provide through your taxes.

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