A creative public infrastructure funding solution

by Tom Campbell, Executive Producer and Moderator, NC SPIN, April 23, 2015.

In our “us-versus-them” partisan culture it is rare to find an issue on which there is unanimous consensus but Governor Pat McCrory has identified one. North Carolina has not adequately built or maintained its public infrastructure for decades.

Some of this failure rests with the cyclical nature of our economy, resulting in yo-yo revenues to state coffers. It’s not sexy. There is no media fanfare when we pay to maintain infrastructure like is the case at ribbon-cuttings, so our infrequent and feeble attempts have resulted in crumbling, unsafe facilities that prevent optimum use.

Governor McCrory wants voters to approve up to $3 billion in General Obligation bonds for transportation and public infrastructure this fall. The two measures will likely be separate initiatives on the ballot - and for good reason. We regularly travel our roadways and experience the gridlock, potholes and problems and believe a compelling campaign can convince voters to pass transportation bonds.

Public buildings and infrastructure are another matter. Fixing plumbing, roofing, drywalls and electrical problems isn’t exciting and most of the discussions we’ve heard focus around rehabilitating existing buildings we currently occupy, mostly in Raleigh. No matter how badly needed this is going to be a tough sell outside the beltline. Rather than face possible defeat at the ballot box, which would only further delay badly needed repairs, we should consider other options.

Former DOT Secretary Tommy Harrelson recently recalled a similar time when our state needed public infrastructure improvements and remembers studying how other states funded them. Harrelson was intrigued with one state’s approach that might offer us some insights.

Here’s what we believe could be a win-win concept. Sell ownership of state-owned public buildings to the Teachers and State Employees Retirement System. Sale prices would be determined by present market value of each property. Treasurer Janet Cowell, the Constitutional Officer charged with administering the retirement systems and investing the funds for some 900,000 local and state employees, currently invests some of the 90 billion dollar pension portfolio in real estate. Backed by the full faith and credit of the State of North Carolina (rated AAA by all credit rating agencies) the investment would be as safe as any imaginable. The State would take the proceeds from the sale and put them in a lockbox designated and dedicated exclusively for public infrastructure rent and new construction.

Other states and municipal governments, under similar circumstances, have sold public buildings and entered into long-term leaseback arrangements. To be sure there are many details that require exploration and resolution, such as how we would guarantee a reasonable return on the investment to public employees, who would manage the proceeds from the sale to ensure they don’t become another political slush fund, how leases would be drawn that would make sure the buildings were well maintained and managed, and many more. But at first blush this could be a solution that could prove invaluable to the state, public employees and taxpayers.

We could attempt a small-scale test of the concept, then expand it when it proves successful. Hopefully we can all agree we need better solutions than doing nothing while our public buildings crumble and endanger the safety of public employees.

We believe this has great promise.