Did you know...
you, the taxpayer in the City of Asheville, are going to be the co-signor of this $74 million debt if voters approve it in November?
YEP - YOU, THE TAXPAYER are RESPONSIBLE. Not the City. The City doesn't lose a thing. These bonds are not backed by City Assets like property or buildings. You, the taxpayer, are held responsible.
In short, you are the co-signor of this bond debt. If the City can't pay, the banks come to YOU by way of your property taxes.
How's that, you ask?
BONDS ARE BACKED BY PROPERTY TAXES OF YOUR HOME AND YOU ARE RESPONSIBLE FOR PAYING THOSE TAXES:
All of these general obligation bonds ($74 million total) are backed by property taxes of the City of Asheville property owners. This is because these are non-revenue bonds, meaning they are not backed by a revenue generating project. Sidewalks, greenways, parks and loans to private developers do not generate revenue. They are not backed by City assets either like buildings or City owned property. The collateral for these bonds, the promise that the banking institutions and investors that buy these bonds, is that they get paid back via property taxes. They get paid back in this case by YOU, the taxpayer, by increasing your property tax rate and ensuring those monies go to the City to pay it's annual debt service.
BUT, WHAT IF, we experience another recession?
As a business person and for your own family, you probably plan for the worst. What is the worst that can happen if these bonds pass? The City defaults.
We are an economy based on tourism. If something were to happen impacting our local economy in a negative way (remember all those businesses that won't come to North Carolina because of HB2? Who saw that coming?) and the City were not able to pay its debt service for these bonds, then this is what happens:
Those same institutions and investors that bought these bonds can sue the City and force an increase in property taxes sufficient enough to pay for its debt. (Source: We spoke to the NC Local Gov't Commission representative on September 29, 2016 who confirmed this.)
That's right. Your property taxes can then be jacked up enough to pay for the debt service. And, if you can't pay your own property taxes then what happens? Your property taxes get added to your mortgage and if you can't pay your mortgage, you lose your home. Essentially, the collateral for these bonds are the value of your property and investors assume that the value will only go up and that you can afford to continue paying for those increased property taxes. It's also entrusting the City to pay the debt service.
You don't think this will happen? Maybe not, but we didn't expect that recession either. Each City taxpayer should consider this carefully just as you would if you were going to co-sign someone's car loan. Just pay attention to the details and ask yourself if you're okay with it.