Bill
SB 862
Allows local governments to issue grant anticipation notes to accelerate STIP-funded transportation projects, with strict limits and no renewals.
Title: STIP Grant Anticipation Notes
Purpose
- Authorizes local governments to borrow funds in order to accelerate transportation projects that have anticipated funding under the State Transportation Improvement Program (STIP).
- Specifically enables use of grant anticipation notes (GANs) to bridge timing gaps between project expenditures and anticipated grant reimbursements from state/federal sources for STIP-funded projects.
Key Provisions
1) Expansion of Grant Anticipation Notes (G.S. 159-171)
- Existing framework allows local governments to issue grant anticipation notes to cover capital projects financed by anticipated state or federal grants, with maturities generally up to 12 months and potential renewals (subject to limits).
- This bill adds a targeted subsection (a1) that applies to STIP projects identified as STI regional impact or division need projects under Article 14B of Chapter 136.
- For STIP projects, GANs:
- May mature no later than 12 months after the first day of the calendar year following the calendar year in which the STIP project is scheduled to be completed.
- Renewal of GANs for STIP projects is not allowed (one-shot financing for a project’s anticipated funds).
- Require an expedited project agreement with the Department of Transportation (DOT) under G.S. 136-66.8 prior to borrowing. The agreement must include:
- Local Government Commission approval for the GAN.
- Project identification, cost, and alignment with the project plan, including timelines, development/delivery phase, current completion date, accelerated completion date with GAN funds, and administration requirements.
- Funding expectations, funding sources, revenue forecasts, and final installment funding date.
- A repayment plan and a contingency plan for events (natural disasters, federal funding delays, revenue losses, cost increases, or other changes necessitating adjustments to the STIP).
- Any other terms DOT deems necessary to comply with federal law and ensure that state funds do not exceed the local share of nonfederal costs, and that state funds flow back to the locality or are used to repay the GAN.
- GANs under (a1) must equal the full estimated STIP project cost (may include financing agreements with private entities, but must cover total estimated cost).
2) Limitations on GAN Issuance (G.S. 159-171)
- For GANs under subsection (a) (general grant anticipation notes), the combined outstanding amount of GANs cannot exceed 90% of the unpaid grant commitment.
- For GANs under subsection (a1) (STIP-related), the amount cannot exceed the identified funding for the STIP project.
- Each GAN must bear a certificate stating:
- It is payable only from the described grant funds (no pledge of the unit’s faith and credit).
- The certificate signed by the finance officer confirms the outstanding GANs do not exceed the applicable limit (90% or not more than the unpaid STIP grant amount).
3) Legal Status and Pledge
- GANs issued under this act are special obligations of the issuing unit.
- Neither the unit’s credit nor its taxing power is pledged for GAN repayment.
- Holders cannot compel use of taxes or property forfeiture to satisfy GAN defaults.
4) DOT Procedures and Oversight (New Rules/Guidance)
- DOT is tasked with developing procedures and rules for expedited project agreements under G.S. 136-66.8 that incorporate GAN terms and STIP amendments.
- The Department of the Treasurer (in consultation with DOT) must also adopt rules aligned with these purposes and existing Article 4 of Chapter 159.
5) DOT-STIP Amendments (Section 2)
- The act requires that any amendment or modification to the STIP will not cause a delay in the repayment of GANs issued to a local government under this act.
6) Effective Date
- The act becomes effective upon becoming law.
Who is Affected
- Local governments in North Carolina pursuing STIP-funded transportation projects identified as regional impact or division need projects.
- The North Carolina Department of Transportation (DOT) for expedited project agreements and supervision.
- The Department of the Treasury in coordinating and issuing rules related to GANs.
- Potential financial partners (including private financing) participating in project funding if explicitly identified in the agreement.
Potential Impact
- Provides a mechanism to accelerate STIP-backed transportation projects by financing upfront costs via GANs, with repayment supported by grant proceeds.
- Creates strict limits and oversight to ensure state funds align with project costs and federal requirements, and to protect the state from over-committing funds.
- Eliminates renewal option for STIP GANs and imposes expedited agreement requirements to shorten project timelines.
- May improve project delivery timelines for high-priority STIP projects, while maintaining fiscal guardrails and accountability.
Compiled from official sources — confirm details with the bill’s official record.
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