by Jon Baliles

There has been a lot of activity across the region recently about bond ratings and localities issuing bonds. It is a timely comparison of priorities of local leaders, a glimpse of a possible future and what happens if you have people in charge who worry more about getting the big, shiny project than the people that end up paying for it.

In May, Chesterfield County approved $90 million in general obligation bonds to fund voter-approved capital projects across the county that include new schools, police and fire stations, and transportation projects. They are part of a plan for $540 million of bonds that was put forth in a November 2022 bond referendum and approved by 76% of the voters.

Before that 2022 referendum, the county published a plan to spend $375 million for expanding existing and building new schools and $165 million on country facilities — $81 million for public safety projects like police and fire stations (etc.), $38 million for libraries, and $45 million for park improvements.

And just weeks later on June 6th, after issuing plans for those new bonds for county projects, all three of the nation’s leading bond rating agencies reaffirmed Chesterfield County’s AAA credit rating, which they have maintained since 1997 (about 1% of all U.S. localities have a AAA rating).

If you motor back a few months to March, Henrico County was preparing to issue $121 million in general-obligation bonds for schools and other county projects and they also received a reaffirmation of their AAA rating from all three credit agencies. Some of that county’s projects include $86 million for schools,  $13 million for a new fire station, $17 million for parks, and $2.5 million for drainage improvements. Henrico has held AAA ratings from S&P Global and Moody’s since 1977, and earned AAA from Fitch in 1998 when that company joined as one of the three main rating agencies.

As in Chesterfield, the Henrico projects were approved by voters in bond referendums held in 2016 and 2022, the most recent of which was approved with 83% of the vote. State law allows localities a ten-year window in which to issue bonds approved by referendum for specified projects.

As an example of notifying residents of their intention to spend their tax dollars, the 2022 Chesterfield bond referendum not only listed the projects and price tags for those which the bonds would fund; it also had a nice video about the goals of the county to provide for residents as a primer to know where their tax dollars would go.

Henrico also produced a similar video about its bond referendum:

The news of both counties’ bond issuances was lightly covered in the media as it may be a bit humdrum as far as news goes, but it means everything in regard to local officials keeping their eye on the ball and being forthright with their residents.

Richmond Mayor Levar Stoney, on the other hand, decided to strip gears and abruptly changed direction in April with a quick decision to have the city cover all funding and risk of the $170 million baseball stadium with little warning; his “new” plan was for the city to issue and risk all the debt and was pushed through City Council within a month. No warning, no sales job, no video. Stoney then held a back-slapping press conference when one of the three rating agencies awarded the city a AAA bond rating that was based on changing their criteria of evaluation.

The reason this is relevant in Richmond in 2024 is not really about the stadium (which will get built) as much as it is about state law. State code § 15.2-2636 says that cities only need the governing body to approve issuing bonds and that a referendum is not required or necessary.

Except as otherwise provided in this section [see § 15.2-2638], whenever any municipality proposes to borrow money and issue its bonds…the governing body may authorize and issue bonds in accordance with the applicable provisions of this chapter, without submission of the question of the issuance of the bonds to the voters for approval.

However, code section § 15.2-2638 requires that counties hold a referendum if they want to issue bonds.

…no county has the power to contract any debt or to issue its bonds unless a majority of the voters of the county voting on the question at an election held in accordance with §§ 15.2-2610 and 15.2-2611 approve contracting the debt, borrowing the money and issuing the bonds.

For some reason, state law allows cities to bypass a referendum (and transparency, accountability, and responsibility) and instead issue bonds merely with the approval of the governing body that votes on whatever plan the city “leaders” come up with. That is state law that needs to be changed.

Using Richmond as a purely theoretical example, city “leaders” can decide to issue bonds for anything — schools, parks, a baseball stadium, or a sports arena — and they only have to get approval from City Council, not the voters. If you come up with an “great” idea and can sell it to a trophy-seeking politician and a handful of local electeds, you can tap into the cheapest and most secure funding source available.

For whatever historical political reason, someone somewhere along the way at the state level thought it was a good idea to segregate bond referendums — counties require a voter referendum, but voters in cities can approve massive spending for anything deemed politically important by just a handful of people only accountable to the voters every few years. No one along the way over the decades has ever succeeded at trying or making the process fair to all residents and voters no matter their zip code — often a familiar refrain on many other issues.

Of course, the argument will be made (and has a modicum of validity) that if you don’t like the decision to issue bonds, you can vote the people who approved them out of office. But that argument is a day late and a dollar short (literally), because once the bonds are issued, the project is moving and, once begun, if the project is not built within cost or the debt isn’t paid back on time, the city will be in bad shape so it is already “all in” and any election rejection of those that voted for it would be too late. (Bristol, VA and Buena Vista, VA are prime examples of this). Some people might also use the excuse that the people don’t know what they are voting for — these projects are “complicated,” say the pushers — but that is just an insult to residents and voters.

If the people had a chance to vote on a referendum for the Navy Hill boondoggle in early 2020, it would have failed. That project would have issued more than $300 million in bonds and vacuumed up 80 blocks of downtown’s tax revenue for thirty years; people did not like that idea, didn’t believe the hype, and said so loudly. Luckily, City Council thought the same way and voted NO.

When the state approved legislation to build five casinos across Virginia in 2020, they included a referendum requirement, probably more as political cover than for the thought that a locality would actually vote a casino down, but it was still a requirement. Richmond voted NO twice — once by a whisker and a second time with a roar. The reason the NO vote increased from 51% against the casino in 2021 to 62% against in 2023 was not because residents were ill-informed, but just the opposite — people were well-informed. The more they learned about the project the second time around, along with the owners who tried to buy votes with $12 million of pro-casino spending while hurling racist and antisemitic insults on their radio show, the more it validated the people’s voice.

But the state has set and maintains two different bars for approving public debt, which affects and limits every locality from improving. The more debt a locality owes, the less they can borrow to fund things like schools and parks, i.e., impactful public needs.

Activist Paul Goldman filed a lawsuit after Stoney announced in April that the city would take on all the risk to build the stadium. Goldman cited the double standard in state code and wanted to hold a referendum on the proposed bond issuance for the baseball stadium. That was his right under state code section § 15.2-2627 that allows for a contest within 30 days of the filing of the ordinance approving the sale of bonds by “any person in interest has the right to contest the validity of the bonds, the taxes to be levied for the payment of the bonds, the rates, rents, fees and other charges for the services and facilities.…” He also argued the that the city’s charter remains unclear about the number of required signatures required to force a referendum because it was poorly written/edited when last revised. The city’s attorney on the case argued that the omission was a mistake and that a clerical error should not invalidate the legislation (which is a strange/funny/sad argument when it comes to a provision about issuing hundreds of millions of dollars in debt).

The lawsuit was a curveball to the Mayor who had suddenly offered to put the entire stadium cost on the city’s credit card after almost two years of promising the city would not be responsible for the stadium debt service. Stoney was out of options after all the inertia, inaction, and inflation that has defined City Hall in recent years; the city was up against a widely acknowledged deadline from Major League Baseball (which controls minor league baseball) that if the stadium was not open by Spring 2026, the franchise would be moved to another city.

The Richmond judge ruled against Goldman and, according to the Times-Dispatch, said Goldman must circulate a petition and gain roughly 11,000 signatures in just a matter of days. That’s practically impossible, [Goldman] said and would require hiring a staff at a cost of $60,000.

“They are restricting my right to vote,” Goldman told the RTD, referring to the city. He called the number of signatures needed “an impossible task worthy of Hercules.”

Goldman made other valid points throughout his case such as the provisions for running for Mayor which allow a candidate to collect the necessary 500 signatures within roughly six months and Council candidates to collect 125 valid signatures to get on the ballot. But to get an opposition question of a bond issuance on the ballot apparently requires collecting 11,000 signatures within 30 days.

What’s wrong with this picture?

There has been so much discussion, debate and even acrimony in recent years about righting wrongs of state legislation written in the past, but apparently no one wants to discuss what is fair and unfair about bond referendums (or lack thereof) or what is best for cities and fair for the voices of those that live in them.

Goldman’s argument had some serious merit, although it will not affect issuing bonds in Richmond to build the baseball stadium. But it could (and should) be a longer-term question for Mayoral and Council candidates this year as well as those running for Governor in 2025 and should also be put to the legislature. That is because there are two standards for public debt depending on where you live — and state code comes with an extra helping of hypocrisy towards those living in cities.

Virginia law even allows counties to put a question on the ballot for their residents as to what method of bond referendum they want — but city residents are not afforded the same option. Virginia Code section § 15.2-2639 is actually entitled “County may elect to be treated as city for issuing bonds.”

Any county may, upon approval by the affirmative vote of the voters of the county voting in an election on the question, elect to be treated as a city for the purpose of incurring debt and issuing bonds under this chapter.

Raise your hand if you are a county supervisor or county manager somewhere in Virginia and want to put that question on the ballot and want your county to be treated like a city in regard to bond referendums where only a few get to decide how to spend hundreds of millions of dollars on whatever they deem “worthy.”

There is no corresponding state code section that allows cities “to be treated as county” and put a question on the ballot to hold a referendum for a bond issuance.

Despite Goldman’s efforts, city dwellers are stuck with bond referendums that simply need approval of a majority of the governing body to issue hundreds of millions of dollars in debt for whatever the “leaders” want to spend it on. Virginia is a Dillon Rule state, so specific powers for localities are enumerated in state code. Cities can act like California and just put everything on referendums, but that has not turned out very well for the Golden State. And you don’t need referendums on everything, just questions on issuing massive amounts of debt that will affect delivery of services and tax rates long into the future.

It is never a bad idea to go to the people for massive spending — unless you take them a really bad idea (especially if the idea goes really bad and has to be made up later through big real estate tax increases).

The imposition of a requirement for bond referendums for cities has to happen at the state level. If that were ever to be considered by the General Assembly, however, you would see most city leaders across the state fight it (“it” being the people’s voice) vehemently.

Which makes elections — like the ones this fall for local offices — all the more important. The current Mayor has set the standard for skipping out on tabs, and he is leaving us a big one as he leaves office. It is (beyond) time for some new revisions to old laws, new application of ideas, and most certainly some new elected leaders who not only seek out the voice of the public, but also listen to it.

Jon Baliles is a former Richmond City Councilman. This column has been republished with permission from RVA 5×5.