CHAPEL HILL – A new state report says Chapel Hill missed federal bond-compliance requirements before paying $389,292.84 to the Internal Revenue Service, while the town says it has changed its procedures and will review compliance annually.
The Office of the State Auditor released its Rapid Response Special Report on Oct. 30. The payment was made July 31, not when the report was published. The liability covered both public-improvement and affordable-housing bonds issued in 2021, rather than only the housing program.
The report says the payment included $184,618.52 in arbitrage rebate, $202,070.26 in yield reduction and $2,604.06 in late-payment interest. After an inquiry from the auditor’s office, the town hired a consultant to calculate its obligations. The report describes the payment as approximately three weeks late.
In a Sept. 25 written response included with the report, Town Manager Theodore L. Voorhees said the town had made all required rebate and yield-reduction payments, including the payment identified by the auditor. That response predates the report’s public release.
Voorhees said compliance reviews would take place each year for all outstanding bond issues. The town would also continue using outside consultants when needed to make sure its calculations and payments were accurate and on time.
For affordable-housing projects, the town said it now signs funding-commitment letters with project partners and waits to issue bonds until projects are ready to begin construction. Its response said those changes are intended to reduce the time proceeds sit unspent and help avoid unnecessary arbitrage liabilities.
The town attributed many project delays to the pandemic, market conditions, permitting and coordination among development partners. It said management would continue monitoring those factors and adjusting its processes.
The report also tracked the voter-approved $10 million housing bond program: eight projects were planned to provide 343 affordable units. As of June 2026, 124 units were complete and 98 were occupied. Those figures describe the report’s data cutoff, not an updated October construction count.
Sources
- State auditor’s Oct. 30 Rapid Response Special Report
- Town Manager’s Sept. 25 response, PDF pages 15-16
- State auditor’s Oct. 30 announcement
Photo Credit: Chapel Hill Town Hall, July 26, 2020, by Mx. Granger, Wikimedia Commons; CC0 1.0 public-domain dedication. Cropped and resized. File photograph of town government offices, not a housing project or current event.
Editor’s Note: This article was drafted with the assistance of artificial intelligence and was reviewed and fact-checked by a member of the NC Political News editorial team before publication.