The North Carolina Office of the State Auditor (OSA) has released a Rapid Response Special Report on the Town of Chapel Hill’s 2018 Affordable Housing Bond program, finding progress on affordable housing unit development, but also a missed federal arbitrage requirement.
In the November 2018 election, Chapel Hill voters authorized $10 million in general obligation bonds to support affordable housing development and rehabilitation. Chapel Hill allocated about $10.2 million for eight affordable housing projects in 2021 and 2023, consistent with the purposes approved by voters.
The projects – which utilize other Town and non-Town funds in addition to the bond funding – are planned to provide 343 affordable housing units. As of June 2026, 38 units were under construction, and 124 units had been completed with 98 occupied. Chapel Hill had disbursed about $3.64 million in bond proceeds for the projects.
“At the Office of State Auditor, we’re taking a dive into taxpayer-funded, voter-approved bonds to ensure there’s follow-through and accountability,” said State Auditor Dave Boliek. “Today’s report on Chapel Hill’s affordable housing bond program details completed and outstanding projects. Transparency throughout bond projects is important to give citizens a view of return on investment from borrowed money.”
During its review, OSA questioned whether Chapel Hill had met certain federal arbitrage requirements associated with bonds. Following OSA’s inquiry, Chapel Hill hired a consultant, calculated a $389,292.84 liability, and paid the full amount to the IRS. The report recommends that Chapel Hill evaluate federal spending exceptions and planned expenditure schedules before issuing tax-exempt bonds, and monitor arbitrage compliance after issuance to ensure required payments are calculated and remitted on time.
OSA plans to continue focusing on accountability and oversight in local bond programs across North Carolina.