Local governments in South Carolina are in debt more than $10 billion, an amount that has grown by 22 percent over the past five years, records provided to GreenvilleOnline.com show.
Borrowing by school systems accounts for almost half of that debt and has grown by 35 percent since 2006, according to the state Comptroller General’s Office.
Local government officials say the borrowing is appropriate and needed for various projects, such as sewer and water construction, the building of roads, construction of recreational facilities, schools and various renovations and repairs.
However, some fiscal conservatives in the Senate say they are concerned by the amount of debt.
Their interest in the issue has been triggered by proposals by some school systems to borrow money to pay operating expenses.
“I’ve got a personal conviction about opposing all kinds of debt, that’s how I was raised,” said Sen. Kevin Bryant, an Anderson Republican and among those who have fought allowing school systems to borrow for operating expenses.
“If you’re going to borrow for a capital project to build something, that’s better than borrowing to run your day-to-day operations,” he said. “That’s totally different and irresponsible.”
Bryant said he was “shocked” by the $10.4 billion number.
Sen. Lee Bright, a Spartanburg Republican, said local government borrowing is reflective of state and federal government borrowing.
“Everybody has spent beyond their means,” he said. “It’s something that eventually is going to catch up.”
Sen. Shane Massey, an Edgefield Republican, said the problem is that most people don’t realize how much their local governments are borrowing.
“That $10.4 billion is a lot of money,” he said. “I’m very concerned about it. You start to wonder if we are over-extending ourselves.”
Local governments by law are limited in their borrowing, at least general obligation bond debt, to 8 percent of the assessed value of taxable property, unless voters approve an increase through a referendum.
According to the Comptroller General’s Office, $5 billion of the $10.4 billion is debt owed by school systems. Of that amount, $4.38 billion is owed through general obligation bonds and $612 million through revenue bonds.
The rest of the debt is about equally split between counties and cities, with the state’s municipalities owing $2.4 billion, counties owing $2 billion and special purpose districts owing $953 million.
Greenville County’s $91 million in debt is ranked sixth in the state and far below first-place Horry County, which owes $449 million, according to the Comptroller General’s Office.
“We stay within our means to the best of our ability,” said Greenville County Administrator Joe Kernell. “We plan accordingly as we build our budgets and set aside funds for major projects so we can pay as we go.”
Anne Wright, assistant county administrator for Horry County, said only about $125 million of the county’s total debt is general obligation bonds, with the rest going for road construction paid for using a 1.5 percent hospitality tax.
“If you look at just the county’s general obligation debt, you will see that we are more in line with the other large coastal counties,” she said.
Among cities, those in Charleston and Richland top the list, with Charleston municipalities owing about $318.6 million and Richland County towns and cities owing $432 million.
Charlton deSaussure, Charleston’s bond attorney, said in an email that the city has general obligation debt of $49 million, well under its 8 percent capacity. That has been used, he said, for fire stations, recreation and municipal facilities.
The rest of the city’s debt has been from tax increment financing bonds, revenue bonds and public works revenue bonds, he said. In fact, the public works bonds skew the city’s overall debt profile, he said.
“In conclusion, the city has used provisions of state law relating to public infrastructure capital improvements for a number of important projects in the Charleston area,” he said. “In doing so, it has been prudent and disciplined in addressing these borrowing needs.
“The result is a use of debt which has served the community well while earning the respect of investors and the highest credit ratings earned by any municipality in South Carolina thus producing the lowest borrowing cost for our citizens.”
Among school districts, those in Richland County — Richland School District 1 and Richland School District 2, owe far more than other school systems, according to the Comptroller General’s Office, a total of $863 million.
By contrast, Greenville County’s school district — the state’s largest — owes $23.1 million, according to the records.
“All of our bonded indebtedness is either going toward new construction or our annual capital improvements,” said Jack Carter, executive director of operations for District 2.
“We have a very conservative board. And they are very conservative in how they borrow or let us spend money. I would say it’s not only appropriate but as about as conservative approach as you can find.”
He said his district is completing a $307 million bond program for construction. The district was able to get about $46 million in bonds with zero interest, saving taxpayers $10 million, he said.
Richland 1’s $512 million debt is due to 1996 and 2002 bond programs approved by taxpayers for construction and renovations, said Edith Caudle, a spokeswoman for the district.
The 1996 bond program funded 30 construction or renovation projects including all elementary schools and one new middle school, she said. The district was able to consolidate eight elementary schools into four, which resulted in significant savings to the district, according to Caudle.
Funding from the 2002 bond program was used to construct or renovate 17 projects including all middle schools, all high schools and most athletics stadiums and fields, she said.
“The district was a good steward of taxpayer money,” she said. “The millage rate for both bond programs was kept level for taxpayers.”
More troubling for some senators, however, has been an increase in the number of school districts requesting exemptions to borrow money to pay for operating expenses.
Several rural districts, including Florence 4, Hampton and Colleton, have requested the help. Gov. Nikki Haley vetoed the legislation allowing Florence 4 to borrow for operating expenses and last week the Senate sustained the veto.
“Borrowing money to pay the light bill is reckless and irresponsible,” Bryant said on the Senate floor. “What the Senate is asking me to do is put my fingers in my ears, put blinders over my eyes and say, ‘Present,’ with this irresponsible and reckless behavior of borrowing money to pay regular bills.”
But Debbie Elmore, a spokeswoman for the South Carolina School Boards Association, said school districts across the state are struggling financially because of problems associated with funding cuts and tax-swap legislation enacted several years ago that capped reassessment increases.
She said the districts asking for exemptions aren’t the first to do so but are a symptom of a larger problem of the need for school funding reform. She said school districts have been forced to operate in a one-size-fits-all funding system, which doesn’t work because of the large differences in wealth, size and demographics among the districts.
“We’ve got to address public education funding in this state, or you’re going to see districts potentially run out of cash,” she said.
She said Florence District 4, from an accounting point of view, is bankrupt.
“We don’t advocate this as the ideal way to fund education,” she said of the borrowing requests. “We haven’t looked at it holistically. All we’re doing is putting Band-Aids or patches or spackling on cracks. And the foundation is crumbling.”
Courtesy of The Greenville News