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Boeing Bond Deal: A $400 Million Taxpayer Tab

For the next 15 years, South Carolina taxpayers will be paying back nearly $400 million in bonds, including interest, for the new Boeing assembly plant in North Charleston.

And the Chicago-based aerospace giant, which posted $16.7 billion in revenue and $1.2 billion in operating cash flow for the most recent third quarter, will be getting more than $100 million of the bond package up front from the Palmetto State.

The S.C. Budget and Control Board took less than five minutes this morning to unanimously authorize the sale of $270 million in bonds for construction of the 787 Dreamliner final assembly plant, which will be located next to two other Boeing plants.

The total interest on the bonds is estimated at $129,077,721.70, according to S.C. Department of Commerce documents provided today to The Nerve. With the $270 million in principal, that comes out to $105,020.45 in taxpayer-funded debt for each of the 3,800 promised jobs.

The Budget and Control Board – made up of Gov. Mark Sanford, state Treasurer Converse Chellis, state Comptroller General Richard Eckstrom, Senate Finance Committee Chairman Hugh Leatherman, R-Florence, and House Ways and Means Committee Chairman Dan Cooper, R-Anderson – didn’t mention the total cost of the bonds before quickly approving them this morning.

“I’m so happy we were able to attract Boeing here,” Leatherman said.

The board also unanimously voted to throw in a state-funded “bridge loan” to Boeing worth an estimated $102.5 million to cover the company’s construction costs for the first three months of this year. That loan would be repaid with the proceeds of bond sales, according to a written agreement between Commerce and the Treasurer’s Office.

The agreement, which wasn’t discussed during the meeting, allows the Budget and Control Board to borrow “any surplus which may be on hand in the Office of the State Treasurer” for the loan.

The Nerve this afternoon submitted written questions to spokespersons for the Budget and Control Board, Commerce and the Treasurer’s Office about why Boeing needs the up-front money or what state surplus funds will be used for the loan. State lawmakers returned Tuesday to a new legislative session facing an estimated $563 million hole to file in next fiscal year’s general fund budget.

Budget and Control Board spokesperson Mike Sponhour in a written response this afternoon referred The Nerve’s questions to Commerce and the Treasurer’s Office. Spokespersons for those agencies didn’t respond by deadline for this story.

According to Department of Commerce documents provided this morning to The Nerve, all of the bond money for Boeing would be expended by August this year. Construction of  the assembly plant is projected at $156.1 million; site preparation and road improvements make up nearly $64 million.

One of the bond resolutions authorizes the construction of a facility projected at $50 million, though it’s unclear whether that amount is for a separate building. Boeing spokeswoman Candy Eslinger did not have an immediate answer when contacted by The Nerve after the meeting; Commerce spokeswoman Kara Borie did not respond on deadline to written questions.

In launching an investigative series Monday on the Boeing deal, The Nerve reported that $170 million in economic development bonds approved by the General Assembly in a special session Oct. 28 could cost taxpayers from about $250 million to at least $330 million.

Up until today, state officials had not publicly disclosed any projections about total bond costs. On Tuesday, the state Joint Bond Review Committee authorized an additional $100 million in bonds for Boeing, bringing the total principal bond package to $270 million.

Lawmakers and agency officials have been tight-lipped over the past two months about details on the Boeing incentives package, rejecting numerous Freedom of Information Act requests by The Nerve. Besides the bond money, Boeing also will receive, among other incentives, unspecified corporate income and sales tax breaks worth millions.

The Commerce documents provided today to The Nerve show that:



  • With the Boeing project, total projected payments on all outstanding economic development bonds through 2031 will skyrocket, jumping to $604 million from $272 million, a 122-percent increase;

  • The total projected cost of the $170-million portion of the bond package is $256,540,909.32; and

  • The projected total cost of all general obligations bonds, including economic development bonds, through 2031 is at least $1.4 billion.


Under the S.C. Constitution, if there aren’t enough tax revenues to repay the bonds, the state comptroller general and treasurer would have to levy and collect a statewide property tax.

 

Reach Brundrett at (803) 779-5022, ext. 106, or rick@scpolicycouncil.com.

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