Opinion: Local Governments Should Be Stopped from Flouting Bond Referendum Requirement

February 24, 2015

Inside Insight

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bond referendum requirement

A bill now in the legislature, S.143, introduced by Senator Creighton Coleman (D-Fairfield), would end the use of “bond shell corporations.”

You might not have heard of those before, but they almost certainly have a lot of your tax dollars right now.

In 2013, the Fairfield County Council passed a $24 million bond ordinance. It issued through a shell corporation – a corporation designed only to facilitate the issuance of a bond. The Council did it that way in order to avoid exceeding the county’s 8 percent debt limit, which would have required a voter referendum to approve the bond.

In response, Sen. Coleman introduced a bill in the General Assembly to end the practice.  The bill would prohibit a governmental entity from entering into a contract in which installment payments on a bond are to be paid by a governmental entity to a nonprofit corporation, political subdivision, or any other entity in order to finance the acquisition, construction, renovation, or repair of any asset.  That’s precisely what the “Fairfield Facilities” Corporation is intended to do.

Our elected officials have a responsibility to provide the voters and taxpayers with the information about how they are implementing our taxes. Instead they’re finding ways to get around getting voter approval for generating debt and spending public money.  Sen. Coleman recently told the Voice of Blythewood: “Fairfield County Council recently approved bonds that exceeded that 8 percent limit, and nobody knew about in the county . . . That’s what I’m trying to fix. At least at a minimum they’ve got to publish what they’re doing. This is such convoluted and complex stuff. If they publish it, they’ve got to publish it where people can understand it.”

Rep. Greg Delleney (R-Chester), chairman of the House Judiciary Committee, sponsored a bill in 2013, H.3105, that addressed a related practice: installment purchase revenue bonding. That involves large bonds that local governments can finance over long periods, thus allowing them to get around mandated referendums. He argued, correctly in my view, that people should be allowed to vote on bonds as large as the ones many local governments are using installment purchases to finance.

The Delleney bill never made it out of the Ways and Means Committee. We in Fairfield County hope S.143 has a better chance of passing. So far it’s still in Finance and hasn’t yet been assigned to a subcommittee.

As a taxpayer I feel that the voters of South Carolina should be allowed to vote on bonds being issued by both county councils and school boards.  We are the ones paying back this debt through our property taxes. The requirement for a referendum is there in order to keep county governments from spending massive amounts of public money in secret. Don’t let them get around it.

Mr. Stogner is a resident of Ridgeway, South Carolina

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