The $29M ‘Invisible’ State Agency

September 15, 2011

Investigative Reports

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The NerveYou won’t find the S.C. Rural Infrastructure Authority listed as a stand-alone agency in this fiscal year’s state budget, though it was created by the General Assembly more than a year ago.

On paper, the authority will have at least $28.8 million in available revenues this fiscal year, though nothing has been spent yet, a state Budget and Control Board spokeswoman told The Nerve last week.

In comparison, the authority’s nearly $29 million budget would be bigger than the total ratified budgets for this fiscal year, which started July 1, of more than three dozen existing state agencies or divisions, state budget records show.

That would include, for example, the Attorney General’s Office ($18.1 million), Department of Agriculture ($12.4 million), Forestry Commission ($25 million), Criminal Justice Academy ($15.4 million) and Commission for the Blind ($10.6 million).

Contacted last week by The Nerve, Rep. Bill Clyburn, D-Aiken and author of the 2010 state law creating the Rural Infrastructure Authority, said he wasn’t aware that the agency’s start-up funds had grown to nearly $29 million.

“I don’t know anything about it,” Clyburn said. “The only thing I knew about was the $13 million (authorized by a state budget proviso).”

The purpose of the Rural Infrastructure Authority, according to the law passed last year, is to “select and assist in financing qualified rural infrastructure by providing loans and other financial assistance to municipalities, counties, special purpose and public service districts, and public works commissions for constructing and improving rural infrastructure facilities.”

“There are small, rural areas in South Carolina that simply need to be helped,” Clyburn said last week. “It’s just hard to lift yourself by your own bootstrap.”

As of July, South Carolina’s rural counties had the state’s highest unemployment rates. Marion County led the state with a 20-percent rate, followed by Allendale (19.8 percent), Marlboro (18.1), Orangeburg (17.7), Bamberg and Union (17.5 each), Chester (17.1) and Barnwell (17), according to the S.C. Department of Employment and Workforce.

Clyburn in May told The Nerve that the authority would finance primarily “smaller projects,” such as sidewalks or relatively small water line projects in rural areas. But the authority legally could go after bigger projects using tax dollars.

Rural infrastructure projects as defined under the new law can include the purchase of land, buildings and machinery; and the construction of buildings to “aid the development of trade, commerce, industry, agriculture, aquaculture and employment opportunities” in designated “distressed or least developed” counties.

The authority will maintain the state Rural Infrastructure Fund, which, under the new law, can receive state or federal funds, private donations and “other lawful sources as determined appropriate” by the agency’s seven-member governing board, which hasn’t been appointed.

Clyburn in May told The Nerve that the only funding source for the authority he was aware of was $13 million in another fund, known as the Rural Infrastructure Bank Trust Fund, under the control of the  Budget and Control Board. Those funds are generated by a portion of state job development credits that are diverted from eligible companies in more affluent counties.

At the start of last fiscal year, the BCB’s five-member governing board, chaired by then-Gov. Mark Sanford, authorized the transfer of nearly $13.3 million – the entire amount of the trust fund – after Sanford vetoed the BCB agency’s entire ratified $25.2 million general fund budget.

The state Supreme Court in January, however, ruled that Sanford’s veto was unconstitutional; and the trust fund money was returned to its account, which Clyburn had contended belonged to the Rural Infrastructure Authority.

Contacted last week, BCB spokeswoman Lindsey Kremlick told The Nerve in a written response that in addition to approximate $13.3 million that was returned to the trust fund, the BCB received another $2.2 million in Rural Infrastructure Fund revenues last fiscal year.

The remaining $13.3 million of the $28.8 million available to the Rural Infrastructure Authority would come from the state tobacco settlement fund, part of which can be used to provide “grant assistance to local communities for water/sewer facilities,” Kremlick said.

Clyburn said last week he hopes the funding available to the authority will “inspire industry to come into a place when they get $2, $3, $4 million of infrastructure,” though he contended that “this is not incentive money.”

Clyburn said there’s a good reason why no money has been spent yet: The authority doesn’t have a governing board or director, though it was legally created in May 2010 after the Legislature overrode Sanford’s veto of Clyburn’s bill.

In vetoing the bill, Sanford in a written message said that it “creates a new state government entity to perform functions the Department of Commerce currently performs.”

The S.C. Coordinating Council for Economic Development, staffed by Commerce and made up of the heads of various state agencies involved in economic development, including Commerce, approved more than $35 million in Rural Infrastructure Fund grants to counties from 2006 through 2009, The Nervereported last year.

Under the law passed last year, known as Act 171, the Rural Infrastructure Authority  is to be governed by a seven-member board, two of whom are appointed by the governor, one by the House speaker, one by the Senate president pro tempore, and one each by the chairmen of the House Ways and Means and Senate Finance committees.

The state Commerce secretary automatically serves as chairman of the board.

“Once the authority is organized and all of the members are appointed, the Office of State Budget will establish it as a separate agency with accounts,” Kremlick said.

“I’m waiting for the (House) speaker and the chairmen (of the House Ways and Means and Senate Finance committees) and the governor for their appointees,” Clyburn said.

Clyburn added, “The politics are really going to creep in now (with the appointments), but the money is there.”

The Nerve this week sent written messages to the governor’s office; House Speaker Bobby Harrell, R-Charleston; House Ways and Means Committee Chairman Brian White, R-Anderson; Senate President Pro Tempore Glenn McConnell, R-Charleston; and Senate Finance Committee Chairman Hugh Leatherman, R-Florence, seeking comment on when they planned to make their appointments and who they were considering as potential candidates.

The Nerve received no responses before publication of this story.

The Rural Infrastructure Authority in the near future might face some competition for tax dollars for rural economic development projects.  A bill (S. 211) sponsored by Sen. John Matthews, D-Orangeburg, would create the “I-95 Corridor Authority,” a stand-alone state agency aimed at bringing new businesses to poor counties along Interstate 95.

Gov. Nikki Haley vetoed the bill in June, saying in her written veto message that it “unnecessarily grows government,” and that it “further dilutes state resources and accountability for education and economic development.”

The Senate overrode the veto, but the House adjourned debate on the veto before the legislative session ended, postponing its vote until at least Jan. 10.

Contacted last week by The Nerve, Matthews said he will re-file his bill next year if the House sustains Haley’s veto.

“The governor had one concern; I think we can resolve that issue,” Matthews said, though he declined to discuss specifics.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org.