The fiscal cliff battle threatens to reduce federal aid long used for improvements in Midlands neighborhoods and increase the cost to taxpayers of borrowing money for sewers, fire stations, hospitals and many more facilities.
“These are resources communities lean on that would be yanked away,” said Reba Campbell, a spokeswoman for the Municipal Association of South Carolina.
Local leaders across the state are mobilizing to lobby federal lawmakers as Congress looks for ways to cut spending and bring in more revenue to offset deficits as soon as Jan. 1.
Some cuts and tax increases will be automatic next year – creating the so-called “fiscal cliff” – if no deal occurs.
Among the cuts would be annual federal grants for neighborhood improvements – called Community Development Block Grants. But as important would be the loss of the tax-free status of local government bonds sold to build sewer systems, hospitals, libraries and roads and help repair older sidewalks and homes.
Nearly 100 S.C. mayors, including six in the Midlands, sent a letter to the state’s Congressional delegation urging no cut in the federal aid.
The aid is a “significant catalyst” that’s become crucial for local improvements for which there is no other source of money, the letter said.
State lawmaker-imposed limits on local tax increases increasingly mean the federal grants are being used for necessities instead of extras, Campbell said.
Lexington County used the money recently to build a medical clinic in Pelion, provide a cooler and a freezer for local food banks and afterschool instruction for students struggling in school.
Those are steps otherwise unaffordable for many towns, supporters say.
“It’s a godsend for a lot of people down here,” said Pelion Mayor Charles Haggard.
A study by the National League of Cities estimates South Carolina could lose $3.7 million in grants next year – including $147,000 from Lexington County, $133,000 from Richland County and $109,000 from the city Columbia.
Meanwhile, Columbia Mayor Steve Benjamin is telling White House aides that elimination of the tax-exempt status for municipal bond debt would compound the loss of the aid he and other mayors want to save from cuts.
It would drive up borrowing costs for public agencies by as much as a third and harm urban revitalization, he said.
The cuts would slow “rebuilding our country,” he said. “It would be a fatal mistake.”
Local governments borrow money by selling bonds to investors.
Local bonds would remain an attractive investment but at a higher pricetag for taxpayers, creating more debt for local communities, said Margaret Pope, a Columbia attorney who specializes in related legal work for communities.
“You and I will pay more for basic services,” she said.
Reach Flach at (803) 771-8483.
