To keep Richland penny road projects rolling, should the county borrow $250 M?

Long-promised road improvements paid through Richland County’s penny sales tax face major delays unless county leaders come up with a solution to financial questions, according to some county officials.

The immediate issue is whether County Council should borrow $250 million early next year to pay for the projects. If the council doesn’t, the program faces a cash-flow problem that will delay the start of any new projects by up to two years, a consortium of private companies hired to help the county oversee penny projects said last week.

Among the projects that would be delayed are the widening of Bluff, Shop, Atlas and Pineview roads, Lower Richland Boulevard, Spears Creek Church Road in Elgin, according to consortium official Rick Ott.

“New projects will be suspended until such time as sufficient revenues are collected, approximately 18 to 24 months,” the consortium said in a report.

But borrowing the money in anticipation of sales tax revenue would likely cause the county to pay millions in interest and borrowing fees, county Administrator Gerald Seals said. That would cut by $16.1 million the amount of money used for construction, he wrote in a Nov. 14 memo to council, which he entitled “Returning the penny to health.” The penny program has cost overruns of $104 million, he wrote.

Ott, who specializes in public project financing, said, “It’s going to take most of 2019 collections just to pay for the work that is already under contract and in construction.”

That’s because the county collects about $43 million yearly from the tax for roads, Ott said. Failure to borrow, he contends, could result in the county dipping into property taxes in its general fund or finding grants or other sources of money.

On Tuesday, Richland County Council is scheduled to cast a final vote on whether to borrow the money. The loan, called a bond, would provide the cash flow to keep pace with construction of projects, many of which are blowing past initial cost estimates, according to those who support the loan.

The loan would not be new revenue on top of the $1 billion the tax is expected to generate over its 20-plus-year lifetime, according to those who support the bond. It would be repaid from money generated by the tax.

Though previous votes show strong backing for the loan, not everyone on the 11-member council is sold on the idea, largely because of question about overruns.

“If we approve this $250 million bond, we will be paying for their mistakes,” Councilman Norman Jackson said of the consortium’s job performance. “I won’t be part of that.”

Jackson, who represents portions of Lower Richland, said he wants a project-by-project accounting from the consortium, including comparisons to original cost estimates established in 2012 when the penny program was created.

He plans to ask council to delay a final decision.

Council is leaning toward a loan

Construction costs have risen in five years and are likely to continue to increase, he said.

Livingston, whose district includes much of the city of Columbia, said he will vote for the $250 million loan because without it, projects promised to taxpayers could be delayed or even stopped.

Efforts Friday to reach several other council members about their position on the issue were unsuccessful.

Pluses, minuses of a loan

Seals wrote council a detailed memo dated Nov. 14 in which he warns about the drawbacks of borrowing money.

The county would give up $16.1 million in interest and costs of floating a $250 million bond, which is money that would not go toward projects, he said.

He also cautioned about borrowing money to pay for projects controlled by municipalities and the state. While it’s called a Richland County program, the penny tax pays for improvements in Richland County municipalities and on state-maintained roads in the county.

“If there is a shortfall in the collection of the penny ... should County Council put the full faith and credit of Richland County on the line (for city and state roads) which also get penny money)?” Seals wrote.

Seals recommends that the county follow the process for approving projects that was set up when the penny program was created.

County law requires the city and county to submit annual budget requests for penny money to the administrator, who then is supposed to prepare detailed budget requests for County Council to accept or reject. “Records indicate no compliance with this section of the (county law),” Seals wrote.

“As best as I can tell,” Seals told The State newspaper in an interview, “that process was not established and therefore the political subdivisions did not have an opportunity to request funding.”

“It’s important that we stay focused on the issue,” Seals said, “and that is, is there a way to accomplish getting the projects completed?”

His solution: Follow the letter of the county law.

“If bonds are not sold, then the penny is projected to run out of money in the second quarter of 2018,” consortium officials said in their report to council’s transportation committee. That, they say, would require taking money from the county’s general fund or other sources.

Voters agreed in the referendum to allow council to get up to $450 million in loans if the pace of construction outstripped the flow of money, which the county receives from the state treasurer quarterly. But the law requires the money be borrowed by March, officials said

This story was originally published December 9, 2017 at 6:10 PM with the headline "To keep Richland penny road projects rolling, should the county borrow $250 M?."