Legislators to mull $123 million in borrowing for Volvo

Brace yourself for another argument over state borrowing.

Ten S.C. legislators will decide Wednesday whether to issue $123 million in economic development bonds to pay for incentives for Volvo, part of a deal to bring to the Lowcountry a $500 million auto plant that eventually could employ up to 4,000.

However, some legislators are unhappy with the proposal, saying borrowing the money will cost taxpayers $86.8 million in interest. They want instead to use part of a $415 million state surplus to pay for some of the incentives.

The dispute does not threaten Volvo, legislators insist. But it once again could lay bare the ill feelings between Republican Gov. Nikki Haley and some leaders in the GOP-controlled Legislature.

Haley wants the Volvo incentives – $54 million to prepare the Berkeley County site and $69 million for roads, including a new Interstate 26 interchange – financed through economic development bonds. That method is best, she says, because Volvo does not want to become part of a political debate.

But Senate President Pro Tem Hugh Leatherman, chairman of the 10-member Joint Bond Review Committee that will consider the bond request, said Tuesday the borrowing proposal uses “trickery finance” and cannot be approved as proposed.

Commerce Secretary Bobby Hitt requested the committee approve $123 million in bonds, to be paid off over 17 years. Commerce proposes paying interest only on the bonds for seven years.

“If this (is not) credit-card-type financing, I don’t know what is,” said Leatherman, R-Florence.

That was a swipe at Haley, who has criticized lawmakers for their borrowing proposals — attempts to run up the state’s credit card, the governor said — during the legislative session, scheduled to end Thursday.

Haley’s office defended the Commerce proposal. “... (T)his process was certified by the treasurer’s office as responsible and then, as now, is the only sure process that gives Volvo what they need,” said Haley spokeswoman Chaney Adams.

While Haley helped kill two legislative proposals this year to borrow for building projects at state agencies and colleges, she has said borrowing is acceptable for long-term projects like Volvo or Boeing.

But some lawmakers say the state does not have the capacity to borrow all the money needed for Volvo.

The S.C. Treasurer’s Office has said the state has the capacity to borrow from $50 million to, under more aggressive growth projections, $120 million for economic development.

The state will make good on the promises made to Volvo, Leatherman said, adding that agreement is not up for discussion. But how to pay for those incentives should be up for debate, the Senate leader said.

The Joint Bond Review Committee could approve issuing bonds for a smaller amount than the $123 million requested. Then lawmakers could pay cash for the rest of the promised incentives, using money from the recently declared surplus.

The S.C. House Ways and Means Committee proposed doing just that Monday, saying it wants to use $70 million in surplus money to pay for Volvo incentives. That would leave roughly $53 million to be borrowed through economic development bonds.

Ways and Means chairman Brian White, R-Anderson, said that if the Joint Bond Review Committee does approve borrowing $123 million for Volvo, the Legislature will insist $70 million in surplus money be used to immediately pay down the debt.

Haley said Monday that House Speaker Jay Lucas, R-Darlington, and Leatherman promised to go through the Joint Bond Review Committee, not the Legislature, for the incentives money.

Leatherman and Lucas signed letters in early April, saying they were supportive of economic development bonds for Volvo but did not specify the amount.

This story was originally published June 2, 2015 at 8:46 PM with the headline "Legislators to mull $123 million in borrowing for Volvo."