County Quiet on Bond

WINNSBORO – After The Voice reported three weeks ago that the County had issued another general obligation (GO) bond on Aug. 7, little information has been forthcoming from the County about what much of the $1,156,000 bond is being used for.

More than Enough

The Payment Certificate related to the Aug. 7 bond states that it is earmarked to pay one or more installment payments to the Fairfield Facilities Corporation (FFC) (to be used toward pay off of the $24 million bond) and the costs of issuance. But the amount of the Aug. 7 GO bond far exceeds the amount of money needed for the Council’s $453,472 installment payment to the FFC that was due Sept. 1.

So far, County Administrator Milton Pope has not answered The Voice’s emailed questions as to how, specifically, the remaining $702,528 is to be used, except to say that $20,000 of it was an issuance fee paid to the County’s bond consultant, Parker Poe. When pressed further, Pope referenced the County’s ‘Projects’ that are being constructed with the $24 million bond proceeds and wrote that an “upcoming presentation will give adequate detail to all aspects of the bond and therefore at least settle the factual discussion about the matter.” He said that presentation will be made at the Sept. 22 Council meeting.

Lingering Questions

The mystery surrounding the disbursement of the new GO bond is exacerbated by a number of issues. It appears the County never explained publicly or early on the details of the role of the FFC, the intricacies of the $24 million bond’s purchase/payment process or that the new semi-annual GO bonds were even coming down the pike. To justify the issuance of the $24 million bond, there have been revelations of late by County officials that the bond ‘almost’ obligates the future revenue from the two new V. C. Summer reactor units in case there were a raid (by other communities in the state) to take away a portion of those moneys from Fairfield County. And in response to complaints that the County has not been open about the entire bond process, Pope insists that the GO bonds were discussed at several meetings when Ordinance 614 (providing for the GO bonds) was on Council’s agenda in March and April 2013. However, while the ordinance is on file, there is so far no evidence that the particulars pertaining to the issuance of GO bonds to help pay off the $24 million bond were discussed in any detail so that the public would be fully informed on the matter. The Voice has filed a Freedom of Information request with the County for the digital recording of the March 25, 2013; April 8, 2013 and April 15, 2013 Council meetings in which Ordinance 614 and a Resolution establishing the Fairfield Facilities Corporation were passed.

In an interview with The Voice on Aug. 18, County Council Chairman David Ferguson (District 5) complained that a news story about the bonds that appeared in the Aug. 15 issue of The Voice was not accurate, but he declined to clarify what in the story was inaccurate.

Ferguson said he was not sure what the proceeds of the $1,156,000 bond are to be used for.

“I’m not a mathematician,” he said. “You’d have to get that information from Michael (Kozlarek, the County’s bond consultant representing Parker Poe) . . . but he won’t talk to you. It’s not in his contract.”

When one of Columbia’s top bond attorneys, who asked not to be named, was asked to speculate on how the new GO bond proceeds are possibly being used, other than to pay for the $453,472 installment payment on Sept. 1, he replied, “I can’t figure out what they’re doing.”

While he said he would not presume there were any illegalities in the matter, he had a number of questions including why the two new GO bonds were being stretched out to a 7-year pay off instead of a standard 1-year pay off. He also said it looks like Council is trying to manage its debt millage so that it doesn’t go down or up “by staying within the tax burden that the people (property owners) already have.”

A Misunderstanding

At a special meeting between the Council and the Legislative Delegation on Aug. 18, Pope blamed what he calls a misunderstanding about the County’s bonds on the media.

But the County’s critics say some of the County’s information about the bonds has been faulty. Following Council’s meeting on March 25, 2013, then County Administrator Phil Hinely was quoted in both Fairfield County newspapers as saying that the Council passed a $24 million bond. Pope has recently clarified that it was not the County, but the Fairfield Facilities Corporation that issued the bond. Hinely was also quoted in the newspapers as saying that the $24.06 million in bonds Council voted on aren’t necessarily ‘new’ bonds, but are a ‘rolling over’ of the 2009 bonds that kick-started the County’s 10-year economic plan. Therefore, he said, they don’t come with a tax increase.

Asked to explain the ‘rolling over’ of the 2009 bonds, two of The Voice’s sources for bond information said that explanation did not make sense.

The FFC has been described to The Voice by various government officials as a non-profit, shell corporation created by Council to borrow more money than it could otherwise legally borrow within its constitutional debt limit, which is equal to 8 percent of the assessed value of taxable property in the County. For Fairfield County, that limit as of March 2, 2013 was $4.5 million. That will decrease with each new GO bond issued unless the previous GO bond(s) are paid off.

Bond Mechanics 101

The purchase/payment process set up through the FFC is convoluted on every level. According to the bond document, after the FFC issued the $24 million bond, it will use the proceeds to construct or renovate the ‘Projects’ (See box at right) for the County. The FFC retires the $24 million bond debt with the semi-annual installment payments it receives on March 1 and Sept. 1 each year from the County. Each of the County’s payments are equal to the amount the FFC pays to retire the $24 million bond.

The Council has agreed to make those semi-annual payments with a portion of the fee-in-lieu-of-taxes (FILOT) it expects to receive from two new reactor units under construction at the V.C. Summers nuclear facility. At the time of the agreement, those units were scheduled to be placed into service in 2017 and 2018, respectively, with the first revenue from the units expected to materialize in 2019 according to the bond document. Since the County had to find an additional source to make payments until the FILOT revenue materialized, the installment payments from 2013 through Sept. 1, 2020 were kept low, at about $450,000 semi-annually or about $900,000 annually. On April 15, 2013, Council passed Ordinance 614 that would allow it to issue as many GO bonds as it needed (without voter approval) to provide for those installment payments so long as the amount of the GO bonds did not exceed the County’s bonded debt limit.

In 2021 the annual installment payments jump to $1,670,106. Adding to the County’s financial burden, in 2019 it will be taking on other large bond related expenses including a payment of $1,670,106 to the $24 million bond’s Secondary Reserve Fund. And that same year it will owe the last payment ($102,919.41 plus interest) on the $769,177.88 GO bond issued Feb. 14, 2014 and the last payment ($139,305.05 plus interest) on the recently issued $1,156,000 GO bond.

Many questions remain, like how is the County paying for the new GO bonds since Pope has said no new taxes will be levied to pay for them?

While the County is counting on the FILOT revenue to start coming in before the larger installment payments on the $24 million bond are scheduled to begin March 1, 2021, there are no guarantees. It was recently announced that, because of construction delays, the first revenue from Units II and III has now been backed up to late 2020 or possibly early 2021.