- Associated Press - Wednesday, June 3, 2015

COLUMBIA, S.C. (AP) - A legislative panel on Wednesday unanimously approved Gov. Nikki Haley’s request to borrow $123 million for infrastructure promised to Volvo, but only after castigating the creative, interest-only financing required in the terms.

While the Joint Bond Review Committee’s 10 legislators authorized borrowing the full amount as Haley insisted - despite an influx of cash - they made clear they don’t want the treasurer’s office to proceed under the approved terms.

Commerce Secretary Bobby Hitt told legislators he needed authorization for $123 million to abide by the terms he wrote into the deal to secure Volvo’s first North American plant.

“Funds will be available. I assure the whole world we will do that. It’s a question of how we do it,” said Senate President Pro Tem Hugh Leatherman, R-Florence. “Would it be just as fabulous to have $123 million in cash?”

Leatherman, the panel’s chairman, called the borrowing terms an irresponsible scheme.

As written, the financing method requires paying $87 million in interest over 17 years - costing taxpayers roughly $20 million more than conventional bonding. That’s due to seven years of interest-only payments and large payments in the final years. The “extremely back-loaded” scenario was necessary to avoid exceeding the legal limit for economic development debt, said Rick Harmon, assistant state treasurer.

Stretching capacity was the only way to certify availability of the money Commerce wanted for the deal, he said, acknowledging such terms could be a first for South Carolina.

“This is the first time we’ve ever bumped the ceiling,” said Treasurer Curtis Loftis.

The unusual terms become moot if the state funds the project, at least partly, through surplus. Last week, the state’s economic advisers recognized revenues coming in above previous projections, giving the Legislature full discretion over an additional $300 million.

On Monday, the House Ways and Means Committee advanced a supplemental budget bill that would put $70 million of that toward the promised site preparations and road improvements, leaving $53 million to borrow.

If the Legislature approves that plan, the financing “becomes a very vanilla operation,” Loftis said.

The bond committee voted to ask Haley to write a letter to all legislators encouraging them to support that plan. Whether she will is unclear. She says that’s unnecessary, since she publicly said two weeks ago legislators should put surplus toward debt, roads and tax relief.

“If you choose to pay down debt, we welcome that,” Haley told the panel. “How much you choose to pay down is up to you.”

While congratulating Haley and Hitt on securing a win for the state, legislators criticized how Haley presented the deal, including a letter she wrote Tuesday to bond committee members. In it, she argued Leatherman and House Speaker Jay Lucas committed to the borrowing method through letters of support they supplied in early April.

The letters do not reference any bond amount. Leatherman noted they were written before he knew any of the terms, and before the windfall became available.

“My problem is not with Volvo. The communication in this has been horrible,” said House Ways and Means Chairman Brian White, R-Anderson.

Haley says she insisted on funding the project through economic development bonds because Volvo didn’t want the request to go through the legislative process for debate.

Such bonds must be approved by the 10-member legislative panel and a five-member finance board that Haley chairs, but not the full Legislature. Haley told legislators earlier this year she didn’t need their help in putting an incentives package together.

“It should be made clear to potential industry that there is some General Assembly required,” said Rep. Gilda Cobb-Hunter, D-Orangeburg.

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