WHY THE RUSH TO PUT FUTURE TAXPAYERS 120,000,000 MORE DOLLARS INTO DEBT?
The news broke this week that Boeing plans to expand its existing North Charleston campus to include an information technology “center of excellence.” The expansion, according to a company spokesman, will create 2,000 jobs. State lawmakers quickly announced plans to issue $120 million in bonds to “help offset some of Boeing’s upfront expansion costs.”
The bond bill was introduced as soon as the news got out. It would provide Boeing with $120 million derived from the sale of state bonds. In effect, taxpayers would be borrowing the money to give to the company, then paying it back over time with interest.
At this point, there are no details of any specific agreement that may be in the preparation process.
South Carolinians’ bond debt alone totals $11 billion, and according to State Budget Solutions when pension liabilities are included the state’s total state debt is $54.1 billion. The new bond bill would add the $120 million to that number, plus at least an additional $15 million in interest. As of 2012, taxpayers were paying $187 million a year on debt service alone.
On Tuesday, April 9, the bond bill passed the Senate Finance Committee hours after it was introduced and without a subcommittee hearing. Then on Wednesday, April 10, the Senate passed the bill on the floor in a 37-6 vote.
Lawmakers and the governor owe it to taxpayers to obtain some basic information about the projected cost and return on investment, including:
(1) Details regarding how the investment will be spent.
(2) A substantive, independent cost-benefit analysis conducted in order to determine the return on investment. The introductory language in the bill states that “such benefits outweigh the costs of such infrastructure” – the evidence that supports that conclusion should be provided to legislators and the public.
(3) The number of projected jobs and salary ranges the investment would create, and the number of those jobs that would likely be filled by South Carolinians.
(4) The projected “multiplier effect” and the assumptions upon which it is based, including the number and nature of businesses the investment is projected to affect.
(5) Verification that the company has met all required targets set by previous incentives agreements.
(6) A reporting plan to provide detailed information to the public on the return on investment.
(7) An analysis by legal experts to assure the legislature that the bill meets the constitutional requirement that the credit of the state shall not be “pledged or loaned for the benefit of any individual, company, association, [or] corporation” (Article 10, Section 11).
This is not a small investment of capital, particularly given that it is borrowed capital that will have to be repaid with interest by the citizens of this state. Elected officials have a fiduciary duty to citizens to conduct thorough due diligence before investing public money in any enterprise. The practice of investing public dollars into private companies should be discouraged – politicians should not be tampering with the free market. At the very least, however, they have a responsibility to take all the steps necessary to demonstrate a clear, provable benefit to taxpayer-investors.