Is it possible for Richland County to implement major community improvements without raising taxes?
Though the idea understandably sounds atypical for government, that is precisely the goal of Richland Renaissance. Since the County announced plans for its sweeping capital improvement and community revitalization initiative, questions about the financing abound. Some even have hinted at George H.W. Bush’s 1980s quip about “voodoo economics” to describe the County’s financial plan.
There’s no voodoo. And the only economic wizardry exhibited is the financial acumen displayed to protect Richland County taxpayers.
Before digging into all the details, it is worth noting the County’s proposed Biennium Budget I was not only balanced, it did not include a tax increase. The County’s first-ever two-year budget laid a foundation of paying for initiatives with no tax increase for the general operation of the County. By the time Richland Renaissance moved from an interesting notion to a great possibility, the practice of using available resources to achieve a financial goal was common under County Administrator Gerald Seals since he came aboard in mid-2016.
Now that you have all the pre-requisite information, following are the basics of Richland Renaissance finances:
No. 1: The COST: Some amazing figures have been bandied about, but the County’s bottom line for Richland Renaissance is estimated to cost $144 million – unless Council votes to increase it. The project will be paid for with cash already in the bank and the issuance of bonds paid for by existing millage. It should be noted, too, that Richland Renaissance calls for private-public partnerships and those arrangements will cover the cost of some anticipated projects. In summary, using only available resources to finance projects means even debt payments will be made using revenues available within the County’s current millage. No magic or voodoo – just sound financial planning.
No. 2: on-hand cash: The County’s financial team was restructured in 2017 to put the County’s financial house in order. In doing so, a variety of inadequacies were fixed to improve tracking of expenditures (money paid out) and revenues (money brought in – taxes and fees). In short, the financial team uses modern financial strategies, including cost savings, to identify needs and the money to fund them. The team identified $17 million in on-hand cash for Richland Renaissance. And consider this: The price tag for the Columbia Place Mall component of Richland Renaissance is estimated at $20.7 million. That means a whopping 83 percent of the cost to move core government operations to Columbia Place Mall can be covered with cash already on hand.
No. 3: More Funding Sources: Another important source of funding will be money received from the sale of County properties. These funds also will assist in reducing the amount that will have to be borrowed for the project.
No. 4: learn the LINGO: In addition to $17 million in on-hand cash, funding sources for Richland Renaissance are preliminarily expected to also include proceeds from one or more series of Bond Anticipation Notes (BANs) and/or Installment Purchase Revenue Bonds (IPRBs). Both BANs and IPRBs are common types of debt instruments used by local governments.
BANs are outstanding for no longer than a one-year period. At the end of one year, the County may pay the interest on the BAN, roll it into a new BAN and add any additional money to the new BAN that it needs for that year. The benefit of the BAN is that the County prepares a budget in advance so that it knows how much money is needed for the project(s) during a 12-month period. By matching the budget with the amount of the BAN issued each year during construction, the County is only paying interest on the money it needs for that one year while the projects are being constructed. Borrowing the necessary money on a short-term basis reduces the total borrowing costs of the County, thus saving valuable resources for other projects.
When the projects are complete and the last BAN comes due, the County will refinance the amount of debt outstanding from the BAN with an IPRB. While the number of years the IPRB will be outstanding has not yet been determined, it will likely be somewhere between 10 and 20 years. The good news is the annual debt payments will be paid by a portion of the millage that is currently levied and will not require a tax increase. How does that work? Quite simply, some of the County debt that we have now will be paid off, and we will use the millage that was used for the old debt to pay for the IPRBs. IPRBs do not count against the County’s debt ceiling, so that it is preserved for the future.
No. 5: Short-term, long-term: Richland County will rely on BANs and IPRBs to fund Richland Renaissance. However, because Richland Renaissance has a significant amount of available financial resources on hand, the County can delay issuing additional debt for the project. That means the $17 million we mentioned earlier will be used to launch Richland Renaissance well before more funding is needed. Once the project’s on-hand cash is expended, the proceeds from the BANs – about $127 million – will be used for four years, from 2018 to 2022. After that, the IPRBs step in. The BANs will be paid off with the IPRBs, which will be issued to fund Richland Renaissance for a period of time much shorter than the useful life of the project.
No. 6: nothing will be overlooked: Anyone concerned about Richland Renaissance impacting other County projects, can rest easy. Richland Renaissance will not disrupt the County’s ability to proceed with its planned capital needs. The transportation program is not connected financially to the Richland Renaissance project. Other capital needs, such as new magistrate offices, are factored into the funding plan for Richland Renaissance.
In closing, here’s something you should know: For several months leading up to the December 2017 announcement of Richland Renaissance, County Councilmembers attended several meetings and workshops, and received briefings, documents, emails and other communications about the project to ensure they had ample opportunity to ask questions about the merits of the financial plan. In other words, the men and women representing you on County Council were schooled in the economics of Richland Renaissance.
We want you to be just as informed. The public is invited to attend a community meeting on Richland Renaissance beginning 5:30 p.m. Tuesday, Feb. 13 at Columbia Place Mall on the second floor of the former Dillard’s store. Email pio@rcgov.us for more information. Additional community meetings are being planned.