County Issues Seventh G.O. Bond

WINNSBORO (Feb. 23, 2017) – Fairfield County Council has issued its seventh general obligation (GO) bond since February 2014. The bond, in the amount of $614,000, was recorded by the Fairfield County Clerk of Court on Feb. 9, 2017.

Like the six previous GO bonds, this one will go toward paying off the $24.06 million bond that was issued not by the County but by a non-profit shell corporation called the Fairfield Facilities Corporation (FFC).

The FCC shell was created by Council with a one-time vote on March 15, 2013 for the sole purpose of issuing the $24.06 million bond to pay for certain economic development projects Council wanted at the time, but could not afford.

Council was not at that time legally able to take on $24.06 million of debt without a voter referendum or a revenue stream sufficient to pay it back.

But a loophole in the FCC arrangement allowed the FCC to pay for the County’s economic development projects and then allow the County to purchase those projects back from the FCC through a mock installment purchase plan over 35 years.

While the County is not, technically, paying off the bond directly, according to the bond document, the County’s installment purchase payments to the FCC are equal to the amount of the payments the FCC makes on the $24.06 million bonds.

The loophole further allowed the County to make these installment purchase payments with an artificial revenue stream created from an unlimited number of GO bonds Council is allowed to issue under an ordinance it gave final approval to on April 15, 2013.

So long as the GO bonds issued do not exceed the County’s 8 percent debt limit, Council can issue an unlimited number of the bonds without voters’ permission according to the April 2013 ordinance.

Even so, the state statute provides a 20-day window (after a GO bond ordinance is passed) that would have allowed the voters of Fairfield County to initiate a petition that could have forced a referendum on the ordinance that could have halted the issuance of the GO bonds.

But while the ordinance was passed in a public meeting (by title only at each of three readings),

Council members at that time and newspaper accounts may have derailed any petition effort by wrongly, publicly and repeatedly identifying the ordinance passed on March 15, 2013; April 8, 2013 and April 15, 2013 as the $24.06 million bond, not the GO bond ordinance that was subject to the initiative petition.

Adding further confusion, then County Administrator Philip Hinely and then Director of Economic Development Tiffany Harrison were quoted in The Voice as saying the $24 million bond would not increase taxes.

But a chart obtained in 2014 from the County through a Freedom of Information Act request showed that it is actually the GO bond debt (that is continually levied each year to make the installment purchase payments on the $24.06 million bond) that will keep the County’s debt millage at an elevated level of approximately 10 mills (or about $1.27 million) each year until about 2042, at which time the debt millage will begin to decrease steadily, reaching zero by 2047.

While the County borrowed $24,690,000 to pay for its economic development projects, it will repay $43,200,663 for the principal and interest on that bond debt, according to the bond document.

Although the former County officials initially aligned the payments for the $24 million bond debt with the dates the County would begin to realize additional income from the second and third units at the V.C. Summer nuclear plant, then Interim Administrator Milton Pope noted during a joint meeting of the Fairfield County Council and the Fairfield County Legislative Delegation in 2014 that the semi-annual installment purchase payments on the $24 million bond do not depend on income from the V.C. Summer nuclear plant.

Pope said it was planned from the beginning to pay off the $24 million bond with property tax revenue from the issuance of multiple GO bonds over a period of about 35 years.