BRADENTON, Fla. - Richland County, S.C., has set aside funds to pay off a $50 million bond anticipation note amid a probe into what state officials claim are improper expenditures of revenue of a local 1-cent transportation sales tax.
The county's move last week followed steps taken by the South Carolina Department of Revenue in April to halt distributions of the tax revenue after the county disputed the state's allegations that funds have been "misappropriated."
By making sure funds are available to pay the one-year BANs that mature Oct. 15, investors are not at risk, Moody's Investors Service said Monday.
"The move is credit positive, given the timing of South Carolina Department of Revenue's decision to freeze quarterly [transportation tax] payments to the county pending an ongoing investigation," said Moody's analyst Edna Marinelarena.
The BANs are general obligations of the county backed by the 1% sales tax voters approved in 2012 to raise $1 billion for transportation projects over 22 years.
The county had planned to roll over the BANs for another year until taking them out with a long-term bond issue in 2017, Moody's said.
Daniel Driggers, county chief financial officer, did not immediately respond to requests for comment about the matter.
Moody's rates the BANs MIG-1, and S&P Global Ratings rates them SP1-plus.
Richland County, home to the state capital in Columbia, had not disclosed the investigation on the Municipal Securities Rulemaking Board's EMMA filing system as of Tuesday.
The SCDOR began collecting the transportation tax May 1, 2013, and completed a seven-month investigation in December assisted by county officials, documents show.
"Council has misappropriated a significant amount of penny revenue and is scheduled to spend millions of additional dollars over the next several years for expenditures falling outside the parameters of the transportation tax laws," SCDOR Director Rick Reames wrote in a
The letter outlined a series of problems, including the county council's exemption from procedures and authorization of certain payments to the Project Development Team that Reames said "raises questions of potential public corruption and fraud."
Reames' letter did not specify what his agency found that constituted public corruption and fraud, though the letter said information had been referred to law enforcement.
SCDOR also found multiple instances of illegal activity by individuals and/or companies associated with the Penny Program, Reames also wrote.
No details were given about the activities in question, and Reames said his agency "is proceeding with cases as is appropriate."
Reames also said that certain expenditures appeared to fall outside the parameters of tax laws and county ordinances.
Questions have been raised about the council's use of transportation tax revenue on a countywide Small Local Business Enterprise Program, Reames said, as well as the hiring of two firms to provide public information services even though the county has its own public information office.
"We are both shocked and alarmed that DOR has found potential evidence of public corruption and fraud along with other illegal activities," McDonald said in a
Richland will fully cooperate with any criminal investigation, the administrator said, and will reimburse the transportation tax fund if the penny tax was "mistakenly" used to fund inappropriate expenses.
McDonald's six-page letter also included a long list of questions seeking further details about questions raised by Reames.
According to Moody's, the county council is considering filing a lawsuit against the DOR.
"If the matter is not resolved by October, when the BANs are due, the county's early restriction of sufficient funds to pay off the BANs ensures that BAN investors are not at risk," Marinelarena said.
On May 5, Richland County resident Rusty DePass and the South Carolina Public Interest Foundation mailed a lawsuit to the county, according to The State newspaper in Columbia.
The suit seeks to block Richland from spending any more transportation tax revenue until the county complies with local and state laws, according to the paper.
