STATE SHOULDN’T RAISE TAXES WITH MULTI-BILLION DOLLAR ASSETS ON THE BOOKS
It seems unbelievable that South Carolina should be struggling to come up with enough money to pay for road repairs; federally mandated educational improvements, and many other critical needs when the Palmetto State has one of the largest cash assets in the United States.
I’m referring to Santee Cooper, our entirely SC-owned power utility.
Santee Cooper is a fantastic state asset. It is the third largest government-owned power utility in America, following Bonneville Power and TVA (both of which are owned by the federal government).
How much is Santee Cooper worth? Back in the 1980s, when I worked for SCANA Corporation, I did a study for SCE&G’s Chairman, Virgil Summer. The study was to determine how much Santee Cooper was worth, and how much we should offer to buy it.
That number was approximately, $2.5 billion dollars.
How much is Santee Cooper worth today? According to its 2014 Annual Report it has approximately: $11.2 billion in various assets, income of $1.5+ billion/year, and an A+ credit rating. Debts and other liabilities could probably be extinguished in a sale – thus making Santee Cooper worth well over $10+ billion dollars.
Another way South Carolina could partially cash out is by taking Santee Cooper public. Our state could possibly obtain as much as $7 to $8 billion and still own the controlling 51 percent of the stock – the value of which would continue to grow over time. The timing is perfect, as investors are desperate for new, solid A+ investments.
What would the sale of Santee Cooper cost our state? Basically, nothing. SCE&G and Duke Power’s rates are about the same as Santee Cooper’s – meaning ratepayers would see little difference. Meanwhile local Co-Ops under existing contracts would still get their power from Santee Cooper as usual. Job losses at the utility would be minimal, as it runs a very tight operation.
What other benefits are there to South Carolina? As the title of this column suggests, lawmakers would not need to borrow any money, raise gas taxes or property taxes to repair the roads, or meet the lost federal lawsuit requirements along the I-95 “Corridor of shame.” If our state invested the money it would return much more to the State Treasury than the approximate $20 million dollars Santee Cooper annually pays today.
There would be billions of dollars leftover for the state’s reserve fund – and the utility’s new owners would pay taxes, which Santee Cooper does not pay in the counties it serves. In fact this is one of the big reasons Santee Cooper’s coverage areas have poor schools. They are deprived of the taxes on physical plants that SCE&G and Duke Power pay out to each county. In fact: SCE&G and Duke are among the largest taxpayers in the Palmetto State – even though their rates are among the lowest in the USA. For example: SCE&G paid Lexington County alone $33 million in 2014. That’s $13 million more that Santee paid for its operations in the entire state. Thus, a sale would guarantee future tax revenues for all the counties it serves while relieving the rest of the state’s taxpayers from having to meet the federally mandated differences.
In summary: South Carolina gets billions of dollars, doesn’t have to sell bonds or raise taxes, poor counties get much needed tax money, rates stay about the same, and our government could still own the controlling 51 percent of the company. It sounds like a no brainer to anyone with common sense.
But, as Virgil Summer warned me years ago getting our state to sell Santee Cooper is a political land mine. It has lobbyists (paid for by taxpayers) working Columbia 24/7/365, and has convinced the public that nothing needs to change. The entire legislature is petrified to even investigate a sale, much less propose one be undertaken.
South Carolina shouldn’t sell bonds or raises your personal property taxes – or raise gas taxes – while at the same time owning vast cash assets. It’s like taking out a second mortgage on your house for repairs when you have a stash of gold in a bank vault. It makes no sense. For the benefit of all South Carolina citizens we need to either sell Santee Cooper, or take it public.
William A. Byrd, Senior P.E., C.S.
President, PrivaCom Ventures, Inc.
William: Great column. This website has been supportive of selling Santee Cooper for years. Thanks for offering these insightful views within the context of the gas tax debate.
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