Reconsideration sought for South Carolina sewer bond ruling

A judge should reconsider a decision allowing a South Carolina county to use countywide taxes to finance a sewer project that only serves a portion of the county.

That's what opponents of the general obligation bond-funded sewer project argue in a legal motion.

In Friday's filing, the South Carolina Public Interest Foundation and several Oconee County residents asked Judge R. Lawton McIntosh, of the Court of Common Pleas in the 10^th Circuit, to reverse his decision earlier this month to side with Oconee County government, which funded wastewater improvements benefiting part of the county with bonds that are general obligations of the entire county.

The plaintiffs said the state's constitution and case law indicate that bonds that support sewer service in a limited geographical area may be issued only if a special assessment is created for that geographical area to pay for the bonds.

They cited the state constitution, which says, "No law shall be enacted permitting the incurring of bonded indebtedness by any county for sewage disposal or treatment, fire protection, street lighting, garbage collection and disposal, water service … benefiting only a particular geographical section of a county unless a special assessment, tax or special charge in an amount designed to provide debt service … for such purposes shall be imposed upon the area or persons receiving the benefit therefrom."

The $25 million of general obligation bonds issued in November 2023 pledged the full taxing power of Oconee County on all the county's taxable property.

The bonds were priced competitively though an auction won by Jefferies. Stifel was financial advisor. King Kozlarek Law LLC was bond counsel and disclosure counsel, according to the official statement. No material event disclosures about the bonds have been posted on the Municipal Securities Rulemaking Board's EMMA disclosure website.

The sewer project funded through the bond issue is to provide service to a part of southern Oconee County.

The county government's lawyers told the court the project will benefit all Oconee County citizens by creating more environmentally favorable conditions, better sanitary conditions, an increase in property values, and more favorable conditions for new industry, among other things.

The plaintiffs said case law does not allow these general benefits to justify widening the ratepayers or taxpayers to all county residents.

"To be an assessment, the improvement must confer a benefit on property distinguishable from the general benefit enjoyed by the surrounding areas," the plaintiffs cited a 1987 decision as saying.

The plaintiffs note that a sewer system was completed in 2015 serving the Golden Corner Commerce Park but that the park is still vacant and thus the county could well be wrong about the extension of sewer service providing economic benefits.

The 1987 decision indicated that a health benefit was not sufficient to support county-wide taxation, the plaintiffs said in their brief Friday. Another decision said the same about improved sanitary conditions and possible increases in property values, they argue.

McIntosh issued a preliminary injunction against the countywide taxation in August. However, earlier this month he ruled largely in favor of the county, agreeing that the sewer system would bring a general benefit to all the county's residents.

The South Carolina Public Interest Foundation and 12 taxpaying residents are the plaintiffs in the case. James Carpenter for The Carpenter Law Firm is their attorney.

Lane Davis, attorney for Oconee County at Maynard Nexsen, didn't immediately respond to a request for a comment.

The state constitutional prohibition against out-of-area taxation for sewers also applies to bonds supporting fire protection, water service, garbage disposal, and other uses benefiting particular geographical areas of counties, the plaintiffs argue.