The credit crunch threatening financial markets around the world is starting to affect the way local governments do business.
City, county and school district officials are taking steps to cope with an economic downturn that is forcing them to make some difficult decisions. Among the examples:
- York County postponed a $45 million bond sale late last month. Typically, six or seven banks bid for county bonds, but only one pursued this one, and the interest rate offered by that bidder was too high, said York County Council Chairman Buddy Motz. The county hopes the market will improve in coming weeks so officials can put the bond out for bid again. The money is needed to pay for several projects, including road construction and building a prison. The county doesn't expect any delays on those projects while it waits.
"We're in the midst of a real credit crisis, not just in this country, but worldwide," said County Manager Jim Baker. "We're simply waiting for a more favorable market position."
Digital Access for only $0.99
For the most comprehensive local coverage, subscribe today.
- Rock Hill schools this month also delayed selling bonds. On Oct. 1, the district was scheduled to sell about $17 million in bonds, which voters approved in a 2005 referendum. The money is spent on construction projects.
The district's bond attorney hasn't set a new sale date.
"Hopefully, it will be done after the markets settle," said Bill Mabry, associate superintendent for administrative services. "I think the whole country is in uncharted waters. This is new to us, too."
- The city of Rock Hill issued a $14 million bond anticipation note last month to pay for various utility projects, including an electric substation. Three to five lenders typically turn in bids offering to issue the loans. This time, the only viable offer came from Bank of America.
The good news, said city finance director David Vehaun, is that the 3.78 interest rate is in line with past utility system interest rates.
"The size (of the note) was such that many of the local banks were not interested," Vehaun said. "Wachovia is usually a player, and I think Wachovia obviously was just not in a position to issue a bid with all the things they have going on."
Vehaun said he expects local banks to take part in smaller financing deals in the next few months.