Efficiency, Taxpayer Value at Heart of Santee Cooper Issue
May 4, 2005
Our campaign was based on the notion that many things need to change in South Carolina if we’re going to prosper as a state. A lot of people agree with this notion, yet too often when my administration attempts to bring about change, there’s an immediate attempt by the legislative branch to prevent it from happening.
For example, last month we proposed looking at whether private companies might do better at running a golf course the state currently owns and operates. Our objective was simple – to see if they could do it for less than the state, thus saving taxpayer dollars. Yet in keeping with the legislative micromanagement we too often see in Columbia, House budget writers responded by writing a provision that would prevent our own Cabinet agency from even looking to see if this money could be saved!
But if you think that’s crazy – you ain’t seen nothing yet. Just this week, the State Senate approved a measure that would once again tie my hands in proposing change – this time at Santee Cooper. Basically, this bill would hand the decision-making keys of Santee Cooper from the executive to the legislative branch.
This bill is not advancing because I replaced several Santee Cooper board members. That was done on a larger scale by my predecessor. What’s different this time is we actually looked under the hood and proposed changes. Specifically, here are three things that upset people who’d rather leave things as they are:
1. Santee Cooper’s board did what we asked every board to do – look at expenses. They found Santee Cooper was spending $90,000 a year at the Heritage Golf Tournament, buying box seats at the Family Circle Tennis Tournament for board members, holding onto 20,000 acres and $20 million of surplus land and paying for image advertising in a captive market. Each of these savings accrued to ratepayers and taxpayers because the board shares my belief in sending as many dollars back to them as possible. For instance, $7 million was returned to the co-ops. I wonder if rate-payers have seen their rebate check from that $7 million?
2. The board looked at sponsorships and giving practices, limiting both. Historically, Santee Cooper gave a few million dollars away each year, yet the board was confronted with three difficulties in continuing this if they were going to simultaneously watch out for taxpayers and ratepayers. First, the Constitution is clear in saying only the General Assembly can appropriate state funds, which begs the question of constitutionality since Santee Cooper is a state agency. Second, most giving was isolated in five counties along the coast, yet there are 41 other counties in the state. What about deserving charities in Greenwood or Rock Hill? Finally, if we agree this is ratepayer (not taxpayer) money, why not give it back to the ratepayers and let them decide which charities they want to support?
3. Third is the market study. On this issue people have generally brought up one of two concerns. The first is, “Mark, I heard from my neighbor that this is part of a secret plan to sell off Santee Cooper.” That simply isn’t possible. Any plan to sell Santee Cooper would have to go through the Legislature – a very public process. Also, anybody who knows me or has followed my time in public life knows that whether my proposals win or lose, I’m not afraid to put them out there simply because they’d upset certain institutions.
The second concern is, “Why have an investment bank do the study?” I’ve consistently said Santee Cooper ought to return a higher yield to the taxpayers. Appropriate yield is a question of value, and an investment bank that’s in the market would have the best take on value. A $10 return on a $100 asset would be a reasonable 10% return. A $10 return on $10,000 asset would be a very low return. To be fair to Santee Cooper and every other stakeholder involved, you better know value when you talk yield.
We’ve been very consistent in focusing on value in all parts of government. In our budget, we broke down ALL activities of government, ranking over 1,500 of them in terms of value and return. Ignoring Santee Cooper wouldn’t have been consistent given that we looked at all the other assets owned by the state.
So where does this leave us?
First, there will obviously continue to be critics of our reforms, but it’s worth noting that some of the loudest critics receive the most from Santee Cooper, which presently pays over $1,000,000 a year in retirement for former management. In fact, one individual will receive $400,000 a year for the rest of his life – which in present value terms amounts to a $20 million retirement package. When I see those numbers, I question whether certain efforts to maintain the status quo are really about the ratepayer.
Second, this bill is a lot like killing a fly with a bazooka. It started as a way to tie my hands in proposing change but has morphed into something that gives away the keys to Santee Cooper. That’s great if you’re one of the co-ops who get those keys, but a lot of South Carolinians aren’t. What happens to them? This bill is simply destructive to Santee Cooper and it needs to be stopped in the House. I’d urge you to call and ask your Representative not to give away the keys to a utility that belongs to us all. And while you’re calling, you might also ask them to get out of South Carolina’s 200-year-old tradition of hog-tying its governors.
Mark Sanford is governor of South Carolina.