South Carolina judge rules against sewer bonds

A county in South Carolina cannot use bond proceeds for a sewer system that benefits only part of the county, a judge ruled, saying it should create a special tax district so only those who will use the system will pay for it.

The state constitution bars this practice, Judge R. Lawton McIntosh said in granting a temporary injunction Monday in the Court of Common Pleas in the 10^th Circuit in Oconee County, the western most county in South Carolina. He noted the need for an expedited trial.

The county sold $25 million of general obligation bonds in November 2023 to provide funding for building a sewer system in the southern part of the county.

The South Carolina Public Interest Foundation and several others sued Oconee County.

“The county may not use bond revenues for sewer project(s) that will only benefit the southern part of the county while taxing the entire county,” McIntosh wrote. “To meet our constitution’s mandate, the county must create a special tax district specific to the area that stands to benefit.”

James Carpenter, attorney for the plaintiffs, said the defendants requested a transcript of a case hearing, a sign they plan to appeal the injunction. In South Carolina defendants can appeal injunctions.

The state constitution 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 or any other service or facility benefiting only a particular geographical section of a county unless a special assessment, tax or service charge in an amount designed to provide debt service on bonded indebtedness or revenue bonds incurred for such purposes shall be imposed upon the area or persons receiving the benefit therefrom.”

Carpenter said the judge’s ruling is relevant for the rest of the state.

Among the defense’s arguments was state law required any challenge to bonds to be presented within 20 days of the bond’s filing and indexing. The judge rejected that argument, saying the case was not about the issuance of bonds but about bond money use.

Lane Davis, one of the defense attorneys did not immediately respond to a request for a comment.