Credit agencies asking questions since DOT cash-flow problems emerged last month

Curtis Loftis

COLUMBIA -- Everything from school buildings and road construction to bridge repair and college dormitory construction could ultimately be affected by the state Department of Transportation's cash-management troubles, Treasurer Curtis Loftis said Thursday.

The first-term Republican said credit-rating agencies have been asking questions about the $52 million federal "bailout" the Transportation Department sought last month.

The department asked the federal government for the cash advance, which is 12 months worth of reimbursements from the federal government on construction projects.

The further reliance on federal money could harm South Carolina's credit rating, which determines how much the state can borrow and at what interest rate, Loftis said.

"We talk to all credit rating agencies virtually every week," Loftis said. "We are constantly giving them information, and these are questions that are naturally being asked. I raise these concerns as being part of why DOT should be more transparent and more accountable."

Moody's Investors Service threatened in July to downgrade South Carolina's sterling AAA credit rating along with that of the United States, as the deadlock between Congress and President Barack Obama on a debt solution dragged into the 11th hour.

South Carolina was one of five states in that situation, in part because of the state economy's reliance on federal cash.

A spokesman for Moody's wouldn't comment Thursday about Loftis' comments, except to say that the agency's conversations are confidential.

Loftis said the Transportation Department has not provided him with the detailed explanation he requested nearly 50 days ago to explain why it fell behind on payments for major construction loans and why it was so late this summer in paying the men and women who build and repair the state's road for their work.

The department has posted weekly updates online that outline its financial situation, and Transportation Secretary Robert St. Onge has testified to legislators about his actions to correct the situation.

St. Onge and his staff also have responded to Loftis, but not to the treasurer's satisfaction.

St. Onge works for Gov. Nikki Haley. Loftis and Haley have clashed several times since they were elected in November.

Rob Godfrey, Haley's spokesman, said the governor has been attentive to the situation.

"We appreciate that Treasurer Loftis shares Governor Haley's concerns about the long-term fiscal health of our state, and to that end, the governor has met with the credit ratings agencies personally and led the fight to reform the retirement system," Godfrey said.

"As to DOT specifically, the governor has been very clear. We can and will reform the agency so that the cash-flow problems that have come from years of authorizing too many projects and spending our reserves will never happen again."

William Hauk, an economics professor at the University of South Carolina, said the economy has created a double whammy for the Transportation Department, with state and federal gasoline taxes taking a hit at the pumps.

Hauk compared the state's credit rating to an individual's credit score. The same principle applies. If the state's credit rating is downgraded, South Carolina would have a harder time borrowing money and it would pay higher interest rates on its bonds, Hauk said.

"That's what's at stake," he said.

Loftis noted that the state's credit rating will not rise or fall on one factor alone, but he said the Transportation Department's financial management exacerbates the situation.

Reach Yvonne Wenger at 803-926-7855, follow her on Twitter at @yvonnewenger and read her Political Briefings blog.