Friday, February 27, 2009

An Odd Perspective On SB 31

What does the Clarke County School District have in common with Georgia Power Company? They both want to fund huge construction projects by collecting the money required for them on the front end before said construction begins, that’s what.

Says an article by Shannon McCaffery in today’s Banner-Herald concerning SB 31:

Critics complain the bill allows the utility to charge consumers for interest and shareholder equity costs on two new nuclear reactors at least six years before they're completed. Backers say Georgia Power will ultimately save money by trimming some $300 million of the project's estimated $14 billion price tag.

Perhaps – I can see merit in the arguments on either side and I will reserve comment on that for the time being. But isn’t this precisely the stratagem employed by the CCSD when it issued that $50 million in bonds back in 2007?

The idea as presented at the time was specifically that of saving overall costs by borrowing the money up front, thereby incurring interest payments, but avoiding the anticipated construction costs increases that would occur over the period required for sales tax revenue to accumulate. In essence, isn't this the same argument put forth by Georgia Power Company. Should the practice be regarded as different when government does it?

For some background on the bonds, see here and here

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