Carolina Station July 19, 2008 Situation and Suggestions

8/11/08 Update: Blue text additions and clarifications in International Paper Study Fiscal Impact/County Model Calculation Comparisons section

Carolina Station July 1 Third Reading and International Paper Study

Only reconsidering the vote will reverse the approval of the Carolina Station development and its development agreement at the July 1 Horry County council third and final reading on Carolina Station.

At that meeting, Will Garland, chairman of the Horry County Board of Education, pled with Horry County council to defer approval of the Carolina Station development and its development agreement so the school system could renegotiate the development agreement on the basis of the Residential Improvement District Act. That act that passed only last month allows a development to be put into a special tax district so that the development itself pays for the public facilities including the public school facilities it requires. Only a councilman who voted with the majority to approve at the July 1 meeting can move to reconsider at the next, July 22, council meeting before the minutes of the July 1 meeting are approved

At the July 1 council meeting, Eddie Rodelsperger, chief construction management officer of Horry County schools, followed chairman Garland by relating the school district’s previous experience with Carolina Forest when International Paper said that Carolina Station was to be a retirement community. which proved false. Rodelsperger estimated that four school facilities would be needed to serve the needs of Carolina Station students: two elementary schools, a middle school and a high school. And he estimated the cost of those needed facilities to be $125 million. This comes out to $9,057.97 per home for the 13,800 homes to be built in Carolina station.

Four other members of the school board attended to support chairman Garland’s request for deferral: MaryEllen Greene, Joe Defeo, Kay Loftus and Chris Shannon. Joe Burch, coordinator of planning for Horry County schools, was also there in support.

Councilman Grabowski asked if the school system’s operating expenses would not outweigh the public school facility costs. Rodelsperger said that they would. The sales taxes that are supposed to cover school operating expenses would not do so for Horry County because much of the one-cent additional sales taxes collected for that purpose in Horry County is sent to the state to be distributed to other less affluent counties.

Dr. Don Schunk of the BB&T Center for Economic and Community Development,presented the results of an economic study funded by International Paper: “Economic Impact of Carolina Station on Horry County, SC.” That paper focused on the direct, indirect and induced economic benefits to those associated with the construction industry and its suppliers due to Carolina Station’s construction and its construction workers spending in the economy.  It claimed continuing economic benefits simply due to the presence of the people added to the county by Carolina Station’s construction. It also claimed a positive fiscal impact on the Horry County budget and thus our taxes in sharp disagreement with a greater negative fiscal impact output of the Horry County fiscal impact model.*

Jim Paulin’s promised opportunity to speak in response to the International Paper economic study report was thwarted by a motion to cut off debate.

The council immediately voted against deferring the development agreement. Those voting for deferral for the 60 days that Garland requested were: Ryan, Schwarzkopf and Worley.

Then it voted to approve the Carolina Station development. Those voting against development approval were: Ryan, Schwartzkopf, Worley and Barnard.

Even though it could be viewed as a moot point, the vote for approval of the Carolina Station development agreement followed on the agenda. Those voting against development agreement approval were: Ryan, Schwartzkopf, Worley, Barnard and Gilland.

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* International Paper Study Fiscal Impact/County Model Calculation Comparisons

8/11/08 Update: Blue text additions and clarifications

The International Paper model adds what it calls Full Time Equivalent (FTE) tourist numbers to the number of county residents to determine the county cost per resident. This significantly lowers the cost per resident from what it would be if FTE tourist numbers were not included. Then it takes only its estimated full time residents in Carolina Station times that number. Using only the current number of county residents without regard to tourists, if one accepted the International Paper model's other conclusions, would change its claimed surplus of approximately $2M annually to a loss of more than $6M annually.

Both the International Paper study and the county fiscal impact model consider that the county average of 38.6% non-owner occupied homes (that yield at least half again [6% compared to 4% -- not including other tax relief]) the property taxes for Carolina Station that is ten miles from the ocean. This may unrealistically boost the revenues from Carolina Station.

The county model’s assumption of more people per home than the International Paper Study would increase the net Carolina Station cost calculation, but not apparently to the degree that the International Paper FTE tourist population assumption decreases its calculated Carolina Station costs.  If everything else were equal, the International Paper study approach would show greater revenues than the county model because it uses the revenues it calculates for the 20th. year into Carolina Station development while the county model averages the revenues over the 20 years by dividing the cumulative revenue over 20 years by 20. This would cause a lesser net fiscal impact number in the International Paper study. But it appears that the International Paper study techniques would still show a positive fiscal impact due to its FTE tourist population inclusion lowering its calculated per person cost and hence its Carolina Station calculated fiscal cost.

At this writing, I have not gotten information on whether there may or may not be disparities between the two models, say in the estimated revenues from Carolina Station’s commercial sector. The county fiscal impact model could be said to have more credibility as to fiscal impact than the International Paper economic model’s fiscal impact section in that it uses more specific assumptions and less generalized data than the International Paper model does.

The real world problem with either model is that neither considers the costs of public school facilities, nor the added operating costs for schools. These costs outweigh the other costs. Even if one were to accept the fiscal gains otherwise claimed in the fiscal portion of the International Paper report, those claimed gains would be lost in the mud.  

There are no state tools available for the county to divert the taxes to cover the additional school operating costs required by new developments from the rest of us. However the recently passed Residential Improvement District Act provides a tool to at least divert the taxes required to cover the Carolina Stations required additional public school facilities from the rest of us to the Carolina Station residents.

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Overall Comments

There is no real world way that population growth can be provided the same level of services as the rest of the county without increasing taxes. The situation is even worse in South Carolina because of the constraints that the state places upon county governments.

We all agree that people have a right to live where they want to live and property owners have the right to profit from their properties.

The best that Horry County council can do is use the tools that the state of South Carolina provides. Rather than elaborate on the state constraints that can not be overcome at the county level, it should do the best that it can.

The S. C. Residential Improvement District Act passed last month makes it possible to reach an agreement with landowners who want to develop their land in which they agree to put their land in a special tax district that requires buyers to pay for the public facilities that they require. This is the first time that any S. C. legislation inarguably allows the taxes on public school facilities to be shifted from the rest of us to the developments that require them.

The Residential Improvement District Act provides many benefits to developers. It was introduced to the General Assembly by a representative who is a real estate developer. It is a tool that shows great promise, and should be utilized with appropriate safeguards in the required agreement with developers wherever and whenever possible.

What County Council Should Do

County Council should do what it can to have developments pay more of the added taxes their added costs require. That includes, where state law allows, requiring developing landowners agreement to put their land in a residential improvement tax district and otherwise using impact fees (that unfortunately, under the S.C. statute can not include school facilities). Right now this means reconsidering Carolina Station’s development approval and development agreement approval and insisting that International Paper put the land upon which Carolina Station is to be developed in a residential improvement special tax district requiring buyers to pay for the public facilities, including public school facilities, that they require.

Would International Paper Walk Away? – Unlikely.

It is unlikely that International Paper will refuse to renegotiate, because it can make more money developing its land as Carolina Station than it could by selling individual parcels. It is also unlikely because agreeing to put Carolina Station buyers into a residential improvement special tax district gives it the ability to transfer the costs that it would normally have to pay for upfront or through its own debt to special taxes on Carolina Station’s subsequent owners.

Furthermore, deferral would allow time to negotiate with the school system and the county to phase the bonds and so the special taxes to a later time – say, only after a specified number of homes particular pods were built – when International Paper may be out of the picture or substantially out of the picture. This approach would insulate International Paper from the special taxes it might otherwise have to pay in early stages of Carolina Station development.

Deferral for renegotiation allows all parties time to protect their interests in working out the required and desirable details of a residential improvement special tax district.

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Requirements for and Realities of Carolina Station Reconsideration

For Carolina Station’s development approval and development approval reconsideration, a motion for reconsideration must be made at the July 22 Horry County council meeting before the minutes are approved. The maker of the motion must be one of those who previously voted for approval. The motion must pass.

The only people that history has shown would consider making the required motion are councilmen Foxworth or Allen. According to Robert’s Rules of Order at least, any council person can second the motion to bring the matter to a vote. For the motion to reconsider to carry and subsequent deferral for renegotiation to pass, two more votes than those that previously approved the development and development agreement must be added as Barnard will be on a trip that was planned more than ten months ago and six votes are required. Again, because they are the only two councilmen other than those who voted against the development agreement who showed a willingness to get developments to pay their own way in the limited fashion that impact fees allow, the two votes with some historical likelihood to carry the proposed motions are Foxworth and Allen.  

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What Residents Can Do

Residents can contact council people urging them to vote for reconsideration of the original approval for Carolina Station and its development agreement and then to vote for deferral for renegotiation.

As it is now, there will be no more public input specifically for Carolina Station and the general public input already has at least eight speakers, of the five given time, scheduled. These are largely, if not totally bikers. Only if some of those decide against speaking, no other speakers will be allowed.

I’m copying and pasting the following contact information on council members from the Growth Impact Action Committee Web site “How to Be Effective” section which should make it possible for you to contact them by phone, e-mail or letter.

Horry County Council

If you wish to verify that the above information is up-to-date, you can go to horrycounty.org from which it was derived.  Once there, to verify the County Council  membership: click "County Council" in the menu on the left side of the opening screen; on the top of the new screen, click Member List as indicated.

You might also consider forwarding this e-mail to other Horry County residents and urge them to also contact council members. Every council vote counts!

In the longer term, we can continue to persuade council members to take similar actions on other developments and ultimately only vote for those who do or promise to take such actions. In the end, it is the preponderance of our votes, not simply campaign funds contributed by developers for political advertising, that determine who is elected.

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Comments on Economic Studies

Economic studies have nothing to do with the concern here of diverting taxes required to cover the costs of new development from the rest of us to the new developments that occasion the costs.

There is no question that new development provides profits to in-state and out-of-state developers, the land owners on which the development is done and others associated with the construction industry, including suppliers for materials required in development. But the simple fact that there is increased economic activity due to the new population that the development brings in does not mean that existing home owners who now have to bankroll that development necessarily benefit from that activity.

Added population not only provides new buyers of consumer goods, it also provides business owners other than those from the current population and new businesses, some of which may have out-of-state owners. Population growth, by itself, is not necessarily an economic boon, nor any other boon, to current residents. It, more often than not, has more adverse than beneficial effects.

Current homeowners should not have to pay the costs of others. They should pay their own way as current residents have.

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