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What Now on Growth’s Fiscal Impact -- George Edwards
2/18/09 Revision: Adding link to 2009 Impact Fee Pending Legislation 1/27/09 Revision: Added a link to the Residential Improvement District Act as it was added last week under Title 6, Chapter 35 of the South Carolina Code of Laws (Unannotated) Current through the end of the 2008 Session. I assume the text is identical to the previous "South Carolina Residential Improvement District Act" e-mail sent to me by Rep. Hardwick on June 6 2008. 1/13/09 Revision: Added What to Do Emphasis Revision and blue text in What to Do.
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The November 2008 additional 1% local option sales tax referendum changes Residential Improvement District, RID, considerations considerably. To the extent that the added sales tax adequately pays for new school facility construction in the next fifteen years, using an RID to cover such is no longer meaningful.
A RID still remains one of the tools by which a development can pay for its percentage use of other public facilities a new development requires. In fact, it is the only special tax district that allows its tax proceeds to pay for bonds to cover facilities that the developer typically provides and otherwise includes in the sales price of its properties. This last is a bargaining chip whereby bonds based on the developers resources can also be used for off-site public facilities that a development requires. A Public Works improvement district allows such for public facilities within or immediately adjoining a development, but not non-contiguous public facilities.
Click #Comparison of Impact Fees, Residential Improvement and Public Work Districts to read more detailed comparisons in this regard.
Coverage of schools within a RID could again become desirable if population growth exceeds expectations, the 1% sales tax collections prove to be inadequate or after their fifteen year duration.
*These items have been struck because of the recent 1%
sales tax that covers new school construction (See What to Do Emphasis Revision
above) insofar as the tax actually covers the new construction. If the tax
should fail to do so, then there should be developer agreements in place so that
new developments will pay their proportionate
share of the public school facilities they require.
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Growth's Public School Fiscal Impacts -- All Important
The additional public school costs of a new development outweigh any other Horry County property tax costs. The S.C. impact fee statute precludes use of impact fees, under any name, for any public facility not listed. It does not list public schools. As a matter of fairness, there is no logical reason for this exclusion. In South Carolina the only apparent way to have developments pay for the public school facilities they require is by putting them in special tax districts. The original developing landowners must agree to this.
The Residential Improvement District Act specifically allows inclusion of public school facilities in a special tax district set up in accordance with that act. It is currently unclear whether a developer can enter into a legally enforceable agreement with a local government to pay for public school facilities other than with a residential improvement act ordinance. An attorney general opinion on this is being sought.
The original developing owners can obligate subsequent owners to pay the special taxes the original owner agrees to, including those to cover the costs of the public school facilities they require under the Residential Improvement District Act.
Unfortunately, the only S.C. statute that currently provides for a new development’s payment of the added operational costs it requires is the Public Works Improvement Act. That act allows inclusion of the additional operational costs to a local government in special taxes from a public works improvement special tax district. But public school costs of any kind can not be included in the special taxes collected in a public works improvement special tax district in the opinion of at least two attorneys..
Both county and school system operational costs from a new development continue year after year while public facility construction costs end after the bonds for them are paid, typically after 20 years. The net public school operational costs that Horry County will have to pay directly are unclear because there is yet no history to base the return to Horry County from the newly passed 1% sales tax to cover public school operational costs.
Even when S.C. statutes allow a new development to pay its proportionate share of public school costs, any S.C. special tax district agreement requires an ordinance passed by the local government, such as the Horry County council, to approve agreements with developers. A school system can not pass such.
The school system would need to provide the estimates as to what a new development requires as to the number of new schools or students that the new development requires and provide assistance in negotiating the agreement with the developer on such as when or what event would trigger school expansion or new school construction bonds.
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Studies and Models of Growth's Fiscal Impact
The fiscal impact to Horry County and its taxpayers is overwhelmed by the fiscal impact to the Horry County school system. Yet the Horry County fiscal impact model does not consider the fiscal impact due to schools, nor did the fiscal impact component of the International Paper study for Carolina Station done by the BB&T Center for Economic and Community Development.
Nevertheless, the Horry County model conclusions on the fiscal impact to Horry County, excepting schools, was in sharp disagreement with the study provided by the BB&T Center for Economic and Community Development for International Paper when applied to Carolina Station. The major apparent reason was that the International Paper study used a much lesser county fiscal costs per person when calculating Carolina Station’s costs than the county model.
The county model determines the cost per person by dividing the costs by the number of people in the county. The International Paper study divided the costs by the number of people in the county plus its estimate of the full-time equivalent number of tourists. The latter method times the estimated number of people in Carolina Station alone would yield a significantly lower estimated cost for Carolina Station.
There are other differences in the assumptions and considerations between the model and the study. It is highly desirable that those be clearly delineated and, if possible, mutually agreed methods arrived at so that the model’s and the study’s future fiscal impact estimates agree.
Both the International Paper study and the county fiscal impact model considered that the county average of 38.6% non-owner occupied homes (that yield at least half again the taxes [6% compared to 4% -- not including other tax relief]) in computing the property taxes for Carolina Station that is ten miles from the ocean. In the future, percentages used should reflect the percentages experienced in the neighborhood of a proposed development's location.
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There is no question that the construction industries and those associated with it will receive economic benefits during the construction phase of new developments. It is not clear whether the rest of us will. Overall economic activity will increase after the construction phase in the same fashion that simply adding adjoining areas to Horry County would. But it is not clear that there will be increased economic benefits to existing taxpayers, although there will clearly be increased fiscal county and school operational costs as well as environmental costs.
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Links to Detailed Discussions and Statute Texts
With further information, thinking has evolved since this Web site began in early 2002 so some of the earlier comments are outdated. But the background details below help broaden the picture. Click the following tabulated links as you see fit.
Click here if you want to return to the top of this page. Horry County Councilperson's Key Votes and Records on Growth's Fiscal Impacts Carolina Station Third and Final Reading Votes The county majority voted against deferral and for the development agreement as it stood even after appeals by school system officials for a 60 day deferral of the Carolina Station development agreement. They asked for this to allow further school system renegotiation with International Paper in light of the just previous month's passage of the Residential Improvement District Act that for the first time made explicit provision for developments to pay for the public school facilities they would require. As at second reading, development approval was on the agenda to be voted on before development agreement approval. The following tabulates the votes made by those not prevailing on the motions:
Six votes were required for or against passage of the various motions (Schulz had to recuse himself because he is a partner in DDC Engineering, the firm representing the developer, International Paper Realty). Surprisingly, Foxworth voted with the prevailing side on all these votes although he has maintained ever since being elected to the council that he was for developments paying their own way. His vote would have defeated acceptance of the development agreement, but as the development itself would have previously been accepted, in accordance with the agenda order, with or without his vote, no apparent incentive remained for International Paper to agree to anything. For more details, click Carolina Station and read the "Carolina Station July 1 Third Reading and International Paper Study" section. 2008 Impact Fee Votes The following tabulates 2008 votes on impact fees:
In summary seven of the twelve 2008 council members had voted their support for establishing provisions for impact fees until the ATI issue arose: Ryan, Schwartzkopf, Worley; Barnard, Gilland, Foxworth and Allen. Overall Records Overall on their records as to developments paying their own way, at least as to county fiscal costs not including schools: Chairman: Liz Gilland -- has consistently supported impact fees and voted against the Carolina Station development agreement, although she voted for the development District 1: Harold Worley -- has consistently supported impact fees and voted against Carolina Station and its development agreement District 2: Brent Schulz -- has shown no support for developments paying their own way District 3: Marion Foxworth -- until his approval of Carolina Station, in which International Paper said they would not agree to putting that development into a special tax district, had consistently stated his support for developments paying their own way and voted accordingly District 4: Mike Ryan -- has been a consistent and most ardent supporter of impact fees District 5: Howard Barnard -- although he has been tepid in his statements regarding impact fees, he supported the 2008 motions to establish provisions for impact fees and voted against the Carolina Station and its development agreement in which its developing landowner, International Paper, refused to consider putting Carolina Station into a special tax district that could have had it pay its own ways as to public schools District 6: Bob Grabowski -- has never voted for any measure in which developments might pay some portion of their own way although he has said he favored $500 impact fees despite being a member of the Homebuilder's Association and that his company, Myrtle Beach Lighting, profits significantly from development. District 7: James Frazier -- has never voted for or supported any effort to have developments pay their own way District 8: Carl Schwartzkopf -- has consistently voted for developments paying their own way District 9: Paul Prince -- a consistent opponent of impact fees or any attempt to have developments pay their own way District 10: Kevin Hardee -- has never voted for or supported any effort to have developments pay their own way District 11: Al Allen -- voted for establishing 2008 provisions for impact fees, but voted for Carolina Station and its development agreement. He is one of the most recent members of the county council Gene Smith, former District 6 councilman. was a strong proponent of impact fees who always voted accordingly as has Mike Ryan, current District 4 councilman. Smith never ran for re-election and Ryan was defeated in this year's primary election.
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