The Penny Tax: Richland County's Billion-Dollar Gamble

By Ron Aiken
Staff Writer
October 30, 2012

It’s being sold as a penny tax to help the poor get to work.

In reality, however, the penny referendum voters will decide upon on Tuesday, Nov. 6, is a 14-percent tax increase to fund a billion-dollar plan intended predominantly to foster economic development projects and set to remain on the books until 2035 or it generates $1.07 billion, whichever comes first.

Supporters say with a decline in state and federal funding sources, counties have to look to themselves to fund transformative change, whether it be rescuing a declining bus system, overhauling the county’s roads for the first time in ages and aggressively addressing quality of life and economic development issues. They contend if the county doesn’t do it for itself, no one will.

This is the best way for us to take care of ourselves, fund and improve our bus system and keep the work local, said Richland County Council chair Paul Livingston at a recent public debate sponsored by the Community Relations Council (CRC). It is a comprehensive plan because it was meant to be a comprehensive plan. We didn’t want to be doing this piecemeal and be coming back five, six, seven, eight years later to re-examine everything all over again and start from scratch. This is the economy to do it in because interest rates are so low. The time for this is now.

Critics contend the current project list is too broadly sketched, is subject to change at any time and that not nearly enough due diligence has been done to determine its long-term economic impacts, especially if rosy development projections fail to materialize.

Opponents also say using the emotionally charged bus issue to sell the plan is a sleight-of-hand trick. By asking for a portion ($301 million, or 29 percent) to fund the buses – which, they argue, could be funded in numerous other ways – Richland County can grab the lion’s share of billion dollars ($737 million, or 71 percent) to dole out to firms and companies for projects no one is certain of, details are unavailable for and many wonder whether are even necessary at all.

Livingston disagrees, pointing out that an oversight committee will ensure that projects remain as prioritized (for a list of projects, go to www.richlandonline.com/TransportationPenny/projects.asp). He says the list of projects has been properly and thoroughly vetted and that the entire process is the result of the best efforts of people who have been studying the issue in-depth for more than two years.

Critics of the plan take issue with how the county, which to-date has spent $50,000 on educational efforts to promote the tax (not including a private pro-penny marketing effort with a $200,000 budget, according to published reports), has marketed the plan to voters.

We as taxpayers have been paying for an educational effort that’s showing only one side of the coin, said Daniel Rickenmann, a business owner and former Columbia City Council member. Well the last time I checked, a penny has two sides, and one side has a head on it.

It makes you wonder, the ‘Yes’ crowd is spending a lot of money beyond what Richland County has spent. Where is that money coming from? Who wants it so bad they’re willing to put up $200,000 at least – I imagine it’s more – for it?

Richland County Council is playing on the emotional issue of bus survival, but the bus system is not what’s important about this; it’s only a third of the whole deal. If it was just about the bus system we could do it for a third of the amount they’re talking about. This isn’t a penny issue. It’s a billion-dollar issue.

Defeated in 2010 by a 2,200-vote margin, critics say the penny-tax proposal on the ballot this time is too similar to the previous one, and that prudence dictates the county – which admits it has no Plan B to fund the buses should the penny tax fail – work harder.

When this failed to pass last time, county council went back to the drawing board, sharpened their pencils and made changes to make this one more attractive, said Don Weaver, a businessman and president of the South Carolina Association of Taxpayers at the CRC debate. That was a good start, but it wasn’t good enough. They need to go back and whittle this thing down to where it makes sense for people to vote for it. They need to try again.

The 8-cents-on-the-dollar sales tax would apply to most purchases, groceries included (though school books, prescription drugs and EBT purchases, or food stamps, would not be subject to the tax). Of the $1.07 billion to be collected beginning May 1, 2013, $656 million (63 percent) is earmarked for road improvement, $301 million (29 percent) to maintain and improve bus service and $81 million (8 percent) is to be spent on building bike trails and sidewalks. For a family of four, the amount the tax will cost per year is estimated at $284.

As a regressive tax in the sense that it imposes a greater burden on the poor than the rich, representatives of those communities in Richland County argue that they’re being asked to shoulder the burden not just for the buses many depend on but also for millions of dollars of other projects they never will use.

Why in the world should (blacks) pay for $100 million (sic) dollars of bike paths? said Bishop Redfern II of the Ecumenical Church in Richland County at the CRC’s debate. Are you kidding me?

Redfern II said blacks in Columbia have been made promises for years by whites about how much better things were going to be for them with a poor history of delivering on them.

Why should we start believing them now? This is the penny that broke the camel’s back.

Two of the biggest-ticket projects on the county’s to-do list should the penny pass are the Shop Road extension ($71.8 million) and two Innovista-related projects ($50 million) at Williams and Greene Streets. Supporters, such as Chernoff Newman CEO and Greater Columbia Chamber of Commerce president Lee Bussell, applaud their scope and vision. He calls the Shop Road project the most transformational for major manufacturing in the area he’s seen.

Besides increasing the potential number of certified sites in Richland County for industry to locate in – meaning sites with existing water and sewer infrastructure – and spurring much-needed job creation to the tune of thousands of jobs, Bussell also said the plan addresses critical issues regarding road safety and for the next 20 years provides a funding source for public transit that you can trust and that is under local control.

Opponents say the two projects alone, weighing in at a combined $121.8 million, are close to half what county council is seeking to run the buses for 20 years, and have almost nothing to do with the county’s pressing transportation needs and are at best unrealistic, and at worst, economic development disasters-in-waiting.

The Miley report calls the planned 3.8 mile Shop Road Extension, which will open up for development an estimated 3,600 acres of land, perhaps the most potent component in the Transportation Plan in terms of potential ongoing economic impact. The study projects that within 10 years the site could produce 4,000 new jobs and represent a capital investment of over $1 billion in addition to property taxes over $25.1 million per year.

This infrastructure is absolutely necessary for us to grow in the way we want to, Livingston said. As it stands we don’t have the sites to show companies to locate here that other areas do. This gives us that ability to compete for those projects.

For critics, those numbers are seriously flawed and represent precisely the lack of sound planning and foresight that makes the referendum so dangerous. For instance, the $1 billion dollar estimate w
ould represent almost 10 percent of all new investment statewide from 2003-2010, according to the South Carolina Department of Commerce.

To think that on a single 3.8-mile stretch of road you’d achieve investment equaling 10 percent of what was done statewide, including Boeing, over the last eight years goes beyond optimistic, says Columbia investor and former South Carolina Secretary of Commerce Joe Taylor. I should know.

The whole pitch is about new business, new business, and there’s no mention of the negative effects on existing business. Nobody has bothered to look at the impact of taking a billion dollars out of local cash registers. And these are the businesses that are already here that you’re hurting, the ones who are the real job providers and job creators.

If you want to be successful in economic development, you need to make sure the companies already here have the opportunity to grow and be successful. Job growth is driven by who you already have, not who may decide to come later. With this tax you’re taking a billion dollars out of local coffers and creating a competitive disadvantage by having sales taxes higher here than in neighboring business-friendly counties. That’s two strikes. What’s the third strike going to be? I’m scared to death to find out. When you start thinking about it, it gets spooky.

Another flaw in the Shop Road projections, Taylor noted, is that it doesn’t account for the fact that much of the land along that stretch of Shop Road is privately owned.

When so much of the acreage along Shop Road that they’re talking about is privately owned, somebody is making some serious assumptions that they’re all going to sell and going to sell at a reasonable price, Taylor said. People may not sell, or their price may be too high. Those are huge assumptions you’re talking about with those projections that could change everything about them. Dr. Miley projected a lot of land would be sold that is owned by people other than Dr. Miley.

Furthermore, in fiscal year 2010, Richland County collected a total of $43.4 million in property tax revenues from existing manufacturing and industrial property ($28.5 million for manufacturing without Fee In Lieu of Taxes plus $14.9 million for manufacturing with Fee In Lieu of Taxes). The estimate of  $25.1 million in new property taxes generated means the new sites along Shop Road will be so attractive to large manufacturing companies and filled so quickly as to represent 50 percent of the entire county’s existing tax revenue in 10 years.

It’s just not realistic to think that in only 10 years this one site will accomplish what the entire county hasn’t been able to do in its history up to now, Rickenmann said. It’s not possible.

The two Innovista projects are equally ambitious in their investment projections, according to the Miley Report. It states that improvements to Williams and Greene Streets will generate direct impacts in the Columbia area of over 1.1 million square feet of office and commercial development within the first 10 years once the Williams Street extension and related improvements are completed. This development equates to over $117 million dollars in capital investment.

The study also projects 1,400 new jobs created as a result of the Innovista improvements and annual property taxes of more than $3.4 million a year.

Rickenmann said besides many of those jobs being temporary construction work, at heart he doesn’t believe the poor should have to pay for the failures of Innovista, a high-minded and ambitious University of South Carolina endeavor that to-date has been marked by unfulfilled promises, embarrassing failures and questionable tactics.

When I was on City Council we were told on a Friday night by university representatives that it was paramount that we had to approve the parking lots down there right then, before the weekend so they could get the buildings built so their clients would have a place to park, Rickenmann said. It was all very rushed and very last-minute, very ‘we have to do this right now or else.’

Well, I’m still waiting on those clients, like a lot of other people. They promised two buildings were to be built, and only one was and it’s half-full. There are two parking garages built, but they’re used by students, not businesses.

And so now we’re being told that if we spend $50 million we’ll get $100 million of investment, create 1,400 jobs and see 1.1 million square feet of commercial real estate occupied in the first 10 years? There’s absolutely no backing for that. There’s not one client, one project, one developer who is saying they’ll do that. To get those numbers you’d have to move Harbison downtown. These are pipe dreams.

Another issue supporters overlook is that nowhere in the Miley Study are recurring costs for necessities such as maintenance, operation and security taken into account. Opponents argue that to pay for those, Richland County will invariably have to raise property taxes. Redfern II compared the likelihood of property taxes having to going up in the future to pay for those unplanned-for eventualities to his city water bill, which has gone up several times in recent years to fund the same issues in Columbia at the expense of long-overdue maintenance to ensure water quality.

My water bill has gone up five times, and do you know the same amount of water comes out of my faucet as before? Redfern II said at the CRC debate. Except now there’s more fecal matter in it than in all the politicians seated here today.

It’s about trust. County Council hasn’t handled responsibly the money they’ve been given in the past. Do we now trust them with a billion dollars?

Finally, opponents of the plan are quick to say they completely support finding a stable method to fund the buses in perpetuity.

If the question was finding the few million dollars each year to keep the buses going, we wouldn’t be debating all this, Rickenmann said. But this project, it’s not about the buses. The buses are used as a scare tactic. There’s just too much no one has thought through.

Community activist and Richland County business owner Joe Azar, a critic of the tax, agrees.

Everyone I have spoken with, including Tea Party people, support the bus and good transportation he write in his Oct. 29 newsletter. What they oppose is giving politicians a blank check to spend as they want. Not only them, but the general public distrusts council as they have seen what happened with the 2-cent tax for hospitality: the misappropriation, the infighting, and the very questionable projects it has financed.

When the hospitality tax was voted in by council, it took no longer than about 10 minutes for council to re-vote on the projects and change funding immediately, adding new, and eliminating ones they said were to be funded. Many were shocked; hence, the distrust of council and politicians. That is why the public distrusts this initiative by council. It is too broad, has no guaranteed projects, and should be broken down into the different issues to be voted separately.

For Taylor, the issue is crystal clear.

It’s a billion-dollar gamble by Richland County Council that they haven’t thought through, Taylor said. Simple as that.

For people like Columbia Mayor Steve Benjamin, a penny-tax supporter, the issue also is clear.

There are going to be certain people in Columbia who say ‘no’ to everything, Benjamin said. Most of the vocal opponents to the penny are opponents of everything else. They don’t believe in creative ways to deliver infrastructure to the city.

This does that in a thoughtful and responsible way, and is our best route to aggressively accelerate development where we need it most.

 

Ron Aiken is a freelance writer and editor based in Columbia, S.C. His award-winning journalism has appeared in newspapers, magazines, websites and books across the country.