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City officials: Local option sales tax our best hope for future

Post Date:03/04/2019 2:53 PM

By ADAM BENSON abenson@indexjournal.com Mar 3, 2019

In many respects, Greenwood lives up to its distinctive reputation.

A bustling Uptown that’s home to the nationally known Festival of Discovery. Mill villages that harken back to the city’s textile roots. A world-renowned genetic research facility.

But in one particular way, officials say, the Emerald City is not so different than its peers.

“The demand for services is only increasing, and our options for generating revenue are limited. We are restricted by the state in the amount that we can increase property taxes. Therefore, future City Councils will be faced with making decisions about possible service changes if allowable property tax increases do not cover rising expenditures — especially those that are mandatory,” city leadership said in an emailed response to the Index-Journal about an idea they argue that, while on its surface might sound unpopular, could be essential to ensuring Greenwood keeps pace with its future growth.

During a joint meeting this past month between the city and county councils, City Manager Julie Wilkie caught some by surprise when she publicly announced that the municipality will consider asking for approval to place a local option sales tax initiative on the 2020 ballot.

At that meeting, Wilkie said the tax would add $6 million to the county and $3.2 million for the city. Of that, $3.7 million and $2 million respectively would go toward property tax relief, leaving $2.2 million and $1.2 million of new money for the general fund.

County Council members were lukewarm on the idea.

Since 2006, the county has gotten a pair of capital project sales tax initiatives totaling nearly $150 million. County leaders said they’re wary about asking voters to approve a local option tax when another capital project venture likely will be needed in the future.

“We’re going to need that again, I don’t know what the next big thing’s going to be. If we create a perception of ‘Here it comes again,’ I think that’s a risk,” County Councilman Theo Lane said last month.

Wilkie, Mayor Brandon Smith and Finance Director Steffanie Dorn collaborated to provide written answers to the Index-Journal about the proposal.

Proponents of the plan — including nearly every member of the City Council — point to constraints such as the 38 percent of Greenwood property that’s tax exempt.

And, they argue, since much of Greenwood’s traffic is generated from non-residents, either through tourism, work or motorists passing through — asking city taxpayers to shoulder the whole cost of running government isn’t fair.

Without a local option, city leaders warn, future property tax hikes are all but certain.

“In short, yes,” city officials said in an email.

When it comes to a local option sales tax, Greenwood city is fighting against history. Similar initiatives were floated twice in the 1990s, and both failed by huge margins.

County Council chairman Steve Brown is in a unique position. As Greenwood’s city manager in 1993, he championed the adoption of a local option sales tax.

“We’ve cut to the very bone. I think we’ve cut and cut and cut … if we don’t have any new revenue, I don’t know what else we can do,” he was quoted in a March 4, 1993 edition of the Index-Journal.

But, he said this past week, times have changed.

“At that time, I don’t even think we had the option then to add a capital sales tax like we have now, and it was kind of an innovative way of adding some additional revenue and at the same time reducing your tax bills, and it was one of the few options we had,” he said. “We put together a program, put it to the people and it failed miserably twice. At that time, we felt it was something we should present to the people and show them how it could benefit them, and it was kind of going around the state. A lot of counties were considering at that time.”

Under current state statute, Greenwood has no ability to put a local option sales tax before city residents only — the County Council would need to approve the question as a referendum, meaning those outside municipal limits will have a hand in its fate.

But that could change if S. 171 becomes law. Known as the “Municipal Tax Relief Act” and sponsored by state Sen. Greg Hembree, R-Myrtle Beach, the measure would allow for cities to impose a penny sales tax by referendum to fund infrastructure projects and roll back property tax rates.

It wouldn’t finance everything Greenwood city leaders are hoping for — such as more money for additional police officers — but could allow for more flexibility in general spending by creating a new dedicated revenue stream.

“We have so much revenue generated by sales taxes that is coming from outside the municipalities and counties, but many of those amenities are being used by tourists so we’re really looking for a way to get them pay for it,” Hembree told a Senate Finance subcommittee on Tuesday, during a hearing on the bill. “In a way, it’s just a user fee.”

S. 171 won’t get a floor vote this year, after Hembree asked for it to be withdrawn pending further negotiation, but its fiscal note shows just how significant the bill could be for cities and towns.

“If all municipalities statewide imposed this tax at the maximum 1 percent rate, we estimate that municipalities would receive $570,111,300 in FY 2020-21,” the state Revenue and Fiscal Affairs Office reported.

Florence Mayor Stephen Wukela and Richard Stall, a member of the Greenville City Council, shared similar thoughts as Greenwood officials about the need for locally generated penny sales tax.

“It will allow us to do what is right for our constituencies,” Stall said. “We ask that you let us control our own destiny by giving us the ability to decide issues around our taxing structures.”

Melissa Carter, research and legislative liaison for the Municipal Association of South Carolina, said S. 171 is a top priority for her members.

“The county has so much more power in maintaining their own destiny, and we’re just asking for some of that same ability,” she said. “Many cities are up at the ceiling and would like to be able to stay ahead of capital needs that never go away and so be able to have a source of revenue that you can do a long-term plan for certainly would be advantageous to all economic centers, and cities are the economic center of counties and the state.”

Brown said he’s open to consideration about putting the city’s request on the ballot next year — but Greenwood leaders will have to make the sales pitch.

“I’m in a different position now. Then, I was an employee and did what my council directed me to do, and now I’m in a position where I have to make up my own mind about what I think is best. While I have concerns now, as they present more and more facts, I still have the opportunity to change my mind whether I would vote to put it on or not,” Brown said. “I’m going to be listening to the people.”