Property Tax Credit

The Town of James Island receives between $50,000 to $80,000 each month from the the Local Option Sales Tax Property Tax Credit Fund.   We began receiving those checks three months after we began operations in August of 2012.   The total amount received is approximately $1.1 million.   Through the end of the fiscal year in June, we should have nearly $1.3 million.   I believe that these funds should be used to provide a tax credit.    If we could do so, the result would be an approximate  25 percent property tax cut for a homeowner.   The property tax cut for businesses, rental property, and cars would be closer to 9 percent and for boats and other personal property it would be 6 percent.

The Town proposed that it collect the operating property tax millage in place of the James Island PSD and then directly pay them an equivalent amount (approximately $2.7 million per year) for fire protection and solid waste collection.   Unfortunately, 5 of the 7 Commissioners rejected that approach.    Commissioner Carter McMillan is willing to work with the Town to provide a tax credit.   While Commissioner Brown-Crouch abstained when the majority of Commissioners voted to send a letter to the Town rejecting our proposal, she has since been open to working with the Town.  

The letter the JIPSD sent to the Town raised legal issues regarding our proposal.   The Town requested an Attorney General's opinion on various legal issues surrounding the proposal.

We received a response.   The Town asked if a substitution of the Town's millage for the JIPSD millage would violate the millage cap.   This is a state law that limits any increase in millage to the previous year's inflation rate and population growth.

The Attorney General's opinion is that it does violate the letter of the law, but that because taxpayers would face the same total millage and pay less tax due to the provision of a LOST tax credit, a court might determine that the Legislature did not intend to prohibit such a substitution.    The Attorney General recommended that the Town seek a declaratory judgement from a court before substituting a Town millage for the JIPSD millage.   The Town's attorney, Bo Wilson, is looking into the procedure for obtaining a declaratory judgement.   He estimates that the legal cost would be less than $5,000.   In my view, only when there is a majority of JIPSD Commissioners willing to work with the Town to provide a property tax credit should we go forward.  If a court determines that such a solution is  contrary to the statute, then we will need to reach out to Representative McCoy and Senators Thurmond and Campsen yet again.

The JPSD said that it would be illegal for them to receive any funds from the local option sales tax.   The Attorney General's opinion was that this should be determined by the South Carolina Department of Revenue.   I wrote the Director of the South Carolina Department of Revenue asking for an advisory opinion on whether funds the Town received from the LOST property tax credit fund could be received by other governmental entities in exchange for the provision of services.   I also asked whether the LOST statute would prohibit the Town from depositing funds we receive from the LOST Property Tax Fund with the County Treasurer, and having those funds be used to compensate either Charleston County or else the JIPSD, for a property tax credit against the millage they charge in the Town's jurisdiction.   We are waiting for a response from the Department of Revenue.

When I first became Mayor in 2010, we had a training session for Council by the Municipal Association of South Carolina.   We asked whether the Town was required to provide a property tax credit.   Their response was that because the Town had no property tax, we were free to use the money as we choose.   There are many municipalities in South Carolina with no property tax and they spend all of the LOST money they receive on current operations.   This practice greatly influenced my thinking regarding LOST.   While I have always been committed to providing property tax relief to our citizens, I saw this as a Town policy.

As I have reviewed the law myself over the last few months, I have become much less confident that standard practice in South Carolina is consistent with the LOST statute.   I think that the most responsible course is to save all of the funds the Town receives from the LOST Property Tax Credit Fund until either the Town introduces a property tax or else we receive clear guidance from the South Carolina Department of Revenue regarding some alternative means of providing a credit against the liability of taxpayers in the Town.