When I was finally sworn in as Mayor, there were bundles of returned checks. And bundles of returned checks from 2009 and 2008.
Returned checks, statements, and forms |
People came into the office every day. The check was made out to the wrong person. There was a divorce. The person named on the check is dead. Forms were filled out. Tax bills found and printed out. New checks written and signed. The Town's single finance clerk spent two days a week for several months sorting through all of the issues.
It was a mess.
I thought that there must be a better way. My goal was to follow the approach of the first Mayor of the Town of James Island, Joan Sooy. We should work with the Charleston County Auditor and the James Island Public Service District to put credits on the tax bills, reduce the amount the County Treasurer sends to the JIPSD, and have the Town make up the difference by paying the JIPSD for fire protection and solid waste collection services using the monies the Town receives from the LOST Property Tax Credit Fund.
Unfortunately, while the County Auditor prepared tax bills including the Town's tax credit in 1995, the Town was ordered dissolved right before the bills were mailed. The order was stayed pending appeal, but the City of Charleston and the Town of Mount Pleasant sued to stop the County Auditor and CountyTreasurer from putting tax credits from a dissolved municipality on the tax bill.
Back in 2010, my view was that first the Town must wait until our date with the Supreme Court, and then once the Town was recognized as legally formed, we could return to the County Auditor and the James Island PSD and talk about tax credits. We should have been able to get the tax credits on the 2011 tax bills.
Sadly, Trent Kernodle's oral arguments did not go well with the Supreme Court. Being worried that the Town would be closed down yet again, I asked Town Council for permission to prepare a last set of checks. The Town hired a contractor to print and mail the checks . The problems started almost immediately, but soon the Town was closed. All the remaining money was taken and split up among Charleston County, the City of Charleston, the City of North Charleston, the Town of Mount Pleasant and every other municipality in Charleston County.
Before the Town was closed in 2011, we sent out a last newsletter. In that newsletter, I wrote that the checks just mailed were the last, that next time the credits would be on the tax bill. The feasibility study the Town submitted to the Secretary of State included the proposal that the Town put tax credits on the tax bill similar to Mayor Sooy's program from 1994. The Free James Island campaign literature also included the proposal to put tax credits on the tax bills.
This time, the Town was formed and there was no legal challenge. Nothing would stop the Town from having our tax credits on the tax bills. Except James Island Public Service District Commissioners who want the Town to mail the checks.
The Town's policy on tax relief is that the Town's program should as closely mirror the LOST statute as possible. The Clark check writing program is not an appropriate model.
Here are some principles that are important for the Town's tax relief program:
1. Tax relief should apply to all taxed property--houses, businesses, cars, boats and other personal and business property.
The Clark check writing program only mailed checks for real property--houses, apartments, farms, and businesses. Nothing was provided for cars, boats and other personal and other business property.
Because of the number of cars, any new check writing program will be much more complicated and expensive than what the Clark administration began in 2008.
It is unclear why the lawyer reviewing the Clark program, JIPSD Attorney Trent Kernodle, approved a program that failed to provide tax relief consistent with the LOST statute. Why were all of the owners of cars, boats, and other personal and other business property cut out?
2. Tax relief should be in proportion to appraised property value.
The Clark check writing program provided checks in proportion to the taxes paid to the JIPSD. This resulted in larger tax credits to owners of businesses and rental properties and smaller credits to homeowners than specified by the LOST statute.
This would be easy to correct. It is unclear why the lawyer reviewing the Clark program, JIPSD Attorney Trent Kernodle, approved a program that failed to provide tax relief consistent with the LOST statute. Why was less tax relief provided to homeowners than specified by the LOST statute? Why did the Town's program provide extra relief to owners of commercial and rental property?
3. All funds that the Town receives from the LOST Property Tax Credit Fund should be used for tax relief.
The Clark Administration kept monies received from the LOST Property Tax Credit Fund segregated from other funds. Each year's tax credit was too small, but the final checks written in the Spring of 2011, used up all the funds.
It is not difficult to keep track of the monies received from the Property Tax Credit fund and to allocate the Town's interest income between funds.
4. If too little tax relief is provided in one year, extra funds plus interest should be moved forward and used to provide tax relief the following year.
The Clark Administration did not shift the funds over along with interest to the next year's credit. However, all of the funds that the Town had received by the spring of 2011 were paid out in the final set of checks.
It is important to note that it would be illegal for a municipality that had provided too small of a tax credit to mail out checks to property owners so that they received the "correct" amount of credit. What must happen is that a larger credit must be provided on the following year's tax bill. (As an aside, it would also be illegal for a municipality to "send the money back" to the South Carolina Department of Revenue rather than provide the required larger tax credit on the tax bill the following year.)
5. Tax relief should take the form of a credit on the tax bill, reducing the amount the taxpayer must pay the County Treasurer
The Town's position on the LOST statute is consistent with the long-standing position of the Municipal Association of South Carolina, and the practice of other municipalities in Charleston County such as Ravenel, Megget, Hollywood, Rockville, Kiawah and Seabrook. Municipalities with no property tax millage are not required to provide credits that reduce a tax that does not exist. Municipalities can spend the monies received from the LOST Property Tax Credit fund on any public purpose. At the request of the Town, the South Carolina Attorney General's Office provided an opinion that explicitly endorses this position. For more than twenty years, these municipalities have been spending the funds they received from the Property Tax Credit fund on municipal operations. None of them have been sent to jail for misappropriating funds.
The Clark check writing program is inconsistent with this element of the LOST statute. It is important to understand that a municipality that is subject to the LOST statute could not legally choose to write checks to property owners based upon taxes that had already been paid. Nor could a municipality subject to these rules choose to not participate and "send the money back" to the state.
No municipality in South Carolina, other than the Town of James Island in 2008, 2009, 2010, and 2011, has ever used LOST Property Tax Credit funds to mail tax rebate checks.
However, the Town's position implies that because a municipality with no property tax millage is free to use the funds for any public purpose, the Town of James Island can, if it chooses, institute a check writing program based upon whatever principles it likes. In particular, the Clark administration's check writing program was legal.
The paradox of Trent Kernodle's position regarding LOST is that he has argued that a municipality must distribute the funds back to taxpayers due to specific language in the LOST statute, but then the actual check writing program he approved for the Town of James Island was in clear and obvious violation of the statute in several significant ways.
However, while the Town's view is that it could "write the checks," or give the money back to the state or distribute it to other municipalities, or use it to provide additional public services, the Town's policy is to provide tax relief consistent with the provisions of the LOST statute to the degree possible.
The Town proposed an agreement with the James Island PSD to provide credits on the 2013 tax bill. The JIPSD turned the Town down. The Town kept those funds and is committed to use them for tax relief in the future. The Town made two different proposals to the JIPSD and one to Charleston County to provide credits on the 2014 tax bill. The Town was turned down. All the funds the Town has received, plus accumulated interest, has been retained and is ready to provide a tax credit on the 2015 tax bill. Consistent with the LOST statute, which the Town is choosing to follow, the Town is seeking to use these funds to provide a larger tax credit on the tax bill next year.
The size of the tax cut the Town could have provided in 2013 was quite small--approximately 6% reduction in the total tax bill. For 2014, a substantially larger tax credit would have been possible--closer to 20% Why? Because the tax credit in 2013 was "too small," that is, nonexistent, so that money could be applied to the tax credit the following year. Unfortunately, the tax credit in 2014 was again "to small," and so those funds can be applied to a credit in 2015. A much larger tax credit, something more than a 30% reduction in the tax bill, will be possible on the 2015 tax bill.
All that is necessary is for the voters of James Island to elect Commissioners who are willing to work with the Town on a tax credit. We need to steer clear of Commissioners who echo Trent Kernodle's campaign slogan--mail the checks.