There has been some action regarding the Kernodle class action lawsuit against the Town. Rod Welch and David and Sandi Engelman are the plaintiffs. The case is Engleman v. Town of James Island.
The Judge gave an order in July that did five things:
1. Dismissed without prejudice Kernodle's request for a summary judgement that the Town is legally required to provide credits whether or not it has a property tax.
2. Dismissed without prejudice the Town's request for a summary judgement that this issue must be resolved according to the Revenue Procedures Act.
3. Dismissed without prejudice the Town's request for a summary judgement that it is not obligated to provide a refund of a property tax it did not collect.
4. Added Charleston County as a plaintiff against the Town.
5. Imposed an injunction against the Town spending or crediting any of the LOST revenue it has or will receive.
The first three items mean that these issues will have to be resolved at trial. That was scheduled to begin this summer. It had been postponed to wait on this order. Because of the addition of the County as an additional plaintiff, it is now scheduled for next spring.
The fourth item was a complete surprise. The Judge said that because Charleston County provided services to people in the Town when it had no property tax, the County must be added as a plaintiff so that it can protect its interests.
The final item was a very serious problem for the Town. Kernodle requested that same injunction against the Town in the summer of 2015, and a different Judge denied it last fall. This Judge said that because Charleston County was not part of the case at that time, and that now it was, he was reversing what the other judge said and imposing the injunction.
The Town has included a 20 mill property tax for the 2016 year, and we have provided a sufficient credit to zero it out for all of our taxpayers. This order appeared to prohibit the Town from providing any tax credit, which would have meant a substantial property tax increase for residents of the Town this fall. Further, the LOST statute plainly states that the Town must provide a credit against its property tax liability, and so this Court order required that the Town violate the law!
I immediately called the Chairman of County Council to ask about them being added to the case. He was completely surprised. The County did not ask to join Kernodle's suit against the Town.
I also met with the County Auditor about the injunction, and he agreed that the Court order would require a violation of the law. Worse, the County had to start preparing the property tax bills soon.
The Town submitted a request to the Judge to reconsider the order explaining the burden it would impose on our property taxpayers and explaining that it would require the Town to violate the law. We carefully explained how the Town is clearly in compliance with the law now, and that the dispute is about the $2.2 million the Town received from the LOST property tax credit fund from 2012 to 2014 when it had no property tax and so provided no credits against the tax. The Town argues that it is not required to provide credits against a property tax it did not have and does not owe a refund to people who paid no tax to the Town.
The County submitted an answer to Kernodle's complaint against the Town. The County was not supportive of any Kernodle's positions on much of anything. Most importantly, it insisted that the Revenue Procedures Act apply, as the Town had argued in our request for Summary judgement. They cited some Supreme Court cases where the Charleston County had faced the exact same issue.
The County also asked the judge to lift the injunction regarding the 2016 property tax so that the tax bills could be prepared. The County argued that the Judge had no authority to use injunctions to interfere with the preparation of tax bills due to the Revenue Procedures Act.
The Judge amended his Order to lift the injunction for the 2016 tax year. The Town's credit will be applied against the Town property tax so no taxpayer in the Town will have to pay anything extra to the Town on the bills going out in October. Thank the Lord!
The Judge has scheduled a new hearing for November. He will consider the arguments that the County and the Town have made--presumably about the Revenue Procedure Act. I also hope for some clarification regarding the Town's current compliance with the law. The Town is providing the required credit against its property tax.
If the Revenue Procedure Act applies, that doesn't determine whether or not Town property owners are due refunds. It rather prohibits class action suits to obtain tax refunds and allows individual taxpayers to seek a refund from County officials. There is a procedure laid out if there is a dispute (as there is in this case,) that possibly ends up at the South Carolina Supreme Court. If it is determined refunds are due, then any taxpayer can make the request to the appropriate County official. In our case, the Town would have to come up with the money to pay for any required refunds.
I am not sure why we would have a trial, since there isn't really a dispute about the facts but rather about the law. I think it is likely that whatever the decision, there will be an appeal.
