The Town asked the James Island Public Service District (JIPSD) to work with us to help limit the burden they impose on the property taxpayers in the Town. I believe this is especially timely since the JIPSD has increased its property tax by 13% this year and its long run fiscal plan includes an additional 10% increase. The JIPSD property tax is a significant portion of a homeowner's tax bill--a little less than 50% last year and likely to rise to a little more than 50% next year. Last year they collected approximately $3.5 million in the Town and plan to increase that to just over $4 million this year.
Right now, what the Town needs is a majority of Commissioners willing to agree to work with us to obtain a declaratory judgement. We need them to come to an agreement with the Town that they would accept if it were legal and then approve it conditional on a court decision on its legality.
What is the Town's proposal?
Much would remain the same. From the point of view of Town residents all that would change is that the property tax bills they receive for their homes, cars, and boats would decrease.
First, the Town proposes that the JIPSD continue to provide services just as it does today--fire protection, solid waste collection, and wastewater transportation. Most Town residents greatly appreciate the services provided by the JIPSD.
The JIPSD Administrator and Commissioners would continue to manage those services. The Town has proposed no additional authority by Town Council to review JIPSD management of any of its departments or its expenditures.
In my opinion, as long as the residents of the Town can vote for JIPSD Commissioners, there is no need for the Town to have additional authority over management of services or expenses. Town residents who have concerns about those matters should reach out to their elected JIPSD Commissioners and carefully consider who they support in the election this November and in 2020.
The Town is proposing no change in the fees the JIPSD charges to pay for wastewater collection and transportation. That is, the Town's proposal does not involve the monthly sewer bills many of us in the Town must pay.
So what does the Town propose to change?
What would change is the method by which the JIPSD funds the provision of solid waste collection and fire protection in the Town. In other words, what would change is the way that the residents and property owners of the Town pay the JIPSD for the provision of those services.
Rather than pay for fire protection and solid waste collection solely by property taxes directly levied by the JIPSD, residents and property owners in the Town would continue to partly pay by property tax but also would partly pay indirectly through their Town government using monies from the taxes, fees, and other revenues already collected by the Town.
What that means is that the Town would directly pay the JIPSD for a portion of the cost of fire protection and solid waste collection on behalf of its residents. The Town is open to paying the full amount at the beginning of the JIPSD's fiscal year in July, well before the property tax bills are sent out in October or due in January.
I believe that the Town could pay as much as $1 million per year, but the exact amount would be determined by Town Council as part of its annual budget process.
The JIPSD Commission could continue to set its millage as usual during its annual budget process based upon the cost of providing services in its entire service area. Town Council is not asking for any new authority to review or approve the tax millage set by the JIPSD Commissioners.
How would Town taxpayers benefit? The amount the Town pays for the JIPSD for services would be distributed to Town property taxpayers as a credit against the JIPSD property tax on the consolidated Charleston County property tax bill.
The amount of the credit for each property taxpayer would be calculated by the computers in the County Auditor's office when they print up the tax bills. The funds would be distributed in proportion to the appraised taxable property of each taxpayer in the Town's tax district. The Town would be responsible for covering the cost of the needed changes in the computer software in the County Auditor's Office. The County Auditor has always been very cooperative, but has always agreed with the Town that any credit or other change in the JIPSD property tax line on the bill must be approved by the JIPSD Commissioners.
The credit on each bill would be a subtraction from the amount charged by the JIPSD, and so would reduce the amount each taxpayer owes the JIPSD and the total amount paid on the property tax bill to the County Treasurer.
The amount that the Charleston County Treasurer receives from Town taxpayers would be less and the County Treasurer would pay a smaller amount to the JIPSD.
The JIPSD would receive less property tax revenue from the Charleston County Treasurer but they would have already received from the Town an amount of money that exactly compensates for that decrease. The total amount of revenue the JIPSD receives from the Town area would be unchanged by the plan. .
For example, if the plan had been implemented for this tax year, the JIPSD would receive 13% more revenue than last year because of the 13% increase in its millage. The taxpayers in the Town would pay less than last year because of the Town credit. With a $1 million payment from the Town to the JIPSD, there would be an approximate 20% saving for homeowners in the Town compared to last year.
If the JIPSD were to raise its property tax millage in the future, then property tax bills would rise for residents of the Town. The Town would not be able to always expand its credit enough to offset whatever millage increase the Commissioners find necessary. However, property taxes would still be less than otherwise because of the credit. For example, if the Town pays $1 million towards services and the JIPSD does enact the 10% millage increase included in its long run fiscal plan, then even after that tax hike, property taxpayers would still be paying slightly less than they did last year.
It is possible that future Town Councils will find it necessary to reduce the amount of the credit because of other needs and priorities. On the other hand, growing Town revenues could allow for a larger credit in the future even while the Town is able to expand other services. Most Town revenues automatically increase with inflation and growing real income. Because of the millage rollback required by state law, property tax revenues only increase with new development or millage hikes--not with rising home values.
Why the need for the declaratory judgement? No other municipality and special purpose district have used this approach to reduce the property tax burden. The legal justification is the South Carolina Constitution's provisions that allow local governments to share the costs of public services and also home rule provisions that require that the Constitution and laws of the state be interpreted in favor of the powers of local government. The key reason to use tax credits is that the South Carolina Supreme Court has ruled that tax credits are consistent with the provisions of the South Carolina Constitution regarding assessment ratios and uniformity of millage. Tax credits are the most legally certain route to tax relief as long as any part of the JIPSD remains unincorporated.
The Town retained the Pope Flynn law firm to work on this matter and they are very conservative. They advise that before the Town and the JIPSD go forward with this plan, we obtain a declaratory judgement from a court to make sure that there are no legal problems.
So that is the next step. Working towards a declaratory judgement. For that to occur, the Town and the JIPSD need to come to an agreement that both would accept if it were legal, both Town Council and the JIPSD Commission must approve it pending a determination of its legality, and then we go to court seeking a declaratory judgement. Because the benefit of this plan would go to the taxpayers of the Town of James Island, I believe it is entirely appropriate for the Town to cover the full cost of the needed court action. At this date, there is no realistic chance that this could be complete before the property tax bills go out this October, but we can begin work for the 2020 taxes that will be billed in October 2019.
Most municipalities pay for solid waste collection and fire protection using a variety of revenue sources, including property tax. Special purpose districts, like the JIPSD, have more limited sources of revenue--property tax and fees. However, with some creative thinking, it is possible to overcome that restriction and avoid an excessive increases in the property tax burden in the Town while the JIPSD continues to be able to fund its services.
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