Last Thursday, October 1, Town Council voted 3 to 2 to roll back the Town millage from 20 to 17.9. The meeting was very contentious, but in the end Councilmen Boles and Mullinax joined me in voting to rollback the millage. Councilman Milliken and Councilwoman Mignano voted against the rollback.
The rollback was done in compliance with SC Code 12-37.250. The effect of that section of state law is that local government collects the same amount of revenue after a reassessment, leaving the dollar amount collected from property taxpayers unchanged on average. Reassessment is required every five years by the South Carolina Constitution and the procedures are laid out in the South Carolina Code. These provisions are applied by the County Assessor and County Auditor.
Without the requirement for a rollback, reassessment would result in a sudden jump in property taxes every five years. If there were no other complicating factors, then property taxes for Town homeowners would have increased 11% this year without the rollback.
However, the Town is in a very unusual situation in that we use our Local Option Sales Tax distribution to provide a credit large enough to reduce the net property tax collected by the Town to zero. Property taxpayers in the Town pay nothing to the Town and the Town receives no revenue from property taxpayers. As long as the Town continues with that policy, reassessment and rollbacks by the Town will not impact anyone's property tax bill or property tax or any other sort of revenue obtained by the Town.
So why the controversy?
While several Lowcountry municipalities have no property tax, such as Ravenel, Meggett, Kiawah Island and Seabrook Island, the larger municipalities such as Charleston and Mount Pleasant do. Those municipalities, as well as some smaller ones, like Folly Beach, provide a credit against property tax bills, but there is still an ample net property tax paid by their residents which funds a substantial part of their budgets. For those municipalities, a higher millage increases the amount paid by their taxpayers and the amount of revenue they can use to fund their services.
The residents of the Town, like residents of municipalities with no property tax, must pay property taxes that municipalities like the City of Charleston, the Town of Mount Pleasant, and the City of Folly Beach do not pay. Those of us in the Town pay property tax to the James Island Public Service District, which funds the very expensive fire protection and solid waste collection services. The millage in the Town, including the Town and JIPSD millage together, is similar to that in the City of Charleston and substantially higher than in the City of Folly Beach or the Town of Mount Pleasant. With the Town zeroing out its own millage and providing a credit through the cost share program against the JIPSD property tax, the result is a tax bill lower than in the City of Charleston, but still higher than in Folly Beach or the Town of Mount Pleasant.
State law authorizes municipalities to increase their property tax millage to obtain extra funding, but only to a limit. The limit is based upon past inflation and population growth. It is calculated by the South Carolina Revenue and Fiscal Affairs Office. Permissible increases can be carried forward for three years, so the Town could legally increase its millage by up to slightly more than 10%. While ordinarily, the Town could have increased it from 20 to up to 22 mils, because of the reassessment, any increase this year and in the future must be from 17.9, which means that the maximum legal millage at this time is 19.7.
The allowed increase in our millage cap is unique to the Town because it depends on population growth. While some municipalities, like Folly Beach and the Town, have had little or no population growth, the City of Charleston and the Town of Mount Pleasant have had rampant development and population growth, and so are allowed substantially larger millage increases.
If the Town operated like the Town of Mount Pleasant or the City of Charleston, and provided a partial (and relatively small) property tax credit, and collected a substantial property tax revenue, then increasing our millage the maximum legal amount would have resulted in a more than 10% increase in the amount Town residents paid and our revenue from property tax. The gross amount before the credit would increase about 10% and depending on the amount of the credit, the percent increase in net amount could increase by more.
What happened at our meeting?
It appeared that initially Councilmen Boles and Milliken wanted to defeat the rollback and leave our millage unchanged. Councilman Milliken claimed that his research suggested that no rollback was necessary. There was also some question about what punishment the Town would suffer if we were to defy state law.
However, Councilwoman Mignano proposed "as a compromise," that the Town provide a partial rollback to 18.9. Councilman Milliken made the motion for this compromise and Councilwoman Mignano seconded it.
If there were no complicating factors, this would result in a 5% increase in the average property tax bill due the Town which would add about $73,000 per year in new revenue. But there is a major complicating factor. As long as the Town provides a property tax credit sufficient to zero out the Town's property tax, there would be no change in the amount Town taxpayers pay or the amount of revenue the Town collects.
Similarly, as initially suggested by Councilman Boles and Milliken, if the Town did not roll back its millage at all, this would have increased property taxes about 11%, but if the Town continues to provide a credit to zero it out, there would be no change in property tax paid or revenue received.
Councilwoman Mignano then proposed that the Town reduce the amount of credit it provides so that taxpayers would have to actually pay something to the Town and the Town would receive more revenue. She wanted to obtain this new revenue to help the Town avoid delays in drainage projects. Charleston County does substantial drainage work for the Town at no cost, but sometimes we must be patient waiting for them to get to our projects while they do work in other parts of Charleston County. She believes that the Town should collect property tax so that the money can be used to provide faster service.
I suggested that we first vote on the millage amendment from 17.9 to 18.9. That increase passed 3 to 2, with Councilmen Milliken and Mullinax joining Councilwoman Mignano to approve. Councilman Boles and I voted against the amendment.
Councilwoman Mignano then proposed that the Town reduce the amount of property tax credit it provides by 5%. Her motion failed for lack of a second.
The amended resolution to adopt a millage of 18.9 failed with Councilwoman Mignano and Councilman Milliken voting in favor, and Councilmen Mulllinax and Boles joining me to oppose.
The result then was that the Town's millage would remain at 20, in violation of state law. Councilmen Mullinax and Boles joined me in reconsidering this action, reversing the amendment, and passing the rollback of 17.9.
Councilman Boles expressed concern about voting on this matter at a special meeting and felt we should consider it at our regular meeting. I pointed out that the County will have already mailed the property tax bills by the time of our October meeting and we had already missed a deadline the day before. Councilman Milliken complained that since he is no economist, I should do a better job in educating him and the rest of Council about how property tax works.
In my view, having the Town for the very first time make our residents pay a property tax to the Town (along with continuing to pay the JIPSD) based upon a decision at a special meeting called because of a routine deadline for the property tax bill is little short of criminal. If members of Town Council believe that our residents should start paying property tax to the Town as well as the JIPSD, then they should have brought this up during the budget process last spring, which includes a public hearing and two readings. If something new has happened since, they can impose a property tax our our residents as part of next year's budget. Really, they should have told voters they plan to start having them pay a property tax when they ran for Town Council a year ago.
When the voters approved the fourth incorporation of the Town in 2012, Mayor Riley said vote NO. He said the Town would soon have no choice but to start raising property tax. I responded that it wasn't necessary for the Town to collect property tax and that we could reduce the total property tax paid by the residents of the Town. It was a long struggle, but with the cost sharing agreement with the JIPSD, property taxes paid by Town residents have been reduced.
But I always knew that what would happen in the future depended on who Town voters elected to Town Council.
It still isn't necessary for the Town to collect a property tax for itself on top of what the JIPSD already collects, but if the voters of James Island don't take a stand, Mayor Riley's prediction will soon come true.
