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Facing shortfall, county may delay tax reassessment
By Jackie R. Broach
If Georgetown County proceeds with reassessment this year as scheduled, it stands to lose $1.6 million a year in property tax revenue, which it would have to find a way to absorb beginning in its 2011 budget.
That would be in addition to a $619,000 shortfall already predicted in the 2011 general fund, County Administrator Sel Hemingway told County Council members during a budget workshop this week. Deficits are projected in the fund in 2012 and 2013, and staff is proposing to pull from the county’s reserve fund to cover them to the tune of just over $1 million.
Though reassessment is supposed to be a revenue neutral event, Hemingway said a combination of the reassessment formula and Act 388, property tax reform legislation that took effect in 2007, creates an expensive problem for counties.
The formula counties performing reassessment this year will have to use to determine 2011 millage rates assumes a tax collection rate of 100 percent, but Georgetown County’s collection rate is historically 95 percent, Hemingway said.
Normally, the county would raise millage to make up the difference, but a property tax cap in Act 388 for residential properties prevents that action.
“You would have to collect 100 percent of every dollar you bill to have the same revenue as the year before,” Hemingway said.
While delaying reassessment by a year might end up being council’s best option, Hemingway suggested trying another tack first. He’s hopeful legislative action might solve the problem this year. The S.C. Association of Counties is already lobbying lawmakers to take corrective action, he said, but they haven’t gained any traction.
There are 11 other counties scheduled to reassess this year and Hemingway planned to contact them this week to see if they’ll join with Georgetown County in lobbying the legislature for change.
“If they don’t realize the impact this will have in their budgets, we will hopefully gain some allies in trying to carry the same message,” Hemingway said.
If corrective action isn’t taken before the legislative session ends, Hemingway said he sees delaying reassessment as the county’s only option.
“We cannot afford a $1.6 million shortfall each and every year” until reassessment occurs again in 2015, he said.
S.C. Rep. Vida Miller said efforts by the Association of Counties to amend language pertaining to millage and reassessment is being held up in the Ways and Means Committee and has not been brought to the floor for a vote.
“It is regrettable that these conversations did not begin earlier in the year as we have only a few weeks left in session,” she said.
The legislative session ends the first week of June. Sen. Ray Cleary said it’s unlikely any corrective action will be taken before then.
“It would be difficult to get it through in that amount of time,” he said.
If the county proceeds with reassessment and the legislature doesn’t take corrective action until next year, even if they make it retroactive, Hemingway said he’s afraid council would be put in the position of having to vote to raise taxes in 2012 to recoup the loss incurred in 2011.
A delay would likely cause some complaints from homeowners whose tax bills would decrease as a result of reassessment, but Hemingway said that’s the only problem he foresees with putting the action on hold.
Hemingway said he doesn’t know yet whether property values are down, but the assessor’s office is on track to mail out assessment statements in July.
Since the valuation date is December 2009 regardless of whether reassessment goes forward this year or in 2011, Hemingway said that work wouldn’t be lost due to a delay.
“I welcome the opportunity to be on schedule, but there’s a pretty severe penalty for moving forward,” he said.”
County Council Member Glen O’Connell questioned whether the cap is applicable in reassessment situations where a millage increase that exceeds its restrictions is needed for the process to remain revenue neutral.
County staff said the issue has been tested in court and the literal reading of the statute was upheld.
“I certainly would not be an advocate for delaying reassessment under normal circumstances, but in this instance, I think it would be imprudent for us not to delay while we try to get this straightened out,” he said.
If the legislature has not taken action when the session ends, Hemingway said he will advise council then to vote to delay reassessment.
Randy Dozier, Georgetown County School District superintendent, said he isn’t sure how a vote from council to delay reassessment would affect the district.
“I’m not sure we had planned that anyway,” he said. “It would depend on the growth and the value. Actually for us, I’m not sure the mill generates as much as it has in the past because of the property values going down.”
He said it might impact debt service, which could delay some of the district’s capital projects.
By that time Hemingway said he hopes to have reduced the $619,000 shortfall in the general fund budget.
Staff will be going through the budget line by line looking for areas that can be trimmed, he said. It’s a process they’ve already been working on for some time.
The shortfall was more than $900,000 at the end of last week, he said.
As the county moves through its budget process, Hemingway said it is facing many of the same issues it did this time last year — declining revenues, rising costs and uncertainty about the effects actions of the General Assembly will have on county finances.
The county is anticipating a reduction of at least $160,000 in local government funds from the state, he told council.
Projected real and personal property tax revenue is expected to increase by only 1 percent and vehicle property tax revenues are not expected to increase at all.
Total general fund revenues are expected to be about $211,000 lower than 2010 estimates.
However, costs are expected to increase by $200,000, including a 12 percent increase to health insurance premiums and increases to workers compensation premiums and fuel costs.
According to projections, it will be 2014 before council’s general fund is in the black again, but staff predicts this year will be the worst.
Projections show shortfalls of $471,700 in 2012 and $239,731 in 2013, and a surplus of $59,997 in 2014.
County policy is to keep $8 million in reserve in case of a disaster, such as a hurricane.
Even using reserve funds to cover the deficit through 2013, the fund won’t drop below that number.
A public hearing on the budget is scheduled for May 25.
Council is expected to give final approval to the budget on June 8.