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Sales tax: Extra penny may raise more than projects cost

By Jason Lesley
Coastal Observer

Georgetown County Council members will decide Tuesday if they will give voters a say in a $40 million capital improvement package through a 1-cent sales tax referendum or kill the idea themselves.

The council voted 5-2 in July to approve the second reading of an ordinance that would put the referendum on the Nov. 6 ballot. Council members will vote on its third reading after a public hearing Tuesday at the old courthouse. The council meets at 5:30 p.m. at council chambers.

People opposed to any increase in taxes made their feelings known at July’s meeting, not wanting to trust a disinterested public with the decision. Council Member Jerry Oakley said that council committed to the referendum months ago when it appointed a capital projects sales tax commission to identify projects, estimate the costs, establish the length of the tax’s term and formulate the ballot question.

The proposed tax would be imposed for eight years, the maximum allowed under a revised state law, with an estimated collection of $5.5 million per year, using the state’s net taxable sales figures for 2009-10 of $516 million for Georgetown County.

That would bring in an estimated $44 million over the eight years, allowing some room to borrow money at favorable interest rates and take advantage of present land and construction costs, according to County Administrator Sel Hemingway.

If money remains after all projects are completed, it must be allocated to a project approved by County Council.

“It can’t be converted to operations,” Hemingway said. “We will be good stewards.”

As the economy improves, opponents of the sales tax say, overrun is a distinct possibility.

Georgetown County is one of six counties in the state without its own sales tax. It implemented an impact fee to fund capital improvement projects identified by committees during what was known as the Visions process.

County Council is considering eliminating the impact fee if the sales tax referendum passes and could have the first two readings of such an ordinance approved before Nov. 6.

Realtors and developers have been outspoken opponents of the impact fee, initiated just as the economy began to turn downward. Its elimination, along with road paving projects, fire stations, recreation facilities and libraries around the county, could help the sales tax referendum with voters who are unmoved by two big-ticket items proposed: dredging Winyah Bay and acquiring a spoils site for dredging Murrells Inlet.

Those, however, are two items that have produced some agreement from people on both sides of the referendum question.

“It’s real hard to accept any kind of tax,” said Tim Tilley, chairman of a port dredging task force. “The prospect of government waste on the federal level makes it difficult for folks to understand a local tax and what it’s for. There is no government that’s efficient, as compared to private individuals. I think that the local option sales tax is one tax that is going directly back to the local entity. The 6 percent sales tax goes in the other direction, and we get only a portion of what goes out. This is mandated to come back and be used for the intended purpose: improving infrastructure in the county.”

Charlie Luquire of Pawleys Island says the county can do without the sales tax and still dredge the shipping channel in Winyah Bay. He challenged County Council to demonstrate the flexibility of its capital improvement plan by funding dredging. He said the idea of raising taxes shows the county to be out of touch.

“The county has the money,” Luquire said, “to pay for the dredging.”

Tilley says Georgetown County is unique in that it has a port. A study said the port has an annual economic impact of $30 million on the local economy.

“The local amount to dredge Winyah Bay [$5.5 million] is just 15 percent of the cost,” Tilley said. “We would get 85 percent from outside the county. It’s a no-brainer. There are a lot of issues regarding the port that the public does not understand. Charleston’s issues are completely different from Georgetown’s. Charleston wants to deepen its channel; all we need to do is maintain ours. Look at it as a 15.9-mile ditch that is 27-feet deep. Over time it fills in with silt. Dredging is just a maintenance project. As it fills in, we can’t get appropriate sized ships that we’ve always had.”

Tilley said the Port of Georgetown has lost business to Virginia Beach, Va., Wilmington, N.C., Savannah, Ga., and Jacksonville, Fla.

“We cannot lose an asset that valuable,” he said. “There are very few locations with a port. It can’t be squandered.”

Dredging was added as an approved use for capital sales tax funds by the General Assembly at Georgetown County’s request.

Tilley said acquiring a spoils site for dredge materials from Murrells Inlet is “massively important” in order to keep it at its best. He also said changes in fire insurance rules that lower premiums on houses within five miles by road rather than within a five-mile radius could justify the $750,000 Big Dam Fire Station and $750,000 in rural fire substations.

Thirty-one road paving projects — only two are a mile or more — carry a price tag of $5.2 million in the proposal. Improvements to Black River Road, a heavily used cut-through in Georgetown between Church Street (Highway 17) and North Fraser Street (Highway 701) running in front of Georgetown Memorial Hospital, is slated for $1 million and Parkersville Road in Pawleys Island is slated for $1.3 million, bringing the total for roads to $7.5 million.

Roads have been a popular use for money generated by an additional sales tax in many counties.

“York County could change its symbol from the eagle to an orange barrel,” said Robert Croom, deputy general counsel at the South Carolina Association of Counties. “York has reassessed itself twice. You can’t turn around up there without hitting a barrel at a construction site.”

Counties have used the optional sales tax for a variety of uses, he said. They include:

• Charleston, matching funds for the Ravenel Bridge.

• Chester, a landfill.

• Allendale, replacing a burned courthouse.

• Aiken, matching funds for the Bobby Jones Expressway.

• Orangeburg, roads and a string of municipal projects.

“With people outside the county paying part of the tax,” Croom said, “it’s attractive to look at.”

James Schofield, a member of the Florence County Council, said his county has two additional pennies of sales tax. A 1 percent local option sales tax goes to property tax reduction. “In our county’s situation,” he said, “that means people from outside the county — traveling salesmen, tourists and so forth — pay 35 percent of the tax so that’s a significant reduction in the tax burden for our local homeowners. I don’t hear anyone advocating repealing it. I think it has worked very well.

“We have a 1-cent for road construction, which other than it taking so long for the highway department to get roads built, I think is working very well. Pretty much all of the major projects that were expected to be funded will be built.”

Georgetown County has twice considered a local option sales tax to reduce property taxes and it was defeated both times.

Johnny Wright, chairman of the Orangeburg County Council, said voters in his county have approved a third sales tax referendum, even though their second one won’t expire until 2013. “It’s been a blessing for us,” he said. “In this economic downturn, without the penny sales tax to help us out, we would be in trouble.”

Wright said Orangeburg County and its 17 municipalities formed a partnership to distribute proceeds from the sales tax on a formula based on population. The towns have identified infrastructure needs — roads, water/sewer and buildings — that benefit them most. Wright said Orangeburg’s first sales tax produced $68 million by the time it expired in 2004. Its second is on track to bring in $74 million before it expires next year. Estimates for the third round exceed $84 million.

Orangeburg’s addiction to its additional penny sales tax — it’s a 16 percent tax hike, foes here prefer to say — fuels the fire for opponents of the vote. The proposal to build parks and libraries, largely perceived to benefit people who pay little in the way of taxes, drew the most passion at July’s County Council meeting.

One woman in the audience booed County Library Board Vice Chairman Jean Cross when she took exception to statements that libraries are no longer necessary.

At least two county residents objected last week when Dwight McInvaill, library director, sent an e-mail from his county account regarding a meeting of people in favor of the referendum.

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