Tax boost possible if lawsuit fails
High court to rule on district's dispute with Revenue Dept.
By Andy Paras
MONCKS CORNER — Berkeley County residents could end up footing an additional $1.2 million annual bill if the state Supreme Court rules against the school district in a dispute with the S.C. Department of Revenue.
The Berkeley County School District, together with districts in Orangeburg and Spartanburg counties, filed suit with the state's highest court last week alleging that the Revenue Department is improperly withholding $3.3 million in annual state sales tax revenue from the districts. The districts planned to use the revenue to make payments on annual lease-purchase or installment purchase agreements that were used to build schools.
Berkeley school officials said they would have to raise taxes to meet those payments, or else they could be restricted from using Timberland High, Berkeley Elementary and Berkeley Intermediate schools.
Taxes would go up by about $36 a year on a $150,000 owner-occupied home, said district Finance Director Brantley Thomas. Also, it could also force the district to use reserve funds for the 2007-08 payments, he said.
The Revenue Department says the districts are not entitled to be reimbursed because the Legislature in 2006 set up the sales tax to reimburse only "school operating" expenses. In an opinion released this year, the Revenue Department said it interprets school operating expenses as day-to-day operations of schools, not for capital improvement projects financed through bonds or lease-purchase agreements.
Both sides say it's an extremely important issue and that asking the Supreme Court to make a ruling will be the quickest way to solve the matter before tax rates are set this fall.
At issue for Berkeley County is a $1.2 million annual payment on a lease-purchase agreement it entered into in 1994 to build Timberland High, Berkeley Elementary and Berkeley Intermediate schools. The district is scheduled to make those payments through at least 2016, officials said.
William F. Halligan, an attorney representing Berkeley, Orangeburg District 5 and Spartanburg District 5, said each of the districts could ultimately lose access to their schools if the payments are not made.
The Department of Revenue's interpretation does not affect Berkeley County's $206 million installment loan in 2003 or similar loans in Charleston and Dorchester counties because those districts are not using their operating budget to pay those off.
The Legislature enacted the Property Tax Reform Act in 2006 to provide funding for schools through the 1-cent sales tax. The only part the state would not pay is general obligation debt, the lawsuit says. It alleges that the Supreme Court ruled in three prior cases that lease-purchase agreements do not constitute general obligation debt.
Halligan said the Revenue Department's interpretation affects seven counties in the state, though only three have joined in the action thus far. He said Spartanburg District 5 may have the most to lose considering it's a smaller district than Berkeley and has to make a $1.9 million annual payment on an agreement it entered into in 2005. Spartanburg District 5 officials could not be reached late Wednesday afternoon to comment on the length of the contract or the total cost of its loan.
Adrienne Fairwell, public relations coordinator for the Revenue Department, said the agency agrees that the matter is very significant and needs to be resolved quickly.
"It is of the utmost importance and we don't disagree with the state Supreme Court deciding on it in its original jurisdiction," she said.
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majorjohnson (anonymous) says...
If yall remember, Berkley did that to get around the law not allowing them to go over a certain percentage in borrowing to build. They called it creative financing. Very creative eh?
July 10, 2008 at 7:30 a.m. ( permalink | suggest removal )
prosperous_hb (anonymous) says...
They should cut the the Big Dog's salary by $36 a year instead of raising taxes. I'm sick of the us (the Residents) having to take the brunt of their mistakes. It's time that they start feeling the heat.
July 10, 2008 at 7:54 a.m. ( permalink | suggest removal )
lou9 (anonymous) says...
Once again the school board has found a way to screw the taxpayers. The law says the money is for operating expenses only. They knew this before they decided to file a lawsuit that they can't win. More wasted tax dollars on a frivolous lawsuit and a lawer giving bad advice. Oh well, let's just raise taxes again because they don't know what else to do. And let's not forget the $30,000 they are going to spend to find another superintendent and pay him/her a large six figure salary.
The Berkeley County School District - their motto is "Nothing spends like someone else's money".
July 10, 2008 at 7:59 a.m. ( permalink | suggest removal )
smalltownrumor (anonymous) says...
And also, if we will remember, our former supervisor warned the taxpayers that "creative financing" would come back to bite us. Face it, folks, over the next few years, our property tax bills are going to be staggering. Thanks to the C F scheme, the school tax portion is going up and thanks to our new supervisor stealing 29% of our property tax relief, the county portion is going up. To all you people who insisted we needed a "change", thanks a bunch.
July 10, 2008 at 8 a.m. ( permalink | suggest removal )
Siri (anonymous) says...
I don't understand why they would sue if there are cases on the books already against them. Having said that, I include my payment to the bank for my home in my budget. It is part of the total $$ I need to operate my household.
July 10, 2008 at 8:29 a.m. ( permalink | suggest removal )
drp7773 (anonymous) says...
Go ahead and get that money ready to pay. Berkeley County finally realizes that if Dorchester county can suck the blood out of all it's citizens then they can too. I mean they have to spend 30,000 to search for a new Superintendent, you know it's not their money......
July 10, 2008 at 8:44 a.m. ( permalink | suggest removal )
prosperous_hb (anonymous) says...
I miss Rozier....
July 10, 2008 at 9:03 a.m. ( permalink | suggest removal )
carolinadude (anonymous) says...
As you folks remember, the "alternative funding for new school construction" was an unconstitutional means to exceed the constitution's 8% cap on bonded debt. The 8% cap means that they have to go to the voters for a bond referendum if they need to borrow in excess of 8% of the district's assessed valuation. So "alternative funding" again was an unconstitutional attempt to "circumvent the voters' right to vote on bonded debt. As we've said before, no matter how much money that a school district has, it is not nor ever will it be enough!! The tax shift of 06 was designed to provide property tax relief by removing the "school operations" funding from the property tax bill while leaving the debt on the house tax bills. True to form, the educrats are now screaming with this law suit that the property taxes don't cover the debt so they need a portion of the sales tax revenues to cover their unconstitutional debt scheme of recent years. This tax shift was an "unpardonable sin" by the lawmakers that shifted taxation from the "haves to the have nots", and that's unconscionable. THROW THE INCUMBENT BUMS OUT IN NOVEMBER.
July 10, 2008 at 11:04 p.m. ( permalink | suggest removal )
carolinadude (anonymous) says...
SATURDAY, MAY 27, 2006 12:00 AM
Deal targets alternative financing
School districts would be banned from issuing installment revenue bonds
By MINDY B. HAGEN
The Post and Courier
A provision in the property tax compromise would ban school districts from using a controversial alternative financing method to pay for school construction projects.
At least eight school districts in South Carolina - including Charleston, Berkeley and Dorchester District 2 - have used installment financing in recent years to fund large-scale building efforts.
The method allows districts to exceed debt limitations without a direct tax hike by issuing installment revenue bonds.
The bonds are purchased by a nonprofit board and repaid over time by future tax dollars, but opponents criticize the funding method for relying on future growth to pay off the debt.
In recent months, local school administrators seemed to realize that state lawmakers were ready to close the loophole that allowed districts to borrow money through installment financing.
District officials added millions of dollars to building programs before it became too late to act.
At the end of March, the Charleston County School Board approved adding up to $120 million to the district's construction schedule and voted to pay for the extra construction through installment financing. That means the district's total building program for 2005-09 will reach close to $500 million.
In late January, the Dorchester District 2 school board added $43.7 million to a building plan that already called for $84.3 million to finance four new schools.The scope of the building project was expanded when officials realized that the original funding proposal would not meet future enrollment estimates.
The Berkeley County School District borrowed more than $206 million in installment bonds in 2003. The school board recently said it may need to build about 10 new schools to accommodate planned subdivisions, and is scheduled to hear a report at a Tuesday night meeting about facility needs.
Facing the prospect of a July 1 end to installment financing, Berkeley School Board Chairwoman Kathleen Bounds said the board still plans to receive the report Tuesday and proceed in meeting the district's facilities needs. Board members and district officials are prepared to operate under a "compressed time schedule," she said.
"We've been making plans for this over the course of the last few months," Bounds said. "We've been aware of this possibility since we first began these deliberations. If, after public input and board discussion, we decide to move forward, we will be ready to face these challenges."
Reach Mindy B. Hagen at mhagen@postandcourier.com or 937-5433.
This article was printed via the web on 5/27/2006 1:48:32 PM . This article
appeared in The Post and Courier and updated online at Charleston.net on Saturday, May 27, 2006.
July 10, 2008 at 11:11 p.m. ( permalink | suggest removal )
carolinadude (anonymous) says...
In June 2006, the South Carolina General Assembly passed, and the Governor signed, H. 4449
(R. 417) legislation that will radically change the state's revenue system. The new law shifts
the burden of funding public school operations from local to state government by replacing the
local school district tax on owner-occupied residential property with a one-cent increase in the
state retail sales tax. The law is intended to provide a clean, revenue-neutral swap of sales for
property taxes, with the state government reimbursing the local governments for the revenue loss
created by elimination of the property tax.
What home owners gain in the form of reduced property taxes, consumers will suffer in the form
of increased sales taxes. Moreover, the hoped-for relief to property owners will prove illusory.
Soon after the old taxes are removed, we predict, local taxpayers, particularly business taxpayers,
can expect to find themselves burdened by new taxes, which will be imposed to replace the old
taxes removed by H4449. The new taxes will be imposed to satisfy local governments' appetite
for revenue and from state government's failure to impose a local spending cap.
We believe that local governments will, by 2010, have completely recouped the revenue loss
attributable to the 2006 tax cut. They will thus be receiving a sizeable transfer from the state,
while offering no relief to local taxpayers. This push could take a number of paths, with the
renewed burden of local taxes falling in different ways on businesses and homeowners. In the
report that follows we sketch one plausible outcome. In summary, we predict that, by FY 2010:
ï ï The entire 2008 reduction in property taxes will have been extinguished by the
introduction of new property taxes. And, because the 1• increase in the state sales tax
will be in effect, the state will be collecting $594 million more in sales tax revenue.
ï ï The 2008 reduction in property taxes will have been extinguished through the imposition
of new taxes on commercial property and on residential property that remains taxed
under H. 4449. We foresee a state of affairs in which:
o Business, which saw no relief in taxes taxes over and above
what they would have paid had H. 4449 not been adopted.
o Home owners will find that their initial tax cut has been reduced by 45% (or
$281 million) from $632 million to $351 million.
Tax Changes in South Carolina: No Relief in Sight 4
By 2010, the state will find that it has merely increased the sales tax while effecting a
redistribution in property-tax burdens from home owners (who will pay somewhat less than they
would have, absent the new law) to businesses (which pay much more).
These political developments will have adverse consequences for the state economy.
July 11, 2008 at 3:27 p.m. ( permalink | suggest removal )
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