The Richland County one-cent sales tax increase for transportation was born in controversy.
AAs a ballot measure, it passed on a second try with 52 percent of the vote in 2012. That election was marred by huge lines at some polling places, with many voters waiting for three hours or more — or just giving up. Some ballots in a county office weren’t found and counted until days later.
The program has since been the subject of repeated and continuing controversies and court challenges, including a legal dispute with the S.C. Department of Revenue that already has brought changes to how money has been spent. That court case continues and could further reshape how the penny’s money is spent — and the timeline of completing projects.
The tax is expected to raise up to $1 billion before it expires after two decades. To date, it has raised about $375 million.
To get the huge amount of work the money would pay for launched quickly, and to keep an eye on it, the county contracted with a private firm called the Program Development Team, or PDT. It was a coalition led by three construction companies, Columbia-based M.B. Kahn and Brownstone, along with Nebraska-based HDR, with 10 other contractors taking part.
That was then. This is now. Richland County Council voted in March to cease its relationship with the PDT after Nov. 2, the end date of their contract. Going forward, the county will bring administration of the program in-house, calling into question how the execution of penny tax projects will work moving forward.
The PDT drew criticism for the compensation it received — $6 million per year for its core oversight function. County officials have indicated they think they could save as much as $4 million per year by handling the program in-house, and insist they could have greater oversight on the projects than when the private companies were in charge,
To get ready for the change, the county is adding eight staff members to its transportation department, with four engineers and four inspectors of construction projects either onboard or being hired.
But with the change comes a seemingly inevitable reality: Construction on numerous road projects will likely slow down, at least at the outset of the new arrangement. And fear that the penny could run out of money before all the planned projects are completed looms.
Republican County Councilman Joe Walker fears a considerable slowdown could be in the offing. Walker, who ran for council as a no-nonsense businessman, has been a critic of the PDT since joining Council in 2018, noting he thought the deal was far too lucrative for the private companies. It was Walker, often quiet during council meetings, who made the motion to end the PDT contract.
Leaders of the PDT reject the idea that the contract was plush, pointing to a 2017 audit that showed a final profit of about $200,000 to be shared among all the companies.
Between transitioning administration of the program to the county and the continued legal wrangling with the Department of Revenue, Walker says there could be a significant pause.
“It would not hurt my feelings at all ... if it came to a halt,” Walker says.
And even if the county finds its own momentum in completing projects, there are serious questions as to whether taxpayers will get everything they voted for.
Pavement from the Penny
- So far about $250 million in Richland County road construction work has been delivered from the extra penny tacked on to the sales tax in 2013. Notable projects include:
- Shop Road is being widened and extended, providing a connection to Pineview Industrial Park.
- North Main Street is being widened, resurfaced and streetscaped in conjunction with a federal grant.
- Clemson Road is being widened to five lanes including a turn lane in the area where it is now two.
- The Three Rivers Greenway is nearly complete, providing a walkable connection from the riverfront downtown to Riverbanks Zoo and Garden.
- Nearly 60 dirt roads in the county have been paved.
Needing More Dollars
A challenge looming over the penny tax is the fact that many of the projects have seen costs rise since the initial list of proposed improvements was offered to voters in 2012.
The backers of the referendum believed that its chances of passage would be increased if an entire list of work projects would be made available, a list that was crafted under the guidance of estimates about the costs.
Those estimates, however, were quite rudimentary, says Rick Ott, an M.B. Kahn executive who was the senior principal of the PDT. To really put a price tag on a road-widening project, for instance, it’s necessary to do a detailed look at the landscape to be crossed to assess some questions and begin a design.
Among the questions to be answered before an estimate can be accurate, Ott explains, are the number of bridges and other improvements that will be needed, the issues involving the location of utilities and the owners of right of way, meaning who owns the land along the road and how much money they want for it.
These more involved estimates sometimes made a road or intersection project seem cheaper than projected, but many saw their likely prices rise, with a few rising millions of dollars above their estimates.
“Of course we realized right off the bat that there were some gross miscalculations within the estimates, and within the way the program was set up,” Ott says.
The more detailed estimates, combined with the rise in construction costs as the recession ended, helped make many county projects more expensive than the estimates prepared ahead of the 2012 referendum.
The rise in costs was accelerated by the state’s passage of a gas tax increase that first took effect in July 2017, which prompted a barrage of state transportation department projects to be bid out one after another, Ott says.
That caused contractors’ prices to rise because they had their choice of work.
The direct impact of the rising cost of projects is that the money very well could run out before all of the planned projects are completed.
The prospect of running out of money before the promised list is finished has prompted debate on Council, especially over the question of whether to drop or curtail some of the remaining greenway projects in order to save money.
As of now, all greenway projects, such as paths along Smith Branch and Rocky Creek near downtown, are on hold.
The council could decide it is hemmed in by the projections that were used to make the penny at election time, even if later information shows higher costs, Jackson notes.
“You’re behind the eight ball right out of the gate,” County Councilman Chip Jackson says.
There are areas where the county could save money to get more projects done.
One project promised under the Richland Penny was to rebuild the Interstate 20 interchange at Broad River Road, but that project is now on tap for the state to do as part of the huge fix to of the I-20/I26 interchange, commonly called Malfunction Junction, that begins work next year.
“That’s $60 million that can be reshuffled back into the program,” Ott says.
County Council Chairman Paul Livingston believes that the progress will, in the long run, outweigh the controversy.
“I think the voters are going to realize that nothing has benefited the county more in my years than the penny,” Livingston says.
The projects being completed are vital to handling future growth, he says. Looking across the river at Lexington County and its traffic challenges, it’s clear to see why Richland had to be proactive, Livingston insists.
“I cannot imagine what the county would be like in 10 years without these things,” he says.
Ott also insists the penny work is critical for Richland County.
“This penny has done a lot of good for the county,” the PDT leader says. “There have been a lot of roads paved. A lot of neighborhoods improved. A lot of sidewalks and other amenities [that] have made it safer for the citizens. Frankly, if the citizens fully understood all the improvements the penny has paid for they would be ecstatic with how those monies have been spent.”
Still to be revealed is whether the changeover to in-house management will save the county any money in the end. Walker believes that it’s tough to know currently how that will shake out.
The conservative councilman also believes that the county still has a lot to learn about how much work there will be and, in light of that, how much will need to be spent.
“I believe our staff is doing all they can,” Walker says. “We really won’t know the full magnitude of the need until we bear the load ourselves.”
If the county slows down the pace of projects it will risk having to pay more to complete them as construction costs rise, Ott says. That will particularly be true, Ott expects, as the state’s huge Malfunction Junction project begins putting work contracts out for bid next summer.
He sounds skeptical that the county will save any money by doing the PDT’s work itself.
“In my expert opinion, I wish them luck if they are able to do it,” Ott says.
The End of the Deal
At the time of the county’s March decision to take over administering the penny program, Walker said he had confidence that county staffers were “more than qualified to execute on the plan that has been presented to us.”
Ott remains skeptical.
Speaking inside the gleaming Main Street conference room of law firm Nexsen Pruet, the PDT senior principal says that, as the private companies wound down their operations, they weren’t consulted on how to transition the billion-dollar enterprise.
“The Richland PDT was not asked about how to transition the program,” Ott says. “No one ever sought our input into it. … Now, since the county voted [to bring the program in-house], we have been having weekly transition meetings, not in how the county was going to take over the program, but just to keep them up to speed on the progress of the [current] projects.”
That the county didn’t consult with the PDT about how to transition the program seems to exemplify a general acrimony between the two entities.
Asked how the icy relationship developed, Ott says, “I can’t answer that. Not because I don’t want to answer that, but because I can’t answer it. I can tell you that the PDT has had an excellent working relationship with the [county] transportation staff. But at a point in time there was a former administrator that really got in and created a lot of havoc in the penny program.”
Throughout a nearly 90-minute conversation, Ott often brings up “the former administrator” as someone who hampered the progress of the PDT’s efforts. When pressed, Ott concedes he is referring to former county administrator Gerald Seals.
Seals worked with Richland County from July 2016 until he was fired in April 2018, when he was accused of, among other things, sleeping on the job. Fearing a lawsuit from the former administrator, the county later agreed to a $1 million settlement with Seals.
Ott says that the near-constant turnover in Richland County staff, particularly during the Seals years, made life difficult for the PDT as it worked to complete projects for the billion-dollar program.
“People who had been at the county a long time left, and they could not keep people in positions,” Ott says. “We really struggled to kind of keep the program going, for a lot of reasons.
“Whenever you have a transitioning staff, there’s just an inevitable slowdown and people don’t understand what’s going on.”
Questions about the penny spending started to fester in 2015 when the state Department of Revenue began to look into it. Rick Reames, who was director of the state tax agency at the time, said the department’s probe into the penny “uncovered millions of dollars of potential fraud, waste and abuse.”
The county and DOR subsequently shot lawsuits at one another, and the legal escalation eventually led to a March 2018 opinion from the state Supreme Court that called into question a number of expenditures that were being paid with penny tax money. They included monthly $25,000 payments to a pair of public relations firms, $550,000 in penny money used to establish a small business leadership fund, and cash for what the court called a “vague and duplicative” mentor-mentee program.
The two public relations firms — Banco Bannister and Campbell Consulting — were each paid $300,000 per year out of the penny fund.
“It was unclear exactly what work these firms performed, since a fully operational public information office already existed within the county and because no documentation existed to detail what specific services were provided, the number of hours spent on these projects, or how much each service cost,” the court’s findings read.
In February 2019, County Council voted to begin reimbursing its transportation fund from the county’s general fund to pay back several million dollars of expenses that were unallowable per DOR and the Supreme Court.
The public relations firms were paid through the PDT.
“The public communications part is a big part of our contract,” Ott says, later adding that a significant component was “to keep the public informed in a very transparent manner, on what was going on in their neighborhoods, with their roadways.”
“We had numerous public meetings where we brought people in. We had a website we were keeping up-to-date,” Ott adds.
Information provided by the PDT shows it held 40 project-specific public meetings during the five years it was under contract, which fell under the public relations umbrella.
Ott says the public relations services were eventually halted in the wake of the DOR and Supreme Court findings. However, he thinks that, if the county wants to win trust going forward, a public relations program — presumably operating outside of penny funds — could be necessary.
“I give the county credit initially: They expected a robust communications program on how these monies were being spent,” Ott says. “[DOR] said, ‘You can’t use these [penny] funds to do that.’ So, I have a personal disagreement with that. I don’t think that’s in the public’s best interest.
“I think having a completely transparent process is the way to go any time you are spending public funds. Even if the DOR doesn’t allow penny funds [to go toward public relations] I think the county needs to get back to having all this information on a website and making sure the public is aware of what’s going on.”
Jackson, the councilman who heads the council’s ad hoc transportation committee, says his confidence has grown that Richland is prepared to take over the oversight of road projects from that the PDT had been keeping tabs on.
“I’m cautiously optimistic that we, the county, can take up that momentum and progress,” Jackson says.
Jackson notes he has seen continuing teamwork between the Richland transportation staff and the PDT to assure the county knows where projects stand, including meaningful PDT participation in meetings even as the final days of its contract ticked away.
“I feel better about the level of cooperation to help the county not be caught off-guard,” Jackson says.
That does not mean the pace of projects won’t slow down. Jackson says he has cautioned the county staff to speak up if it cannot keep up with the number of projects that the penny tax will put on its plate. He’s conscious that the county’s staff, while bulked up, will not be as numerous as what the PDT employed.
Walker sees the continuing case pitting the county against the S.C. Department of Revenue Department as a potential game-changer for the penny spending.
In recent months, Revenue and the county have been working on a mediated settlement of the spending issues at the heart of the dispute. At an October meeting, council members spent more than an hour and a half behind closed doors in executive session on the subject of the Revenue dispute.
Upon emerging, the council ordered county staff, including representatives of the legal and financial departments, to get together with Revenue staffers and attempt to move the discussions forward.
Walker argues the result, after addressing concerns raised by the state tax agency, could be major changes to the county’s efforts under the transportation penny. He also believes that there could be major parts of the penny spending that Revenue objects to, and a final arrangement on the legal case could cause the program to change.
“I don’t feel like anybody has a grasp on what’s real,” Walker says. “DOR has brought forward information that makes us pause.”
Rep. Kirkman Finlay, R-Columbia, has seen the Revenue Department’s report on the penny spending and said he is worried about the impact. He said the report classifies about $40 million of project spending by May 2018 as out of bounds for funds raised by the penny, meaning the county could have to tap other funds to cover for it.
Finlay said he wants to see what the plan is to handle this. “I don’t believe that the county can stand a $40 million to perhaps $50 million hit to its general fund,” Finlay said.
He said he is speaking out about the issues because he fears that the Legislature will be asked to help. “The General Assembly does not have $50 million budgeted to help Richland County with this,” Finlay said.
A Freedom of Information Act request filed to seek the Revenue Department’s report on county spending was refused, with a Revenue spokesperson saying that the report still is a draft document being worked on and not ready yet for release.
‘The County Made Some Mistakes’
As the development team exits the transportation penny arrangement with the county, Ott remains insistent that the consortium of private companies did the best job it could under the circumstances.
“From our perspective, and from, I believe, the county’s perspective, and from the other governmental bodies that we interact with through intergovernmental agreements, everyone has been extremely pleased with the services provided by the PDT,” Ott offers.
The businessman points to a number of PDT metrics through the last five years: It has delivered $250 million in construction contracts, paved nearly 60 dirt roads, and has 150 roads under construction as its contract comes to an end; it has completed 30 sidewalks, wrapped up the first phase of a widening of Bluff Road near Williams-Brice Stadium, and finished or was in the midst of scores of other transportation-related projects.
Ott says more could have been done, but the near-constant jousting between the county and the Department of Revenue, leading up to the state Supreme Court decision and beyond, bogged down the process.
“The county made some mistakes, there is no doubt about that,” Ott says. “But they didn’t make them, I don’t think, in bad faith. I think they made them with good faith efforts to comply. But they were working without the benefit of the rules [on what penny funds could be used for]. I don’t think Richland County did anything much different than what any other county had done with the expenditure of [transportation penny] funds.”
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