Could the City of Columbia return to the once controversial practice of transferring money out of its water and sewer fund and into the general fund?
At least one councilman — at-large member Howard Duvall — wants to discuss the possibility, noting the funding could be allocated to public safety.
The talks come as the city continues to look for ways to increase revenue. While the 2020 budget recently was balanced and passed, city officials — including City Manager Teresa Wilson and Budget Director Missy Caughman — have continued to emphasize to Council that the general fund is strained, in part because the city hasn't had a property tax increase in 10 years.
The budget also is hampered by the fact that — in a town that is dominated by state government, colleges and other nonprofit entities — an unusual amount of the city’s land is not on the property tax rolls.
As such, Council has been discussing a number of methods that could bring more revenue into the city's coffers, including, according to city documents, changing city business license laws so that nonprofit entities "that operate a business-type activity" would be charged a business license fee. Council members also have talked about seeking "letters of agreement" with certain major nontaxable entities — such as the area's hospital systems and the University of South Carolina — in which they would agree to provide some compensation for the city services they receive.
Those talks have remained preliminary, but now Duvall has thrown another possibility into the mix with the idea of rekindling the water-sewer transfer into the general fund, specifically for public safety initiatives. He says it could generate $4-5 million per year.
For almost 20 years, the city transferred millions of dollars per year out of its water and sewer fund into the general fund. It was a practice that proved controversial, as many took note that, at the same time the city was transferring those funds, its water and sewer infrastructure was aging and in need of repair. Eventually the city entered a consent decree with the federal Environmental Protection Agency, and is in the midst of a $750 million upgrade to the wastewater system.
A group of citizens sued the city over the transfers. The case found its way to the state Supreme Court, which ultimately sent it back to the lower court, but not before offering a scathing statement that the city's water and sewer fund should not be "treated as a slush fund."
City Council voted in 2016 to end the transfers from the water and sewer fund. The lawsuit was eventually settled and dismissed in 2018.
Now Duvall says he wants to revisit the practice, noting that the 2015 Supreme Court opinion points toward a pathway for transfers out of the water and sewer fund, assuming they come from surplus revenues and certain other conditions are met.
"I think that we should look at setting up a fund within the general fund — we could call it Safe City or Smart City — and designate four or five projects that need to be done in public safety," Duvall says. "We could designate four or five certain items that could be funded by a transfer from the water-sewer fund. ... We could come up with $4 million or $5 million dollars that we could transfer into the general fund that would relieve the burden on the property taxpayers that are paying 100 percent of that now. And it would 'tax' all of those nonprofits through the water fund, because they all have water bills.
"I think we need to go back and look at that."
Other Council members don't agree. District 3 Councilman Moe Baddourah — who, like Duvall, is up for re-election this year — bluntly says he would not vote to reinstate transfers out of the water and sewer fund.
"I am not for it," Baddourah said at a June 18 meeting. "I am not going to support it. I know Howard Duvall has been pushing this. I don't know how many times I have to make it clear to you. I am not there, and I will never be there until we meet all the obligations of the EPA [consent decree]."
Duvall acknowledges that even discussing a return to water-sewer transfers could prove unpopular. He says it's a risk he's willing to take.
"You aren't going to get around the controversy," Duvall says. "The naysayers will say, 'Here they go again, they are raiding the water and sewer fund to prop up the general fund.' ... But, we need to have a healthy general fund, and we don't have a healthy general fund. The general fund is strained. I'm willing to take the political heat, because I think it is a way that we can make the city's general fund healthy again."