A plan to stimulate commercial real estate sales in South Carolina with property tax breaks fell several votes short Wednesday in the Senate, leaving the plan badly wounded but not quite dead.
The legislation is a compromise aimed at satisfying the real estate industry's demand for tax breaks while addressing local governments' concerns about losing revenue.
The benefits would go to those buying property other than owner-occupied homes, such as rental housing, second homes, stores and offices.
"We thought we had the votes going into this morning," Nick Kremydas, S.C. Association of Realtors chief executive officer, said Wednesday. "We knew it was going to be close."
The opposition in the Senate came from two directions.
Some thought the tax breaks, estimated to cost local governments and schools $35 million in lost property-tax revenue this year, went too far and would either harm local services or result in tax increases for most property owners.
Others thought the plan did not go far enough, partly because tax breaks would not apply to owner-occupied homes.
The proposal called for temporarily suspending point-of-sale reassessments on commercial properties and second homes so that any sold in 2010 would be taxed based upon the prior owner's assessed value.
For example, if an office building assessed at $1 million sold for $1.5 million, the new owner would continue to be taxed on the previous $1 million assessment.
Commercial property sold after 2010 would be reassessed if the ownership changes, as properties are now under current law. However, the new assessments would be reduced by 20 percent, or reduced to the previous assessed value, whichever was higher.
If a building assessed at $1 million were sold for $1.5 million in 2011, it's assessment would be $1.2 million.
Second homes were included in the plan because they are treated as commercial property for tax purposes.
Sen. Thomas Alexander, a Walhalla Republican who led weeks of negotiations on the compromise, said the legislation is now "on life support" but the effort was worthwhile.
"I think trying to spur economic development in South Carolina is worth it," he said.
The Realtors association mounted an aggressive campaign to reduce point-of-sale reassessments, claiming in direct mail pieces and advertisements that the reassessments and the higher tax bills they bring are scaring investors away from South Carolina.
"I don't think it's dead, and I hope I'm not jinxing it by saying that," Kremydas said.
The legislation promises little, however, for most people who currently own property in the state. There is language in the bill that would benefit people who transfer property to their children, but for most property owners, the bill raised the possibility of higher tax rates or reduced local services.
"Just where do they think that this $35 million will come from?" said Willard D. Fitch, a North Charleston homeowner reacting to coverage of the bill. "Just because these fat-cat real estate guys want to make more money, they want to put the burden on me, to pay the taxes they won't be paying so that they can make more money."
John Jamison, a commercial developer in Greenville, had a different perspective.
"Look, we're in the development business to make money, and we're not ashamed of that," he said. "But that also creates jobs -- used to be 1,000 a year -- and it's not that way any more."
"I am 100 percent positive that it's hurting new business growth in our state, because the national franchisers and their local franchisees see this as an unfair expense," Jamison said. "When the economy is bad, you don't need government policies that deter business."
The compromise plan needed 31 votes in the Senate to pass but failed 27-13.
"I think there are probably efforts to get the votes, but I don't know if they will be successful," Alexander said. "I think we need a little time to step back and see what happens."
"This debate has demonstrated that there's additional work to be done on the tax process in South Carolina," he said.
How they voted
Republicans voting in favor of the bill: Campbell, Goose Creek; Campsen, Charleston; Cleary, Murrells Inlet; McConnell, Charleston; and Rose, Summerville.
Republicans voting against: Grooms, Bonneau.
Democrats voting against: Pinckney, Ridgeland, and Matthews, Bowman.
Not voting: Ford, D-Charleston
Reach David Slade at 937-5552 or firstname.lastname@example.org.