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ScribeBy: Arlie Porter and James Scott of The Post and
Courier Staff
Originally Published on: 4/11/03
Suit threat, court actions add confusion
The tax system used to run Charleston County governments spiraled further into confusion Thursday, with a new threat of a lawsuit, another court decision and a sales tax that S.C. Supreme Court justices continue to hold hostage.
In separate but related actions:
-- North Charleston City Council voted 10-0 to attempt to stop the county from implementing a controversial new reassessment cap on tax bills set to go out this fall. The legal action throws into question the status of the cap, which would provide huge property tax breaks to many commercial property owners at the expense of most homeowners.
-- A judge ordered Charleston County to notify by next Friday as many as 80,000 property owners that they may be entitled to a tax refund from being overcharged by a 2001 county reassessment cap the Supreme Court ruled illegal last year.
-- Citing a different Supreme Court ruling, County Council members postponed a discussion on how to spend revenues from a planned half-cent sales tax increase, which was to go into effect May 1. Supreme Court justices ruled last week that the county cannot collect the tax until they rule on a legal challenge.
"Most attorneys agree that this is not a good sign for a sales tax," said Council Chairman Tim Scott.
The tax, which would raise $1.3 billion over the 25 years it is in effect, would pay for new roads and bridges, run the Charleston Area Regional Transportation Authority and purchase land for parks and conservation.
"CARTA is on thin ice," Scott said of the agency, which put up its headquarters building as collateral to secure an operating loan to be repaid with anticipated sales tax revenues.
The revenues will be delayed three or four months, costing CARTA between $50,000 and $75,000 in interest. But the agency is not in jeopardy of defaulting on the $3.5 million loan during that delay, said CARTA Director Howard Chapman.
Ridership, however, has declined about 5 percent since December, when sales tax opponents filed lawsuits challenging the referendum through which voters narrowly approved the sales tax. The legal challenge or the economy may have caused the decline, Chapman said.
The S.C. Revenue Department, which collects the sales tax, will spend about $5,400 to mail letters instructing Charleston County businesses not to begin collecting the tax May 1, after an earlier letter had set that date for collection. The agency will spend another $5,400 to send out letters telling businesses what to do after the court rules.
Revenue Spokesman Danny Brazzell said costs to reprogram registers to calculate the tax will vary from business to business, but should be minimal.
North Charleston city officials, meanwhile, voted 9-2 to join the county's legal defense of the half-cent sales tax, with Councilmen Bob King and A.C. Mitchum voting against. Both are among the local elected officials challenging the tax. Both Charleston and Mount Pleasant also plan to defend the tax, which will raise hundreds of millions of dollars for road projects in each municipality.
Even as North Charleston lined up with the county on one lawsuit, it threatened legal action against the county on another.
At their meeting Thursday, council members voted overwhelmingly to block a new property reassessment cap, which would result in higher property taxes for the majority of the city's residents. City Councilman Kurt Taylor, who is also a deputy county attorney, abstained.
An April 1 letter from Scott prompted Thursday's decision, council members said.
"We wrote the county and asked them not to do this, but that didn't work, so we have to take the next option we have," said Mayor Keith Summey. "It would be very risky to go ahead and implement something that has not yet been approved by the courts."
Scott has said he hopes the Supreme Court will rule on the cap before mid-July, which is the last chance the council has to change its mind before the September tax bills are calculated.
But a Supreme Court decision on the injunction may well preclude a council decision on whether to postpone the cap until next year, as some council members are proposing, he said.
In his letter to Summey, Scott acknowledged the city's stand against the cap, including the need to take legal action. "Your concern is duly noted, and I feel confident that you will do whatever you feel is necessary for the protection of your North Charleston citizens," Scott wrote.
North Charleston City Council, which over the years has passed four resolutions against the cap, has argued that the cap shields residents in downtown Charleston and in the beach communities from rising taxes while sticking North Charleston residents with the tab.
The cap, first implemented in 2000, limited property value increases on owner-occupied homes to 15 percent in a reassessment year, giving a tax break to homes that appreciated rapidly. As a result, owners of homes that did not increase as much in value, along with owners of commercial property and second homes, paid a relatively higher tax rate.
The state Supreme Court ruled last year that capping only owner-occupied homes was illegal, prompting the council to institute a new cap this year. The new cap would also apply to commercial properties that have increased substantially in value.
After the Supreme Court ruled the first cap illegal, a state judge ordered the council to refund taxes to as many as 85,000 property owners who paid higher taxes because of the first cap. Letters must be mailed to those owners by April 18, according to a court order signed this week.
If the recipients don't respond, they are automatically included in a class-action lawsuit against the county and may get a tax refund later. County Council members say they will appeal the refund ruling.
Also, the county would have to charge higher taxes to raise the refund money, council members said.
Scott said no other county in the state has attempted the cap and sales tax. Because Charleston County is at the forefront of setting tax policy, legal challenges are to be expected, he said.
Still, the defeats have been disheartening, he said. "We're certainly being cut on the edge of our wrists as opposed to being on the cutting edge."
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