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ScribeBy: Arlie Porter of The Post and
Courier Staff
Originally Published on: 3/3/03
Page: A1
For a while, anyway, Charleston County Council members hoped to get a breather from debating the controversial 15 percent reassessment cap.
But with the prospect of having to refund millions of dollars in taxes after a judge ruled the cap illegal, with a new version of the cap facing a legal challenge before the S.C. Supreme Court and with a turnover in the members of council, the cap has proven to have the sticking power of pine sap.
To the public, this means one thing: No one has a clue what taxes will be when bills go out in late September.
It could turn out that the entire tax structure could change -- for the third year in a row.
It could turn out that the county, all cities and the school district will have to raise property taxes by sizeable margins to keep from shutting down.
It could turn out that the county has to spend tens of thousands of dollars to refund millions of dollars in taxes, not once, not twice, but as many as many as three times.
"As a property owner, it's disconcerting. It's confusing. You really don't know what's going on," said Robert Clement, president of the Charleston Trident Association of Realtors.
And now, adding to this confusion, council may vote yet again on a cap -- after already having agreed to enact it in a 4-3 vote last year.
The uncertainty is rooted in a series of decisions three years ago, when council members embarked on an ambitious plan to reform the property tax burden by shifting taxes away from owners of homes that soared in value in the 1990s.
Facing a reassessment in 2000, in which all property values were to be adjusted higher for tax purposes, council considered options state lawmakers handed them with the passage of a new state law.
The law, which grew out of a Charleston County homeowners' uproar after the 1993 reassessment, caps the taxable value of property after reassessment. By state law, property is taxed at actual value. But with a 15 percent cap, a $100,000 home that has increased in value to $200,000 would be taxed at $115,000 rather than $200,000.
Because most of the increase in property value was exempt from taxes, the county would have to raise the tax rate. Because of this, owners of property that did not increase as much in value would end up paying higher property taxes with a cap.
The cap approved by legislators applied to all property, including commercial and rental units. This cap would have resulted in a substantial tax break for those properties that increased the most in value, including stores and offices.
Arguing that the reform effort was intended to help homeowners, not commercial and rental properties, council members instead passed a cap that applied only to owner-occupied homes.
County attorneys and the S.C. attorney general advised council that it was legal to apply the cap to one set of property owners though the state law did not expressly permit it. They were wrong.
Months after the cap took effect, the S.C. Supreme Court ruled it illegal.
In July, following the court ruling, council passed a cap that applies to all properties. With the 4-3 vote, council effectively shifted a portion of the property tax burden from owners of businesses and homes that soared in value in the 1990s to most homeowners and everyone who owns a car.
But fearing new litigation and yet another adverse court ruling, council decided not to enact the cap until this year.
As a result, taxes on fast-appreciating homes last year were based on the higher, reassessed values, and therefore, were much higher than the year before, when the cap had held taxable property values artificially low.
Meanwhile, the city of North Charleston promised to sue as early as last summer, a decision County Council members welcomed because a court decision would resolve legal questions before the cap applied across the board takes effect later this year.
North Charleston City Council, however, waited until this week to file its lawsuit. As a result, it's unlikely the Supreme Court will rule on the second cap until after council has decided whether to spend $75,000 to reprogram computers to apply the cap.
A circuit court judge, meanwhile, has ordered the county to notify as many as 85,000 property owners that they may be entitled to a refund after being overcharged by the first cap the Supreme Court ruled illegal.
If the new cap is enacted as council proposes, and the Supreme Court later rules it illegal, the county and all governments could have to refund taxes a second time. To get the refund money, the county and all governments would charge higher taxes.
Another court ruling likely will follow the collection of a new half-cent sales taxes beginning in May. If the Supreme Court rules against that tax, the county may have to issue yet another refund, although its unclear how it would repay the tax.
Complicating matters even more, council must decide whether to program money for a new cap by June. That would give the county time to calculate the cap in tax bills that will go out in the fall.
Some council members now suspect that opponents will attempt to derail the cap during the upcoming vote on spending the $75,000.
"Here we go, flip-flopping again," Councilman A.D. Jordan, a cap supporter, said at a recent meeting.
"I thought that we had already made that decision," Councilman Curtis Bostic added, referring to last year's cap vote.
If the cap survives a challenge, owners of high-priced commercial properties would get tax breaks worth tens of thousands of dollars, while most homeowners would pay more. Taxes on more than 300,000 cars also would be higher.
If the cap is voted down, taxes on homes and businesses would be about the same as last year's, although the school district has warned that it may have to substantially raise taxes for the second year in a row to make up for cuts by state lawmakers.
If cap opponents are mounting a drive to throw out the cap, it has not been successful so far.
Five or six council members support the cap. Three are opposed, two votes short of changing last year's decision.
Also, the makeup of council has changed since last year's 4-3 cap vote. With three new faces, a cap applied across the board appears to have picked up a vote.
An ardent cap opponent, Cindy Floyd, lost her council seat to Fran Roberts, who supports the cap. New Councilwoman Carolyn Conlon replaced her husband, John Conlon, on the council. Both are cap supporters.
In his campaign before the election, Ed Fava, a former county administrator, said he supported the cap. He was elected, taking the place of Toi Estes, also a cap supporter. But Fava recently said he supports putting off the cap until a S.C. Supreme Court ruling on the North Charleston lawsuit.
Fava said he's worried that a ruling may go against the county, potentially forcing a tax refund.
Council Chairman Tim Scott, who opposed the cap last year, said another vote is planned in case the county needs to respond to a Supreme Court ruling.
"We're preparing for all options," he said.
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