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... Building Stronger Counties for Tomorrow

(2006 Past Issues)

The Friday Report will be published online around 1:00 p.m. every Friday while the South Carolina General Assembly is in session.

Issue 20-06
May 26, 2006

Eminent Domain / Regulatory Takings
A. In the Senate - S. 1030 & H. 4503
The Senate took up the eminent domain legislation this week. H. 4503 contains statutory changes which provide someone who has had their land condemned the right of first refusal if the condemning entity decides to sell the property condemned. The bill also creates a study committee to investigate further changes in the eminent domain area. Both S. 1030 and H. 4503 have been sent to the House, but H. 4503 is the bill which will receive attention on the House floor.

B. In the House - S. 1031 & H. 4503
● S. 1031 - The debate in the House on eminent domain and regulatory takings issue was moved to next week. S. 1031 is the constitutional amendment passed by the Senate which currently only states that eminent domain may only be used to take land for public use, not public benefit or to grant or sell to another private owner. Any amendment to add regulatory takings provisions would require a two thirds vote of the House. There is an amendment pending to insert regulatory takings provisions into this constitutional amendment.

● H. 4503 - H. 4503 will be back before the House next week and it is a statutory bill requiring only a majority vote to amend it back to the House passed version - containing regulatory takings provisions.

At the center of the debate, is whether to pass a bill that addresses the eminent domain concerns alone or to include regulatory takings provisions. Regulatory takings provisions allow any landowner to sue local or state governments for potential profits if land use regulations were adopted, changed, or enforced. The liability that local governments would face would make any changes or enforcement of land use regulations very unlikely.

The debate is very intense and the vote on an amendment to add regulatory takings was very close in subcommittee and committee. In the debate on the House bills earlier this year the votes on regulatory takings changed wildly. One contact by you with your House member could be the difference.

PLEASE ASK YOUR REPRESENTATIVE TO VOTE AGAINST ANY REGULATORY TAKINGS AMENDMENT AND PASS A CLEAN EMINENT DOMAIN BILL.

Property Tax Restructuring - H. 4449 & H. 4450

Both of these conference committee reports will have be voted upon by the House and Senate next week.

A. Conference Committee on H. 4449 - The conference reached a compromise Thursday evening on property tax restructuring. The draft of the agreement is not yet available and there are conflicting interpretations of the various motions made. Below is a rough outline of the contents of the agreement as best we can determine at this point.

� There will be a one cent increase in the statewide sales tax, exempting food and accommodations.
� The revenue will be applied to eliminate school operating taxes on owner occupied homes with a minimum distribution to any county area for schools of $2.5 million. The balance of the revenue will be applied to the county operating millage on owner occupied homes. The county tax relief will probably take the form of a credit and fluctuate from year to year. This will probably be less than $100 million.
� There is a local option sales tax in increments of one tenth of a cent, not to exceed one cent, to grant relief from county operating taxes on all classes of property. There may be a feature which addresses school operating taxes on classes of property other than homes.
� The new millage rate cap will be the increase in the CPI plus increase in population, without any exceptions or override vote.
� EIA millage driver reform was not adopted.
� There is also likely to be a local spending cap in the final version.
� There is no state spending cap in the final version.
� The provision to address the school alternative financing plan sometimes referred to as BEST was included, but is being redrafted to avoid bringing in other situations such as bonds issued under the Capital Projects Sales Tax and other situations.
� The early recognition and pro rata billing of new structures for property taxes provision was included.
� The installment payment of property taxes provision was included, but may have been made optional.

B. Conference Committee on H. 4450
This committee met once this week and adjourned until the agreement could be worked out on H. 4449. During that meeting a compromise was discussed by both House and Senate conferees to cap increases in valuation from reassessment at 15% per reassessment cycle. It was said that the increases would be 15% of the value on the year of adoption of the cap, not compounded each reassessment cycle. This committee will meet again early next week.

3.	Budget Conference Committee Meeting The Budget conference committee is meeting as this Friday Report is being written. There is no word on the proviso to increase the DJJ per diem from $25 to $50. The budget could be finished on Friday.

4.	Local Accommodations & Hospitality Tax Uses - H. 4691 & S. 985 A. Local Accommodations / Hospitality Tax - H. 4691. This bill allows counties which collect less than $900,000 in state accommodations tax annually to use up to 20% of the preceding year�s revenue from a local accommodations or hospitality tax for the operation and maintenance of tourist related items. H. 4691 received third reading in the Senate and will be enrolled for ratification. B. Local Accommodations / Hospitality Tax - S. 985. S. 985 was amended in the House to be identical to H. 4691 and was additionally amended to contain language allowing alcohol purchases on December 24. The House gave third reading this week and is pending concurrence in the Senate.

Big Annual Tax (BAT) Bill - H. 4913 & S. 1065

S. 1065 originally made modifications to last year�s marina owner information disclosure bill, but the House tax, accommodations or hospitality taxes. (There was a similar provision in H. 4449.) Another provision in this bill allows counties to reduce the assessment ratio on boats from 10.5% to 6%. The Senate has one more opportunity to amend S. 1065 or may concur in the House version of the bill.

H. 4913 is pending second reading on the Senate calendar. It will probably be the vehicle for numerous other tax amendments, which are stalled in other places or have been looking for a vehicle to pass. This version also contains the provision to allow county ordinances to reduce the assessment ratio on boats to 6% from 10.5%.

Shrinking of the Property Tax Base

Several bills, or amendments to bills, are currently pending on the House and Senate Calendars which would shrink the property tax base. Most of these involve reducing the assessment ratio or creating special valuation rules. Whenever the assessment or value of these properties is decreased, the property tax burden on owner-occupied property increases.

A. Motorcycle & Truck Assessment Ratio Decrease - H. 4307. This bill mandates a decrease in the assessment ratio on motorcycles and trucks with a gross weight limit of 11,000 lbs from 10.5% to 6%. The fiscal impact of the legislation is $6.1 million, primarily because of the trucks. The Senate amended the bill to exempt motor vehicles licensed as antiques from property taxes this week. H. 4307 is pending concurrence in the House.

B. Recognition of Tax Credits for Low Income Housing - H. 4737. H. 4737 would disallow an assessor recognizing the federal income tax credits given to low income housing developers when using an income based approach to valuation. These income tax credits are commonly sold in the financial markets for 90% of their income tax value for cash. The legislation has a fiscal impact of $2.8 million and is concentrated in the counties which currently include the value of the credits in their valuation of these properties. This legislation is pending second reading on the Senate calendar.

C. No Yacht Left Behind - S. 776. S. 776 is pending second reading on the House contested calendar. The bill originally exempted vehicles licensed as antiques from property taxes. This week the House adopted an amendment that would:
(A) reduce the assessment on trailers used for camping and recreational travel from 10.5% to 6%;
(B) reduce the assessment on houseboats from 10.5% to 6%; and
(C) cap the individual property tax bill on every boat at $1,500.This legislation in its current form has a very significant fiscal impact.
Additionally, the amendment is unnecessary given that there is a provision in the BAT bill to allow a county to reduce the assessment ratio on boats from 10.5% to 6% by ordinance.

Other Actions of Interest

A. Traffic Ticket PTI - H. 3343. This bill to divert traffic offenses from magistrates court passed the House this week and has been sent to the Senate. This bill takes all of the revenue from these offenses away from the county or city and gives it to the solicitor to run the educational or public service program. The end result is another reduction in court generated revenue to support the court operations.

B. Common Law Marriage - H. 3588. H. 3588 was recommitted to Committee in the Senate, killing it for this year. The bill provides that common law marriages would no longer be recognized if the common law marriage is established after January 1, 2008.

C. Reassessment Delay - S. 1322. This bill reads: �Notwithstanding any other provision of law, a county that postponed the implementation of values determined in a countywide assessment and equalization program, conducted in 2004, may not implement the values until property tax year 2007, unless the county's county council adopts an ordinance affirmatively implementing the values.� S. 1322 passed the Senate and is in House Ways & Means Committee. There will likely be an attempt to amend those provisions into any of a number of bills in the Senate.

Newly-Introduced Legislation

Note: If you would like copies of any of the bills or if you would like to offer comments to the SCAC staff, please call us toll-free at 1-800-922-6081 or fax us at 1 (803) 252-0379 or email us. Or, you can view or download bills by clicking on the bill number.

HOUSE BILLS

H. 5224 - Provides that during the regulation and licensure of construction and electrical work, counties must abide by state regulations and that in certain circumstances the Building Codes Council may supercede the authority of a county.

RATIFICATION OF ACTS

The following bills have been passed by both chambers and are now before the Governor for his signature or veto.

(R.322), S. 925 - Gives one or more of the joint tenants or tenants in common the right of first refusal to purchase subject property before its judicial partition.

(R.325), S. 1154 - Enacts the Interstate Compact for Juveniles.

(R.326), S. 1205 - Provides that with certain exceptions, local ordinances in conflict with state law or regulations governing an agricultural facility or operation are null and void.

(R.332), S. 991- Provides for acceptable forms of security for funds held in trusts by a bank or by a trust company.

(R.333), S. 1045 - Provides a one time $50 tax credit for couples who complete a qualifying premarital preparation course.

(R.337), H. 3665 - Declares December 15th of each year Bill of Rights Day and encourages all governmental bodies to observe the day.

(R.339), H. 4446- Permits a 10 year moratorium on state corporate income taxes to a taxpayer who makes at least 90% of total investment in this state or creates 100 new jobs and invest at least $150 million in a manufacturing facility in a distressed county.

(R.340), H. 4481 - Provides that DOT may conduct vegetation management at its discretion along the highway medians and roadsides after consulting the local governmental authority that has jurisdiction of that portion of highway.

Issue 19-06
May 19, 2006

There are six legislative days remaining in the legislative session. The remaining issues will move at a feverous pace and become very confused before the close of the session. It is important to have conversations with your members of the General Assembly to minimize the chance of truly harmful legislation passing.

Eminent Domain / Regulatory Takings - S. 1031 and S. 1030 & H.4503

The House and Senate each have bills on their calendars that address Kelo case eminent domain issues and regulatory takings. At the center of the debate, is whether to pass a bill that addresses the Kelo case eminent domain concerns alone or to include regulatory takings provisions. The regulatory takings provisions would allow any landowner to sue local or state governments for potential profits if land use regulations were adopted, changed, or enforced. The liability that local governments would face would make any changes or enforcement of land use regulations very unlikely.

A. House - S. 1031
S. 1031 is a constitutional amendment that currently addresses Kelo case eminent domain concerns. During this week�s committee meeting the inclusion or exclusion of regulatory takings provisions hinged on 10-11 and 11-10 votes. An amendment to put regulatory takings provisions is pending on the House desk and an all out effort will be required to defeat that amendment. PLEASE ASK YOUR REPRESENTATIVE TO VOTE AGAINST ANY REGULATORY TAKINGS AMENDMENT AND PASS A CLEAN EMINENT DOMAIN BILL.

B. Senate - S. 1030 & H. 4503
S. 1030 is a statutory bill containing several procedural changes to the condemnation process and providing a right of first refusal for a previous owner to repurchase their condemned land. The Senate set S. 1030 for special order to be debated next week.
H. 4503 was recalled from committee to the Senate calendar for possible debate next week. H. 4503 is a statutory bill which also makes procedural changes to the condemnation process. H. 4503 also contains regulatory takings provisions. In order to get a bill passed this late in the session, they plan to put the final language from S. 1030 into H. 4503. If H. 4503goes back to the House, there will be another fight over including or excluding regulatory takings provisions. PLEASE ASK YOUR SENATOR TO SUPPORT ONLY KELO EMINENT DOMAIN LANGUAGE WHICH DOES NOT INCLUDE REGULATORY TAKINGS PROVISIONS.

CONTACT THE MEMBERS OF THE HOUSE AND THE SENATE TO TELL THEM THE IMPACT OF THESE PROVISIONS ON ORDINARY COMMUNITY REGULATION AND ENFORCEMENT. ASK THAT THEY VOTE AGAINST ADDING REGULATORY TAKINGS PROVISIONS TO THESE BILLS.

Property Tax Restructuring In the Senate - H. 4449 & H. 4450

The House amended the Senate version of both H. 4449, the sales tax for property tax swap, and H. 4450, the constitutional amendment relating to assessment methodology and parts of the swap legislation. The members of the conference committees on both of these bills are attached along with their contact information. The Senate conferees are different for the two bills. The conference committee on H. 4449 will meet Monday at 10:00 am.

H. 4449 is the tax swap component and the House version has now been segmented to allow the conference committee the ability to pick and choose among taxing entities on owner-occupied homes to be included in the sales tax for property tax swap. A conference committee may only choose between either chamber�s version and the segmented drafting of the previously adopted House plan makes that much easier. The House also added a more thorough reform of the school millage driver formula known as the EIA maintenance of local effort requirement.

H. 4450 is the constitutional amendment relating to assessment methodology and how the sales tax for property tax swap is to be accomplished. Both the House and Senate versions adopt a point of sale approach to assessment which means that once a property is purchased, its tax value is set until it is improved or sold. The Senate version allows for alternate methods of assessment to be adopted.

A quick comparison of the provisions in both versions of H. 4449 is attached.

NOW IS THE TIME TO CONTACT THE CONFERENCE COMMITTEE MEMBERS IF YOU HAVE CONCERNS ABOUT ANY PROVISION OF
H. 4449 OR H. 4450.

3.	Budget Conference Committee Meeting The budget conference committee began meeting this week. There do not appear to be many major disputes between the conferees. It is likely that the most serious issue will be whether or not to adopt the budget before any result from the property tax restructuring conference committees and how much if any of the state�s additional revenue to devote to tax relief. The House has stated that they may hold up the budget to force the Senate to work on the property tax bills. Most of the issues involving county operations have been resolved, however, the committee has not taken any action on the DJJ per diem increase in Proviso 39.20. Proviso 39.20, which passed in the House but was deleted in the Senate, increases the per diem paid for the housing of juveniles by local governments to the DJJ from $25 to $50. This proviso should not be included in the budget. PLEASE CONTACT THE MEMBERS OF THE CONFERENCE COMMITTEE ON THE BUDGET AND ASK THAT THEY NOT ADOPT THIS UNFUNDED AND UNNECESSARY MANDATE. The Conferees need to know: �A 100% increase in juvenile detention per diem cost is nothing more than a mandated increase in cost to the property taxpayers of their county and city. � When the per diem was set at $25, DJJ received a portion of court fine assessment revenue amounting to another $2.8 million in FY 04-05. Section 14-1-208(C)(11) specifically states �that per diem costs charged to local governments utilizing the juvenile detention centers do not exceed twenty-five dollars a day.� � DJJ funds their pre-trial juvenile detention center with the $25 per diem charge to local governments and revenue from criminal court fine assessments. According to the State Treasurers Office DJJ received $2.8 million from fine assessments. The $25 per diem will generate approximately $912,500 in any given fiscal year. For FY 2005, DJJ received $3.7 million to fund their pre-trial detention center. Assuming DJJ contributed their 1/3 share of operational costs as required by statute, this is $5 million for their pre-trial detention center or $50,171.18 per child per year and would not include education funding nor federal funding they receive from other sources.

4.	Fowl Bill - S. 1205 The chicken industry protection act has passed the House and will be ratified next week. The county may not pass setback regulations which impact agriculture operations, except for hog operations. If your county has existing setback ordinances that impact agriculture they are voided. What can you do should your county desire to limit the growth of poultry farms or regulate where they locate? The General Assembly says you may only use zoning ordinances. Just make sure the zoning doesn�t contain setbacks for agricultural operations covered by this bill. What do you tell your constituents? Call DHEC if they have a problem in this area.

Local Accommodations & Hospitality Tax Uses -
H. 4691 & S. 985

A. In the Senate - H. 4691. This bill allows counties which collect less than $900,000 in state accommodations tax annually to use up to 20% of the preceding year�s revenue from a local accommodations or hospitality tax for the operation and maintenance of tourist related items. The legislation is currently pending second reading on the Senate contested calendar. Opposition to this legislation has developed. Several local chambers of commerce apparently believe the bill will cut their funding or the funding for tourism promotion.

B. In the House - S. 985. A committee amendment pending on S. 985 would amend the bill to be the same as H. 4691. Opposition to this bill has developed in the House and the bill is on the contested calendar with several amendments pending.

Big Annual Tax (BAT) Bill - H. 4913 & S. 1065

S. 1065 originally made modifications to last year�s marina owner information disclosure bill, but the House added the contents of the BAT bill contained in
H. 4913 and it is pending action in the Senate. One floor amendment to S. 1065, which became Section 42 of the bill is aimed at cutting off the BEST Plan for public finance which several school districts have used to circumvent the 8% bonded debt limit for very large bond issues. However, several bond firms have indicated that the provision may be too broad and affect some privatization and economic development types of financing. (There is a similar provision in the House version of H. 4449.) Another provision in this bill allows counties to reduce the assessment ratio on boats from 10.5% to 6%. The Senate has one more opportunity to amend S. 1065 or may concur in the House version of the bill.

H. 4913 is pending second reading on the Senate calendar. It will probably be the vehicle for numerous other tax amendments, which are stalled in other places or have been looking for a vehicle to pass. This version also contains the provision to allow county ordinances to reduce the assessment ratio on boats to 6% from 10.5%.

Shrinking of the Property Tax Base

There as several bills and amendments to bills currently pending in the House and Senate which would shrink the property tax base. Most of these property tax breaks involve reducing the assessment ratio or valuation of personal property or non-owner occupied real property. Whenever the assessment or value of these properties is decreased, the property tax burden on owner-occupied property increases. How can the General Assembly ever address real property tax reform when legislation and amendments such as these continue to shift the property tax burden to owner occupied property?

A. Motorcycle & Truck Assessment Ratio Decrease - H. 4307. This bill mandates that the assessment ratio on motorcycles and trucks with a gross weight limit of 11,000 lbs drop from 10.5% to 6%. The fiscal impact of the legislation is $6.1 million, primarily because of the trucks. H. 4307 is currently pending second reading on the Senate Calendar. An amendment pending on this bill, and several other bills on the Senate calendar, reduces the assessment on camper trailers from 10.5% to 6%. The fiscal impact of reducing the assessment on trailers is $2.2 million.

B. Recognition of Tax Credits for Low Income Housing - H. 4737. H. 4737 would disallow an assessor recognizing the federal income tax credits given to low income housing developers when using an income based approach to valuation. These income tax credits are commonly sold in the financial markets for 90% of their income tax value for cash. The legislation has a fiscal impact of $2.8 million and is concentrated in the handful of counties which currently include the value of the credits in their valuation of these properties. This legislation is pending second reading on the Senate calender.

C. No Yacht Left Behind - S. 776. S. 776 is pending second reading on the House contested calendar. The bill originally exempted vehicles licensed as antiques from property taxes. This week the House adopted an amendment that would:(A) reduce the assessment on trailers used for camping and recreational travel from 10.5% to 6%;(B) reduce the assessment on houseboats from 10.5% to 6%; and (C) cap the individual property tax bill on every boat at $1,500.This legislation in its current form has a very significant fiscal impact. Additionally, the amendment is unnecessary given that there is a provision in the BAT bill to allow a county to reduce the assessment ratio on boats from 10.5% to 6% by ordinance.

Other Actions of Interest

A. Traffic Ticket PTI - H. 3343. This bill is still pending second reading on the House contested calendar. The bill would allow those persons charged with a traffic ticket to enter a public service/educational program administered by the solicitor and pay no fine which supports local courts. State agencies are purported to be held harmless, but victim services advocates are not convinced that victim services are in deed held harmless. The solicitors will make money after the costs of the program are paid and there is no audit of these funds.

B. Big Box Rehab Property Tax Credits - H. 3841. This legislation allows a credit of up to 25% of rehabilitation costs against �big box� stores against property tax bills spread over an eight year period. Each property tax entity would have the opportunity to opt out of the credits after notice from either the city if located within a municipal limits or county if located in the unincorporated county. Alternatively, the owner could take a 10% of rehab cost state income tax credit. The conference committee reported out this bill, it was adopted in both chambers and ratified this week. It will now be before the Governor for his action.

C. Reassessment Delay - S. 1322. This bill reads: �Notwithstanding any other provision of law, a county that postponed the implementation of values determined in a countywide assessment and equalization program, conducted in 2004, may not implement the values until property tax year 2007, unless the county's county council adopts an ordinance affirmatively implementing the values.� S. 1322 is pending third reading in the Senate next week. This may be the subject of an amendment to a House bill in the Senate given the fact that it would be hard for a Senate bill in the Senate to pass this late in the session.

D. Property Taxes in Bankruptcy - H. 4419. The auditor may negotiate a lower total tax and penalty for taxpayers in bankruptcy with the consent of county council. H. 4419 is pending second reading on the Senate calendar.

E. Law Enforcement Training Council - H. 3977. This legislation creates an 11 member council, including a detention center director, to oversee the Criminal Justice Academy. H. 3977 has been ratified and will be before the Governor for his action.

F. Family Court Records Privacy - S. 150. A House Judiciary subcommittee gave a favorable report to S. 150 this week. S. 150 seals financial declarations in the family court file, except for parties to the action and certain other officials or upon court order to open them. The subcommittee made the act effective prospectively and with old files to be sealed as they are used. The House Judiciary Committee will take up this bill if they meet again.

G. Marriage License Fees - S. 1045. The House Judiciary Committee gave
S. 1045 a favorable report and it is pending second reading on the House calendar. The bill provides for a $50 income tax deduction as an incentive for couples who complete a qualified premarital preparation course.

H. Common Law Marriage - H. 3588. H. 3588 was set for special order in the Senate and is in interrupted debate status pending second reading. The bill provides that common law marriages would no longer be recognized if the common law marriage is established after January 1, 2008. If the common law marriage can be proven that it was established before this date by a preponderance of the evidence or upon the discretion of the court, the marriage license fee would be waived. The key to this bill�s passage is breaking a filibuster which is underway.

I. Illegal Aliens and Public Employment Act - H. 5057. A Senate Judiciary subcommittee gave a favorable report to an amended version of H. 5057. The bill prohibits public employers entering into a contract for services unless the contractor and subcontractors register and participate in the federal work authorization program to verify employee information. The federal work authorization program is authorized by the US Department of Homeland Security to verify information of newly hired employees, pursuant to the Immigration Reform and Control Act of 1986. H. 5057 was amended to include language from a similar bill in Georgia regarding trafficking a person for sexual servitude. H. 5057 has been sent to the Senate Judiciary committee.

Newly-Introduced Legislation

HOUSE BILLS

H. 5140 - Provides that when a municipality annexes property in a county with a land use, zoning policy, plan, regulation or ordinance, the county�s density requirement must remain in effect for 5 years after the annexation.

H. 5145 - Provides that when a municipality annexes property in a county with a land use, zoning policy, plan, regulation or ordinance, DOT may not provide curb cuts, engineering services or any other expenditure of public funds to develop the annexed area.

H. 5200 - Provides that a public official represented before a public body does not have to resign due to a conflict of interest under certain circumstances.

SENATE BILLS

S. 1427 - Allows a special purpose district to be dissolved if it has outstanding indebtedness payable from revenues derived from the provisions of one or more governmental services.

RATIFICATION OF ACTS

The following bills have been passed by both chambers and are now before the Governor for his signature or veto.

(R.295), S. 205 - Exempts the Marine Corps League from property taxes.

(R.297), S. 558 - Provides a method for revising the number and method of board appointments for water districts.

(R.300), S. 862 - Provides that the exemption granted to a debtor�s interest in property used as a debtor�s resident not exceed $50,000 and that the aggregate value of multiple homestead exemptions not exceed $100,000.

(R.302), S. 1133 - Makes it illegal for a car to have a radar or laser jamming device.

(R.304), S. 1175 - Revises the definition of �distribution facility� as it relates to the targeted job tax credit and property tax exemptions and permits certain counties to qualify for a job tax credit two tiers higher than the credit for which they would otherwise qualify.

(R.309), H. 3414 - Permits the counting of absentee ballots at 9:00 a.m. instead of 2:00 p.m. on election day and gives poll workers immunity from civil liability for any act or omission made in good faith and which does not constitute gross negligence or willfulness.

(R.310), H. 3841 - Enacts the SC Retail Facilities Revitalization Act, providing property tax credits for rehabilitation expenses made to eligible sites.

(R.311), H. 3977 - Creates the Law Enforcement Training Council for the purpose of establishing a training program for law enforcement officers and persons employed in the criminal justice system.

(R.314), H. 4428 - Enacts the SC Competitive Cable Services Act, permitting cable providers to apply for a statewide cable franchise to offer cable services throughout the state.

(R.317), H. 4938 - Permits the establishment of an air wing in the state guard and provides that workers� compensation benefits for its members must be paid from the state accident fund.

(R.318), H. 4951 - Permits a job tax credit that is two tiers higher for counties which have had an unemployment rate greater than the state average and an average per capita lower than the state average for the past ten years.

Issue 17-06
May 5, 2006

Property Tax Restructuring In the Senate -
H. 4449 & S. 969

The Senate gave second reading to H. 4449. The details of H. 4449 are discussed below and a copy of the bill is linked to the web version of the Friday Report. It is expected that there will be at least one �technical� amendment offered on third reading and possibly substantive changes as well. This is the Senate version of the bill passed by the House and a conference committee will have to be appointed to reach some compromise between the two different versions. Next week, S. 969, the constitutional millage rate cap, will still be pending second reading on the Senate calendar. The subject of millage rate limitations is treated in H. 4449, so it is unclear whether S. 969 will proceed.

A. The Tax Swap Component - H. 4449
There are several parts to the bill given second reading.
Part I imposes a statewide � percent sales tax increase, exempting food and accommodations with the proceeds placed in an account separate from the state general fund. The first $50 million is placed in a reserve fund. Thereafter, each county is given a quarterly per capita distribution. The county treasurer then divides that amount by the number of owner occupied residences and applies that amount as a credit against county operating property taxes on those homes. Any credit amount in excess of the property tax liability would then be applied uniformly to the remaining parcels with a county operating tax liability. If the statewide sales tax exceeds the amount of county operating tax imposed on owner occupied homes, the excess is to be applied to school operating property taxes in the same manner. This state property tax credit is to be applied before the local option sales tax credit.

Part II creates a local option sales tax for property tax exemption. A county may by ordinance or 7% initiative petition, submit a referendum to the voters to impose an additional local sales tax. If this local option sales tax is imposed, owner occupied homes would then be exempt from operating taxes and the ballot question could be crafted to grant property tax credits to other classes of property, such as 6% commercial property, manufacturing, personal property, etc.... The rate of this local option would be determined by submitting the proposed property tax exemption and credit plan to the Budget and Control Board, which would then estimate what rate would be necessary to fund the plan in increments of tenths of a percent. If this local option sales tax is adopted, a millage cap is imposed which limits millage increases on the remaining tax base to the Southeastern Consumer Price Index as modified by �6-1-320 (which is amended in this bill and discussed below). If a local government exceeds this limitation, then up to 150% of the overage is withheld from their Aid to Subdivisions or EFA funds.

Part III of H. 4449 allows counties the option of placing new construction on the tax rolls and issuing a partial year tax bill prior to December 31 of the year.
H. 4449 also enacts the installment payment of property taxes plan put forth by some of the county treasurers. Part III amends �6-1-320(B) of the existing CPI millage rate cap to allow exceptions for prior year deficit, catastrophic event beyond the governmental entity�s control, compliance with a court order, compliance with an unfunded state or federal mandate, and closure of a taxpayer reducing total revenue by 10%. These exceptions to the rate cap would still be temporary surcharges listed on the tax bill each year so long as the cause of the expenditure existed.

B. The Millage Cap Component - S. 969
S. 969 appears to be unnecessary given the fact that H. 4449 includes millage rate caps changes in both the House and Senate versions of the bill. This would allow future statutory changes in the event of some unforeseen circumstance, without having to wait for a constitutional referendum and ratification process, which could take two or more years to complete. Please contact your senator and ask that they not adopt S. 969 because millage rate caps have been dealt with in H. 4449.

Fowl Bill or 2006 Version of the Hog bill - S. 1205

The Agriculture Subcommittee of the House Agriculture Committee will hold a hearing on S. 1205 Tuesday, May 9 at 3:00 pm in Room 410 of the Blatt Building. Subcommittee Members are Reps Frye (Lexington), Funderburk (Kershaw) and Hiott (Pickens). S. 1205 is also scheduled for the full House Agriculture committee on Thursday, May 12 at 8:30 am. It would appear that S. 1205 will be sent to the House floor on Thursday.

S. 1205 repeals ordinances passed by elected county councils dealing with agriculture set backs and moves land use decisions concerning agriculture from elected local officials to a state bureaucratic agency. This is a bill that is designed to benefit the large poultry companies.

Traffic Ticket PTI Program - H. 3343

The House Judiciary Committee reported H. 3343 out favorably this week. The legislation requires creation of a PTI-like program in all counties for traffic tickets. H. 3343 would allow a traffic offender to pay a $140 application fee which is split among the state agencies which receive fine assessment revenue and a $140 participation fee to the solicitor for the cost of the education or service program. Local governments would receive no money out of the program, which diverts people out of magistrates and municipal courts. At the subcommittee hearing on this bill, the chairman announced that there would be no Judiciary Committee meeting this week and because the bill would not meet the May 1 crossover deadline the chairman asked everyone to hold their comments. SCAC and others accommodated that request. Despite the fact that all interested parties did not get the opportunity to express their thoughts on the bill, the Judiciary Committee reported the bill out. Please ask the members of the House to recommit H. 3343.

There are substantive problems created in H. 3343 which include:
� no revenue to make up lost fine revenue which supports the operations of the
court.
� no fiscal impact statement which gives a rough idea of how much fine revenue
would be lost.
� no fiscal impact statement to ensure that victim services funds which come from
assessment revenue really are being adequately replaced by the application fee.
� no real method to ensure that participants can only participate in the program
once.
� no way to ensure that persons with significant driving violations in other states
cannot participate in the program.
� no audit provisions for the program.
� no requirement for the program to pay for workers comp or liability insurance for
those performing public service work.

Other Actions of Interest to County Officials

A. FOI Act Copy Rates - H. 4834. The House gave third reading to H. 4834 and it is now in the Senate Judiciary Committee. The bill limits copy charges for documents provided under the FOI Act to the prevailing commercial rate in the community.

B. Law Enforcement Training Council - H. 3977. This legislation puts the Law Enforcement Training Academy under a Law Enforcement Training Council consisting of 11 appointees, including sheriffs and a detention center director.
H. 3977 was polled out of the Senate Judiciary Committee and is pending second reading on the Senate calendar.

C. Marina Business Records - S. 1065. The House Ways and Means Committee will take up S. 1065 next Tuesday. The subcommittee�s proposed amendment changes the definition of business records to be provided by the marina owner to include the boat owner�s name and billing address and the make and model of the boat if available. The subcommittee�s proposed amendment also added the BAT bill (H. 4913). Most likely, the bill will be conformed to the House passed version. For explanation of H. 4913 see below.

D. Big Annual Tax Bill (Bat Bill) - H. 4913. The Bat bill was passed by the House this week and it is now in the Senate Finance Committee. This is the annual miscellaneous tax clean-up bill. One floor amendment of note passed in the House allows a county to reduce the assessment ratio on boats to 6%.

E. Local Accommodations Tax - S. 985. S. 985 was amended by a House Ways & Means subcommittee to conform to H. 4691. The proposed amendment allows counties which collect less than $900,000 in state accommodations tax annually, to use up to 20% of the preceding years�s revenue from a local accommodations or hospitality tax, to be used for the operation and maintenance of tourist related items. S. 985 will be taken up by the Ways and Means Committee next Tuesday.

F. Eminent Domain - S. 1031. A House Judiciary subcommittee will meet next Wednesday to discuss the Senate�s Constitutional Amendment, which addresses only Kelo concerns. This is the same subcommittee that passed out two bills addressing Kelo that also included regulatory takings. Please contact the members of the subcommittee and ask that they keep S. 1031 clean by not adopting any amendments including regulatory takings. The members of the subcommittee are Reps. Delleney (Ch.), Hagood, Harrison, Coleman, and Fletcher Smith.

Senate Finance Subcommittees to Meet

The Senate Finance subcommittees will meet next Tuesday to take up several pieces of legislation passed by the House. Although the agendas are currently unknown some of the bills that may be considered are:

A. Motorcycle and Truck Assessment Ratio Decrease - H. 4307. This bill mandates that motorcycles, trucks with an empty weight of 9000 lbs, and trucks with a gross weight limit of 11,000 lbs are all considered motor vehicles for the purposes of the assessment ratio drop from 10.5% to 6%. The fiscal impact of the legislation is $6,102,000.

B. Recognition of Federal Tax Credits for Low Income Housing - H. 4737. H. 4737 would disallow an assessor recognizing the federal tax credits given to developers of low income housing when using an income based approach valuation. The legislation has a fiscal impact of $2.8 million.

C. Responsibilities of Comptroller General moved to the Department of Revenue - H. 4504. This bill transfers many of the former statutory responsibilities of the Comptroller General to DOR.

D. Local Accommodations / Hospitality Tax - H. 4691. This bill allows counties which collect less than $900,000 in state accommodations tax annually, up to 20% of the preceding year�s revenue from a local accommodations or hospitality tax to be used for the operation and maintenance of tourist related items.

E. SC Economic Development Incentive Act - H. 4874. In addition to creating new tax credits for certain manufacturers and allowing banks to qualify for the job tax credit and the corporate headquarters tax credit, this bill lowers the minimum investment requirement for the fee in lieu of tax agreement from $5 million to $2.5 million. The bill lowers the minimum initial investment requirement for the super fee in lieu (4% assessment ratio) to $150 million dollars. The amount of new full time jobs required for the super fee in lieu is dropped from 200 to 125.

Supreme Court Rules in TERI Case

The State Supreme Court issued its ruling in Layman v. State, usually referred to as the �TERI case� on Thursday. The court ruled that those persons participating in the �old TERI program� (those persons who elected to TERI prior to July 1, 2005) were not required to pay employee contributions to the retirement system and were entitled to a refund plus interest. The court held that in the TERI statute the legislature used language which indicated a contractual relationship with TERI participants. Because one party to a contract may not unilaterally alter the contractual relationship, the legislature could not require participants in the TERI program prior to July 1, 2005 to pay employee contributions. The court ruled that the state did have the right to alter the plan for participants who enrolled in the TERI program after July 1, 2005.

The Supreme Court also considered whether the state could require working retirees who had retired prior to July 1, 2005 to pay employee contributions. Prior to July 1, 2005, working retirees could retire, return to state employment, receive their retirement, and were not required to pay an employee retirement contribution. The statute limited these retirees earning to $50,000. The court ruled that the statute defining the working retiree program did not contain language which would indicate a legislative intent to create a contractual relationship. However, because the record indicated that some of these participants may have had a separate written contract defining the working retiree program, the court remanded the case back to circuit court for a factual finding of whether a contact existed between some of these participants and the state.

The court opined that the ruling would not hamper the states ability to govern, because the court required the state to place all of the old TERI participants retirement contributions into an interest bearing account. Therefore the court believes the money to repay these participants exists and will not cause a hardship on the retirement system. However, the ruling does have a significant impact (at least temporarily) on the retirement system and its unfunded liability period because money that was relied upon when the guaranteed COLA was granted to retirees will not be flowing into the retirement system. It is likely the General Assembly will have to appropriate some of the budget, or make changes to the employee benefit program, to make up for any shortfall. View the actual copy of the Supreme Court decision.

NACo Steering Committee Nominations

Do you want a voice in creating the national legislative policies of the National Association of Counties? Then consider filling out a NACo nomination form to be appointed to one of their 11 steering committees. The nomination process for membership on NACo policy steering committees is underway. As a steering committee member, you are responsible for debating and creating national policies and priorities affecting counties and serve as NACo�s front line in their grassroots efforts. Committees meet at the NACo legislative and annual conferences and one other time during the year. You will be responsible for your own travel.

Contact Kathy Williams (kathy@scac.state.sc.us) at the SCAC Offices if you would like to receive a nomination form. Or download one now:

Completed forms must be received by SCAC no later than Friday, June 16. The nominations will be processed by SCAC and forwarded to NACo for approval by the NACo President after the NACo Annual Conference in August. Appointments will be announced in September.

Newly-Introduced Legislation

HOUSE BILLS

H. 5082 - Permits property taxpayers eligible for the homestead exemption to work off the county or municipal portion of property tax on their residence.

SENATE BILLS

S. 1384 - Concurrent resolution congratulating SCAC�s Kathy Williams on being chosen 2006 Association Executive of the Year by the SC Society of Association Executives.

South Carolina Association of Counties
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