Friday Reports — June, 2009
Issue 20-09 — June 19, 2009
The General Assembly has adjourned for the year after the one-day veto session. There were also a very limited number of items the General Assembly could take up during the veto session, and they are covered below. Bills filed this year may still be considered next year. The annual SCAC publication Acts That Affect Counties is nearly complete, and it will be mailed shortly. In the meanwhile, the SCAC staff is available to answer questions.
State Budget and the Local Government Fund
As many of you read in the news, the Board of Economic Advisors trimmed the revenue projection for both FYs 2008-09 and 2009-10. For FY 2008-09, the year-end budget balancing will be performed by the Comptroller General and the Budget and Control Board. It is expected that the state Capital Reserve Fund will be used. For FY 2009-10, that leaves using the state General Reserve Fund as the first line of adjustment.
The Local Government Fund (LGF) will not be cut again for FY 2008-09, because it has already been cut to the FY 2007-08 level and §6-27-50 does not allow the Budget and Control Board to cut it below that level. In FY 2009-10, the LGF starts out the year below the funding level for the previous fiscal year, so it is not subject to Budget and Control Board cuts during the year. The LGF could be cut by the General Assembly, if it were called back into session to deal with the budget again. The General Assembly can come back into session, if the budget revenue is off by 5 percent or more during the year.
Gubernatorial Vetoes Overridden
During the veto session, the General Assembly overrode all of the 10 vetoes made by the Governor. Those of interest to counties are discussed below:
- Stormwater Fees, Livestock and Poultry – S. 453.
This measure provides that the General Assembly of South Carolina occupies the field of regulating livestock and poultry and that a local government is preempted from regulating that subject
—with the exception of land use or zoning regulations. The act also prohibits local government stormwater fees from being imposed upon undeveloped lands. Stormwater fees in existence prior to June 16, 2009 may continue in their current terms, conditions and amounts. S. 453 is now law.
Sex Offender Residency – H. 3087. This bill provides that a local government may not enact an ordinance that either expands or contracts the boundaries in which a sex offender may reside, as set by state statute. H. 3087 is now law.
Home Builder Tax Exemption and Legal Residence Ratio Requirements – H. 3018. H. 3018 provides that the value of a newly constructed, single-family residence is exempt from property taxes until the property tax year in which the home is sold or otherwise occupied, or the property tax year ending the sixth Dec. 31st after the home is completed and a Certificate of Occupancy is issued. The owner of the property eligible for the exemption must notify the county assessor and auditor, by written affidavit, within 30 days of the issuance of a Certificate of Occupancy and no later than Jan. 31st in subsequent exemption eligibility years that the property is unoccupied. A second section of this legislation inserted the words "under the age of 18" in the provision formerly excluding dependents who could be claimed on the income tax return of someone already receiving the 4 percent legal residence ratio from also receiving the 4 percent legal residence assessment ratio. H. 3018 is now law.
Accommodations and Hospitality Bonds — S. 304
The conference committee on S. 304 reported out a free conference report this week. The report amends §6-1-760 to clearly authorize pledging local accommodations and hospitality fees and state accommodations taxes for revenue bonds.
After an agreement was reached between the interested parties, the conference committee also amended S. 304 to state that these fees may only be pledged as security for revenue bonds, if they are used for capital projects used to attract and support tourists. Tourist is defined as:
a person who does not reside in but rather enters temporarily, for reasons of recreation or leisure, the jurisdictional boundaries of a municipality for a municipal project or the immediate area of the project for a county project.
"Free conference" powers allow a conference committee to include material which was not in either version of the legislation passed and require a two-thirds vote of the membership of each chamber. The Senate granted the committee free conference powers and adopted the committee report. The House refused to grant free conference powers. The House can revisit S. 304 when they return in January.
Tax Realignment Commission — S. 12
The conference committee on S.12 met and reported out a bill that was passed this week. It now goes to the Governor for his signature or veto. S. 12 creates the Tax Realignment Commission (TRAC). The commission will consist of 11 members—four appointed by the Senate (one member each appointed by President Pro Tempore, the Finance Committee Chairman, the Majority Leader, and the Minority Leader); four appointed by the House (two members appointed by the Speaker, two by the Ways and Means Chairman); two appointed by the Governor; and the Director of the Department of Revenue to serve Ex Officio. A member of the General Assembly may not serve on the commission.
The commission is to develop criteria, within three months, for assessing the effectiveness of the current tax system structure, as well as the likely systemic impact of any proposed changes affecting tax revenues. Then, the commission is to prepare and deliver a detailed evaluation of the state's tax system structure by March 15, 2010. This report must consider sales and use tax exemptions to be retained, modified or repealed; an assessment of state and local taxes levied and other provisions affecting state and local revenue to fund the operation and responsibilities of state and local government, respectively; and fee, fine, license, forfeiture or other funds. The commission is also to consider the Fair Tax proposal.
After providing the report by March 15, 2010, the commission is to continue studying the tax system and may make further legislative recommendations at any time. Additionally, the commission must submit a report to the Chairman of the Finance Committee and the Chairman of the Ways and Means Committee on Aug. 1 and Feb. 1 of each year detailing the commission's progress and points of focus. The commission expires on Jan. 1, 2011.
The commission may not consider the exemption of owner-occupied residential property granted in §12-37-220(B)(47).
Big Annual Tax Bill — H. 3722
A conference committee met on H. 3722, after it was added to the Sine Die resolution to allow consideration of H. 3722 during the veto session. The House version of the bill contained numerous tax changes. The Senate narrowed the bill to four changes which the Department of Revenue felt it needed and six additional economic development items. These include adding §12-37-220(51) to exempt from property taxes all property used in the operation of a facility with a capital investment of $20 million or more at a single site that is owned by a tax exemption organization when the facility is principally used for researching and testing the impact of natural hazards such as wind, fire, water, earthquake and hail on building materials.
The House version of the bill added a new section, §4-1-180, to authorize counties to designate a portion or all of a multi-county business park for extraordinary commercial facilities. "Extraordinary commercial facilities" which would qualify under this section would be commercial facilities, including facilities for the retail sale of goods, which makes a new capital investment of at least $100 million within the designated economic development site, create at least 1,000 new jobs, and have total sales tax receipts at a rate of $6 million dollars each year.
The House has proposed adopting the Senate version of the bill with the addition of the extraordinary commercial facilities section. The Senate rejected the proposal at the committee meeting. The conference committee could revisit the bill when the General Assembly reconvenes in January.
2010 Legislative Session
The 2010 session of the General Assembly is already shaping up to be a challenge with items left unfinished from the 2009 session, and several study committees will be working over the summer and fall to jump start work for next session. Those items include:
H. 3272 is set for special order pending second reading in the Senate, having already passed the House. H. 3272 will most likely be taken up for debate on the Senate floor early in 2010. SCAC and other interested parties are scheduled to meet with the realtors in July to continue searching for a mutually agreeable compromise.
The House-passed version of H. 3272 recognizes valuation changes after an assessable transfer of interest (ATI) at the time of the next reassessment implementation. Due to the rollback millage calculation performed as part of reassessment implementation, there would be no revenue growth because of an ATI. The Board of Economic Advisors estimates the revenue loss in a typical year would be $44 million statewide, taking into account all taxing entities.
The Senate Finance Committee proposed amendment would recognize increases in value after an ATI, capped at 15 percent. The Board of Economic Advisors estimates the revenue loss in a typical year would be $44 million statewide, taking into account all taxing entities for this version as well.
Financial Accountability Act – S. 699. This bill was filed late in the session and is anticipated to be considered early next session. The primary focus of the bill is to require annual financial audits of all political subdivisions.
Counties are currently required to have an annual audit, and it is filed with the state. However, there are questions which arise from one sentence in S. 699 which reads, "The State Treasurer may develop standards for and report on the financial health of political subdivisions to the Governor and General Assembly."
SCAC staff has already met with State Treasurer’s office staff regarding S. 699. If you have specific concerns or questions, please contact Robert Croom via e-mail or by calling 1-800-922-6081 as soon as possible so that those issues can be discussed with the Treasurer’s staff during future meetings.
TRAC and Local Taxes – S. 12. As discussed above, the Tax Realignment Commission will be studying local taxes and is charged with making recommendations to the General Assembly no later than March, 2010. The legislation prohibits registered lobbyists from contacting those appointed to the commission, except in formal presentations at a called meeting. This will require close monitoring.
Sentencing Reform Commission. This joint study commission is working on recommendations regarding sentencing and alternatives to incarceration. They have already scheduled a retreat in Charleston for June 26–27, 2009, with several meetings expected during the interim.
Municipal Annexation – H. 3253. This bill was moved to full House Judiciary Committee at the end of the regular session. That committee will not meet again this year, but the subcommittee requested that interested parties see if there is any room for agreement during the summer. SCAC requested that the following items be included in any annexation bill: 1) a ban on adhesion contracts (requiring annexation for utilities); 2) respecting the density requirements of the county (ban forum shopping); 3) a freezing of business license income in annexed areas (the county would continue to receive the current revenues, and the city would get the growth); and 4) a provision for de-annexation, where the city does not provide promised services. SCAC staff will continue to work on this legislation over the interim.
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, fax to 1 (803) 252-0379 or send e-mail. You can view or download bills by clicking on the bill number.
House Bills
H. 4128 – Removes the tax credit for placing in service property used for the distribution or dispensing of renewable fuel and the tax credit for placing in service a commercial facility for the production of renewable fuel and places those credits instead on the dispensing or production of alternative fuel.
H. 4146 – Authorizes counties to charge a person confined in a local correctional facility a fee for health care services provided while they are incarcerated.
H. 4152 – Enacts the “South Carolina Rural Infrastructure Act.”
Ratification of Acts
The following bills have either been signed into law by the Governor or have been enrolled and are pending ratification:
(R.58) S. 166 – Creates a pilot project by the Department of Transportation and the Federal Highway Administration to reduce the number of non-conforming billboards along I-95 and I-26.
S. 12 – Creates a committee to study and recommend comprehensive tax reform.