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Building higher taxes and lowered revenues

web posted October 16, 2006
COLUMN – With the recent controversy over tax assessments a developer stood in the County Council chambers on October 3 to inform the council on how much money his developments bring into Edgefield County through additional taxes. Many Mount Vintage residents claimed the county council was going to “kill the goose that laid the golden egg,” with huge tax increases on their homes. However, the county taxpayer’s worst enemy at this time is developers and the county council who are building Edgefield County into even larger tax increases, or worse.

For years developers and pro-growth supporters have stated, “growth leads to better schools, more jobs, and lower taxes.” Nothing could be further from the truth; growth costs and costs big.

Edgefield County is primarily an agricultural county. A study by the American Farmland Trust clearly spells out who pays for growth in such counties. For every tax dollar collected from open farmland there was a gain of fifty-one cents to the county. However, “residential development overall did not pay for itself, requiring $1.25 in services for every dollar of tax revenues collected,” or a net loss in revenues to the county.

Conveniently supporters of rapid residential growth fail to tell citizens what the growth entails; added infrastructure, electricity, water, sewer, storm water retention and run-off, added roads, fire protection, EMS, and law enforcement since growth also brings more crime. Sheriff Dobey told the County Council during the budget meetings this Spring he needed an additional 12 deputies just to catch up to present population levels. The county could only afford two and the population continues to grow making next year’s needs even greater.

Already the County Council has had to raise taxes to stop more Paramedics from leaving for higher paying jobs in bordering counties and the Sheriff's Office is losing two deputies this month for the same reason.

Dr. Marty Solomon wrote an article in The State newspaper on September 5, of 2000 telling Lexington County residents who were faced with a similar situation as Edgefield County’s, “You’ve been told that your taxes will be lower because of all the growth. Baloney. What happens is a few people make huge profits, and the taxpayer ends up footing the bill.” Yet, county leaders fawn over wealthy developers making false claims of huge tax money that is going to be pouring in without realizing they are eating a poisoned apple.

Residential growth does not equal more jobs either. Harvey Molotch of the University of California at Santa Barbara examined two decades of census data on area growth rates and unemployment. He studied the 25 fastest growing areas in the United States with the 25 slowest growing areas. Surprisingly, he found no statistical correlation between growth rates and unemployment with both having similar unemployment rates.

Growing the tax base does create new funds; however, this leaves out the empirical costs of residential growth. A study done by Oregon’s Springfield Planning Department showed that a decade of rapid growth (1971-1981) left Springfield’s funding decimated. Total spending quadrupled in constant dollars as did total indebtedness. More telling, per capita spending tripled. Simply put, residential growth costs money and that means higher and higher taxes.

South Carolina’s fastest growing areas such as Lexington, Horry, Richland, and Beaufort Counties experienced rapid growth and struggled to fund basic services. The cities of Mt. Pleasant and Fountain Inn faced the same dilemmas. Most coped by either raising taxes or finding creative revenue enhancements in the form of “fees”, which is just another name for a tax, to meet shortfalls. Others held the line by delaying funding for basic needs. Edgefield County has been doing this for the last six years as our population continues to rise but Fire, EMS, and Sheriff’s Deputies are understaffed, under paid, and under funded.

The reason for this is local governments rely heavily on property taxes to fund services that support development, but there are problems in doing so. First, the property tax is inelastic and does not grow with a service economy. A growth in service employment does not bring more revenues unless buildings are built to house businesses.

Secondly, the property tax base is being depleted as more money is directed to tax incentives to economic development. These give-aways diminish local revenues needed to fund residential growth as they rarely show a positive gain in revenues even when successful in relation to cost.

Lastly, changes in the state law continue to remove the property taxes’ ability to support development. The property tax on vehicles was flexible because people would buy newer and more expensive cars and trucks. Vehicle taxes were the only part of the property tax that did see substantial growth. However, with the state requiring vehicle taxes to be lowered they removed the ability to fund growth. Furthermore, the increase in Homestead exemptions is also taking its toll.

An excellent study commissioned by SC Governor Carroll Campbell reached the same conclusion in 1993. Even with needed tax reform, it found, we would not be able to pay for residential growth without higher taxes. The same holds true today.

With new developments being given the green light by the Planning Commission, which never delves into revenue figures of residential growth, hundreds of new homes are in the works and hundreds more are currently in the planning stages. Other developers have also already purchased large tracts of land in the county and will soon be doubling if not tripling the number of new homes, and in turn, residents needing public services, especially our schools.

Within a few years even higher tax increases will be seen across the county as more funds are needed to supply services. Tax bills could quadruple, as has happened across the country when counties bought into the idea of growing the tax base with residential growth.

There are solutions to the situation. Developers will fight tooth and nail to prevent them being put into effect because it affects their bottom line, not the taxpayer's.

A moratorium on new developments is one way. That allows for our already overburdened tax base and under funded public services to get up to required levels before increasing the burden on either. This is the most drastic measure and the most effective. Basically, until the needed personnel and equipment levels of the Sheriff’s Office, EMS, and Fire Departments are met, no additional developments would be allowed. This would not affect the individual building a home on his or her own property, just large-scale developments and developers.

Another way to offset the huge costs of residential growth to the county is to charge developers impact fees. With impact fees the county places the burden of the fast-paced residential growth on the developers. A fee is charged on each home built in development projects that will help the county deal with the increased cost of services to the communities. The impact fees can range anywhere between $2,500 to $5,000 per home and some can go as high as $10,000. The funds, if divided among the county, local law enforcement, fire, and EMS, who supply the additional services to the communities, can offset the cost of additional personnel and equipment needed to support the some of the growth.

Impact fees will also be fought by developers. Developers do not want to take on the tax burden for what they are causing, just the profits from it. They would rather pass that cost on to long time residents, with the help of the county council, through higher taxes after they have made all the money they can make. The devastation left in their wake is marked by angry residents that blame the local government, who are complaisant in allowing greedy builders to ravage a once peaceful county.

The developers simply move on to the next county full of ineffectual local leaders to be wined and dined into suicide for their county. I hear Newberry County is ripe for the picking.

Edgefield County is well on its way to becoming another Springfield Oregon and the Edgefield Planning Commission and County Council are allowing it to happen. Without new leadership, or a drastic stand against powerful developers, the train wreck is inevitable. As long as our local representatives remain mesmerized of wealthy developers, we the taxpayer, will suffer the brunt of the costs.  

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