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Letter to the Editor
Writer offer's County Council options in tax debate
web posted November 6, 2006
The Edgefield County Council is scheduled to meet November 7, 2006, to adopt an amended budget for FY 06-07 that will spend the 34.6% increase in real property tax revenues for the general operations budget obtained from their decision to go forward with reassessment this year. I offer two alternatives to the action Council proposes to take Tuesday night. Either proposal is a fiscally responsible alternative to the fiscally irresponsible action that I understand the Council is poised to vote on Tuesday.
The amount of real property tax revenue used to fund any of the County funds such as the general operations fund is determined by the following equation:
assessed base x millage rate = real property tax revenue raised.
The assessed base is the assessed value of the real property located within the county. The budget process normally begins with the Council drafting a budget and determining the revenues needed to fund the proposed budget. Once the assessed base is known, the millage rate is calculated based upon the values for the assessed base and the amount of revenue to be raised. Since reassessment was approved by the Council in July-September 2006, the assessed base value has increased significantly, creating a windfall increase in real property tax revenue unless the millage rate is reduced or rolled back from last year’s value. Rather than rolling back the millage rate to return the windfall increase to the taxpayers, the Council is proposing to keep the windfall and spend it. It must be kept in mind that the supposed financial bind the Council perceived the county to be in did not arise overnight, if it exists at all. Rather, any financial bind was caused by the Council’s budget inactions over the last three to four years. Yet the Council proposes to cure the perceived financial problems in a single year by way of the unprecedented 34.6% increase in real property tax revenues for the general operations budget. Rather than be in response to any financial difficulty, the Council’s actions in adopting reassessment appear to have been motivated by a circular issued by the South Carolina Association of Counties in July 2006, suggesting South Carolina counties implement reassessment this year, if possible, in view of the possibility of caps on real property assessments that may be voted in this Tuesday. In other, words, the Council’s actions in attempting this tax grab and spend are not motivated by any real financial crisis in Edgefield County this year but, rather, are motivated by one last opportunity to raise and spend a windfall increase in real property tax revenue before the caps can possibly come into force.
Proposal 1—Rescind the reassessment and continue to operate the county under the June 2006 budget, supplemented as explained below.
The reassessment should be rescinded because it was neither legally nor financially required and appears to have been hastily implemented, resulting in errors and inequalities. The Council voted earlier this year to postpone reassessment until 2007 as provided for by South Carolina law. The Council also adopted a budget for county operations in June 2006, for FY 06-07 without any hint of revenue shortfall, unmet spending needs or dangerously low reserves. The only apparent reason for implementing reassessment is Council’s desire to create and spend a windfall in real property tax revenues.
Furthermore, the Council’s abrupt decision to implement reassessment in July-September 2006, has resulted in a reassessment process that from all appearances was hastily conceived and implemented, and has resulted in confusion among property owners as to the correctness of individual assessments, and on what basis a challenge to an individual assessment can be mounted. Council’s dismissal of constituents’ concerns about the reassessment process and results by blithely telling their constituents to individually appeal their assessment ignores the reality of the situation. The Assessor’s office has made it clear that individuals should not come in to only state “their assessment is too high.” Rather, the Assessor’s office wants property owners to point out specific errors in their assessment. However, it does not appear that the Assessor’s office has issued any public guidelines, factors or any information that informs a property owner how their property should have been assessed so the owner can check the Assessor’s data for accuracy. The lack of guidelines has created a squeaky wheel operation in the Assessor’s office as people come in to discuss their individual situations.
Anecdotally, it seems some folks have come in two, three or four times to discuss their assessment and each time they have left the Assessor’s office with a lower assessment while others are asked to sign a waiver of any future appeal rights at the first visit before any adjustment is made. Others have gone in to discuss a specific error such as square footage of a house only to have the Assessor’s office notice on their own that the individual’s house had not been properly depreciated, resulting in another decrease in the assessed value. How many homeowners in Edgefield County know to check whether their house has been properly depreciated? There are many other stories of the inadequacy of the reassessment process and the resulting inequalities. How many homeowners understand that a masonry fireplace is apparently valued 3-4 times higher than a gas log insert fireplace? The worksheet the Assessor’s office uses only lists “fireplaces” and does not distinguish between masonry and gas logs. Also, the Assessor’s office managed to find a two person gazebo on one property and determined its fair market value to be twice what it cost build four years ago while apparently managing to overlook barns on other property. It seems that the Assessor’s office in their haste to complete the reassessment on short notice made guesses as to the construction and features of many houses in Edgefield County.
There is enough consternation among the county’s homeowners and a developing record of errors and inequalities in the reassessment process that Council should rescind the reassessment. It is my understanding that the number of formal appeals filed with the Assessor’s office is quite large. This should tell the Council that something is wrong with the reassessment process as implemented this year. Reassessment can be implemented in 2007 as Council originally voted. While the delay might mean that the reassessment caps to be voted on Tuesday will come into being, so be it. Council’s haste to create and spend a real property tax revenue windfall has resulted in a reassessment process that is neither transparent to the homeowner nor readily understood. Delaying reassessment one year will allow Council to exercise their oversight function over the Assessor’s office and ensure that the process is conducted properly by properly trained persons. It will also allow property owners to become familiar with the process so they will be in a position to intelligently evaluate their reassessment notices and determine whether they are complete and proper. It will also provide time to develop an outreach program so that all citizens of the county will have an effective avenue to have their assessments analyzed for correctness instead of the present squeaky wheel approach that is occurring in the Assessor’s office.
If reassessment is rescinded, the county can continue to operate under the current FY 06-07 budget that is supplemented if needed. South Carolina code allows the Council to increase the general operations fund millage rate in a non-reassessment year essentially only by the increase in the CPI, a measure of inflation, from the previous year’s value absent an express override vote. I propose that the Council raise the general operations fund millage by the CPI percentage as permitted and use the additional revenues to fund any newly identified mission critical line items that are not included in the existing FY 06-07 budget such as increasing EMS pay levels. Keep in mind that we are almost halfway through this fiscal year which began July 1, 2006 and ends June 30, 2007. The Council will begin the budget cycle again next February and ultimately adopt a budget for the next fiscal year that begins on July 1, 2007. Surely most of the mission critical line items the Council proposes to fund from spending the reassessment windfall can wait until next July. However, If there are additional mission critical line items that need to be funded this budget year that are not provided for by the supplemental revenue generated by increasing the general operations millage by the CPI percentage, the Council can identify those line items and make the case to the taxpayers of Edgefield County why it is necessary to increase the millage rate above the CPI increase.
Proposal 2—Maintain reassessment but rollback the millage in accordance with South Carolina code and then increase the millage by the CPI percentage
If for unknown reasons reassessment should not be rescinded, the general operations fund millage should be first rolled back in accordance with the South Carolina code. The code contains this rollback provision to prevent counties from quietly receiving the windfall increase in real property tax revenues that inevitably occurs during a reassessment year. Once the rollback millage is properly calculated, the Council can raise the general operations fund millage by the CPI percentage as permitted and use the additional revenues to fund any newly identified mission critical line items that are not included in the existing FY 06-07 budget such as increasing EMS pay levels. As mentioned above, we are almost halfway through this fiscal year. The Council will begin the budget cycle again next February and ultimately adopt a budget for the next fiscal year that begins on July 1, 2007. Surely most of the mission critical line items the Council proposes to fund from spending the reassessment windfall can wait until next July. However, If there are additional mission critical line items that need to be funded this budget year that are not provided for by the supplemental revenue generated by increasing the rolled back general operations millage by the CPI percentage, the Council can identify those line items and make the case to the taxpayers of Edgefield County why it is necessary to increase the millage rate above the CPI increase.
Either proposal is a more disciplined approach to meeting the county’s financial needs than the Council’s approach of grabbing and spending the reassessment windfall. It is not too late for the Council to back away from their proposed precipitous tax increase and adopt either proposal. I understand the County Treasurer wants to mail the tax bills by November 15. However, I believe most taxpayers in Edgefield County would rather have a lower tax bill mailed later in November than receive a higher tax bill on November 16.
William F. Smith
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