County, school district must sort out of TIF issue

As public financing options go, tax-increment financing is among our least favorite.

The special tax district created in December 2001 for the University of South Carolina Beaufort's South Campus and a nearby facility for the Technical College of the Lowcountry has been a particular headache from the start.

Beaufort County drew a line around 3,470 acres that included areas primed for development that had nothing to do with a new college campus as it sought to raise about $40 million.

The Beaufort County School District, anticipating growth in student numbers and operating expenses in the coming years, and beholden to County Council to set its annual tax rate to raise that money, balked at participating.

But County Council wanted the district to opt in because the district's participation would mean a lot more money would be collected a lot more quickly to pay for the college facilities.

The ensuing debate included arguing over whether the district had opted out as required by state law and moved on to dealing with the district's concerns about giving up money generated as a result of new development. It even included a debate over financial independence for the school district. In the background were state education officials telling us that they would not move forward on granting USCB four-year status unless Beaufort County ponied up some money.

The result was an agreement signed in July 2002 by the county and the school district that had the district participating in the special tax district, but suffering no financial loss as a result of doing so. To put it another way, the district "opted in" on participating but "opted out" on any financial losses as a result. None of it ever made any sense.

So here we are today with the school district saying it's owed money from the tax-increment financing fund, pointing to the 2002 agreement and state law on tax-increment financing.

The district says it doesn't want to get money from years back (which totals more than $9 million by the district's reckoning). But the district does want money going forward, and it has even included $1.1 million of $1.7 million it says it is owed in this year's budget.

The county, which is holding the line on tax increases for itself and the school district, will have to answer for what it agreed to in 2002. If money is owed the school district as a result of that agreement, the county should pay. The County Council Finance Committee said it would look into the issue. It would appear it doesn't have a choice.

Here's what the 2002 agreement says: "The council and the school district mutually agree that the school district shall not sustain a loss in revenues as a consequence of the New River Redevelopment Plan and the issuance of TIF obligations. Accordingly, upon demonstration by the school district of a loss resulting from the implementation of the New River plan, whether as a result of changes in funding from the state based on any formula taking into account property values or taxpaying ability or from the unavailability of the difference between the initial equalized assessed value and the actual equalized assessed value of real property in the New River Redevelopment District, the county agrees that millage for the school district shall be adjusted so as to replace any such lost or foregone revenues."

A question is whether the school district has suffered a loss and can demonstrate that loss.

A look at county-approved tax rates suggest the district would be hard pressed to make that case for years past.

Between 2001 and 2004, the district's tax rate for operations rose from 96.7 mills to 108.2 mills, according to county records. It dropped to 75.2 mills in 2005 after 2004's countywide reassessment. It climbed to 102.6 mills in 2009, then dropped to 90.26 mills after the 2009 reassessment. (The school district has another argument with the county over that decrease in its tax rate after the last reassessment, but we'll leave that one alone for now.)

State law on tax-increment financing states that if school enrollment increases as a result of a redevelopment plan, then a school district should get a certain amount per pupil. The district says that 148 students now live in the special tax district.

The school district hasn't pushed this issue in years past. If it had a case to make, it could have made it then. What's done is done. This year, its back is up against the budget wall with the county's insistence on no tax rate hike; the declining collection rate on property taxes in general; and continuing problems with state funding.

For many of us, the district must show it doesn't have other ways to deal with its budget problems, no matter the source of the money. The school board loses credibility every day it doesn't do something about extra capacity in its school buildings.

And as we said recently after reports that the school district might get an additional $2 million in state funding this year: District schools should be operated as efficiently as possible, not as efficiently as funding will allow.