A Short History of the Low Countries’ Involvement in Lowering Property Taxes

Since 1995 Lowcountry counties were experiencing 200% and 300% increases in property taxes every 5 year reassessment cycle. In 2004 two bills, H 4271 and H 3689 were introduced to limit increases in assessment to 0% and 15% respectively in the 5 year cycle.  Charleston County passed a 15% cap based on previous legislation allowing counties to optionally adopt a cap. Edisto Beach called on Colleton County to do likewise but they hesitated awaiting a possible Supreme Court ruling on the constitutionality of the legislation.

In response to these property tax increases several coastal communities formed the Coastal Coalition consisting of Pawleys Island, Isle of Palms, Kiawah, Seabrook, Sullivan’s Island, DeBordieu, Litchfield and Edisto Beach to support bill H 3689 which was moving through the House committee process. The Committee hired Dr. Wayne Beam to act as a lobbyist for the bill.

Summarizing Bill H 3689:

A bill to amend the Code of Laws of South Carolina, 1976, by adding section 12-37-223 so as to limit to 15% increases in fair market value of owner-occupied residential and second homes attributable to quadrennial reassessment in the county, and provide the period for which this exemption applies; and amend section 12-37-223A, relating to the county option property tax exemption limiting to 15% increases of fair market of real property as a result of quadrennial reassessment in a country, so as to conform this optional exemption to the provisions of section 12-37-223 of the 1976 code as added to this act.

In essence, this bill continues what the General Assembly tried to do several years before and also restricted the reassessment cap to owner-occupied residences and second homes.

The Edisto Beach Property Owners Association (EBPOA) in an effort to give more impetus to the legislation decided to raise money from its membership and fund a second lobbyist. The firm selected was Tompkins, Kinard & Associates of Columbia, SC. The EBPOA proceeded to raise $60,000 of which $40,000 was paid to the lobbyist firm. The effort was successful and the bill was passed out of the General Assembly and on to the desk of Governor Mark Sanfford. He let the legislation die on his desk citing concern for constitutionality.. The effort and expense was not in vain, however, as a 15% cap over 5 years was incorporated in Act 388, passed in 2006, and a constitutionall amendment presented for vote in the general election of 2006.

This constitutional amendment read as follows:

Must Article III and Article X of the Constitution of this State be amended to authorize the General Assembly to establish the method of valuation for real property based on limits to increase in taxable value, adjusted for improvements and losses of no more than fifteen percent over a five year period unless an assessable transfer of interest occurs; to provide that for purposes of calculating the limit on bonded indebtedness of political subdivisions and school districts, the assessed value of all taxable property within a political subdivision or a school district shall not be lower than the assessed values for 2006, and to provide that the General Assembly, by general law and not through local legislation pertaining to a single county or other political subdivision shall provide for the terms, conditions, and procedures to implement the above provision.

Note that this limitation on valuation applies to all properties, commercial and residential, owner-occupied or second home, without regard to 4% or 6% assessment ratio or any other consideration. This proposed amendment bill was signed by the Governor and approved by 69% of the voting public in 2006. Also note that the property valuation for the purpose of bonded indebtedness limitation was not to go lower than the value in 2006.

Act 388

The EBPOA combined our efforts and remaining finances with NoHomeTax in 2006 in support of what became Act 388. Act 388 was signed into law June 10, 2006.

It provides:

• A 1 cent additional sales tax to be put into the Homestead Exemption Fund to be used to reimburse counties for exempting owner-occupied homes from paying the school operating portion of the property tax bill. Other components of the property tax bill, school bonds, county operating expense, county bonds, were not affected. Owner-occupied homes, those assessed at 4%, are subject to these portions of the property tax and at the same millage as 6% assessment ratio properties.
• Restricts school districts’ increases in budget amounts to increases in the Consumer Price Index, Southeast Region, plus county population growth, plus increases in number of students in poverty. The base year for these increases was 2007-2008. Reimbursement to the school districts is from the Homestead Exemption Fund.
• If the 1 cent sales tax is inadequate to reimburse the school districts according to the formula, the difference is made up from the General Fund.
• The local counties and municipalities can only increase millages over the previous year by the Consumer Price Index plus the county population increase.
• If any school district is not reimbursed $2,500,000 under the formula, the Homestead Exemption Fund will bring the reimbursement up to that amount.
• The sales tax on unprepared food is reduced from 5% to 3%.
• Assessable transfers of property will trigger a full purchase price reassessment with exceptions for spouses and a complicated list of other entities.
• A referendum item to be put on the 2006 ballot for approval of a local sales tax to be used in reducing property tax on all classes of property. This additional sales tax does not apply to accommodations taxes. (Approved)
• A referendum item to be put on the 2006 ballot for approval of a cap on all property tax assessments of 15% in a 5 year period. (Approved by 69% of the voters)

NoHomeTax.org feels that Act 388 is fair to the counties, municipalities and school districts in that provisions are made for the major causes of inflation and increased expense. Other sources of funding are available to school districts such as the Education Improvement Act and other special funds. The effect of Act 388 in most cases was a 50% reduction for owner-occupied properties and all properties gain protection from future unrestrained spending and taxation. The counties and school districts should not depend heavily on property taxes for income because this tax falls on those on fixed income and low income with the possibility of taxing people out of their homes.

This has been the case in the past, particularly on the coastal areas.