NEWBERRY COUNTY COUNCIL

MINUTES (CPI)

NOVEMBER 1, 2006

Newberry County Council met on Wednesday, November 1, 2006, at 6:30 p.m. in Council Chambers at the Courthouse Annex, 1309 College Street, Newberry, SC, for a special called meeting.

Present were: Mike Hawkins, Chairman

William D. Waldrop, Vice-Chairman

John E. Caldwell, Councilman

Henry B. Summer, Councilman

John David Dawkins, Councilman

Andy Morris, Councilman

Edgar Baker, Councilman

Wayne Adams, County Administrator

Gary T. Pope, County Attorney

Susan C. Fellers, Clerk to Council

Media: Cindy Pitts, Newberry Observer

Heather Hawkins, WKDK

Tarla Wilber, Whitmire News

Notice of the meeting was duly advertised as required by law.

Mr. Hawkins called the meeting to order and determined a quorum to be present.

The purposes of this meeting are for the County Council to receive public comments regarding Council’s consideration of overriding the CPI limitation on tax millage increases in accordance with Code Section 6-1-320(C) of the South Carolina Code of Laws, 1976, as amended, and to vote whether to enact such increases.

Prior to taking the vote to override the CPI limitation, the County Council will receive public comments.

John Epting, 2502 Harrington Street, Newberry, SC, stated as a landlord there are only three times he ever raises the rent on his houses; that is, major construction, insurance going up and taxes going up. He has two renters who are handicapped and receive government funds, and hates to tell his tenants the rent has to go up. Mr. Epting’s concern was to speak for these people because he would have to go up on the rent. He asked Council to consider whether it was fair to put the majority of paying on those individuals who probably can’t afford that much.

Charles Simmons, 2122 Pinehurst Drive, Newberry, SC, stated Council asked us to pass a penny sales tax, which we did, and you said it would fund these projects. Council wants to fund these projects with “X” number of taxpayers’ dollars, and the taxpayers did not vote for that. They voted for the one cents sales tax and that is all you need to spend of the taxpayers’ money on these projects.

Mr. Simmons has followed with great interest the building in 219 that used to house the Sheriff. The Sheriff told you he had a problem, and you ignored him. You went ahead and bought the building, and now you claim you have a real problem. There is no way you are going to win this lawsuit. All you are going to do is dig the County that much further in the hole. The best thing you can do is cancel that lawsuit, fix the building, put the Sheriff back in it and leave our taxes alone.

Bill Parr said the voters of this county, not once, but twice over the past approximately eight years voted themselves a one per cent increase in sales tax to fund projects that were to be done in the priority in which they were listed on the ballot. His understanding was that if the money wasn’t there, then the projects at the bottom part of the list would not be done and the voters would have a chance in the next time that was on the referendum to vote for those projects.

Mr. Summer had a letter from Theo DuBose, which says that the projects would be funded simultaneously. It says the projects shall be fully funded to the extent of the cost shown on the ballot, and they would be funded simultaneously. The concern that we had with prioritizing, which was an option, was that you would do project one and when it was finished, you would do project two. One project could hold off all the other projects, and you end up waiting and construction costs keep going up. When we passed the penny sales tax, we borrowed the money, and we were not going to prioritize the projects, and they were all going to be done simultaneously.

Mr. Parr’s understanding from working with the first one cents sales tax was that the legislation was written so that the problem we are facing tonight would not be a problem. As the projects were prioritized, if money became a problem, the projects at the bottom of the list would be dropped off.

Mr. Summer stated the letter from the bond attorney said that all projects would be funded simultaneously.

Mr. Parr stated on the last referendum there were two different questions. One was should we do the projects, and the other, should we borrow the money. Are you saying that borrowing the money was what took the priority off of doing the projects as the money came in?

Theo DuBose, Bond Counsel, stated the law allows you to do either. To the question of priority, there is a question when you have your committee that decides what the capital projects will be, which was done in the spring of 2004, the referendum is on the ballot in November. Then the sales tax doesn’t get collected until the following spring and bonds are issued over a year following the time this project was put together. The concept of prioritization is that we wanted to make sure that based on the costs of the projects shown on the ballot that we would be able to issue sufficient amount of bonds. Because you are working with this over a year later than when the interest rate was set on the bond issue, you have to make some assumptions about how much in sales tax would be collected each year in order to pay back these bonds. At the time the ordinance was adopted in July of 2004 on this question of priority, we didn’t know how much in the way of bonds the County would be able to issue because we were over a year away from issuing those bonds. In the meantime interest rates could change. Because it is a seven year bond issue you have to pay back the money fairly quickly. The amount you can pay back each year is sensitive to interest rates. It is also sensitive to a year’s worth of sales tax collection history between the time you make the decision of when to go forward and when you actually issue the bonds. Tax collection rates dropped significantly in most jurisdictions in South Carolina following 911 so if you take four or five years worth of sales tax collections, you can make an educated guess based on that, but you don’t know what is going to happen down the road. The thought was that they would be prioritized according to the amount of bond proceeds we could actually collect. It turned out that we were able to issue bonds in an amount, given interest rates, given what sales tax collections were, then provided funds for every one of those projects at its stated costs, except for the hospital’s MRI. When we went into it, it was understood that the hospital MRI wouldn’t initially be payable out of bond proceeds. We never thought we would get sufficient bond proceeds to do that. If we could not issue enough bonds, then you would go down the list.

Mr. Parr asked what was wrong with dropping off the projects at the bottom of the list above the hospital MRI machine. Mr. DuBose said that was a question for Council; it was not a legal question. Mr. Hawkins stated Council did that. When we first saw that funds were running short, we dropped the Public Works from the bottom. Council did not set these priorities. This was a citizens’ committee that set up the list of priorities. Council dropped the Public Works since that was a County project and pro-rated that money over some of the other projects to try to get them finished. Council probably would have stuck with that until the Legislature came up with this idea of capping our millage. We are in a capital projects process and unless we have capital projects in this year’s budget, and some millage in there for those projects over the next period of years, next year there is no way to put it in there.

Mr. Parr said the voters of this County would have never approved the one cents solution if they had thought it would have lead to a tax increase long term. If you do proceed, as you have done for the first two hearings, to increase taxes, you have probably killed a chance to ever have an additional one cent sales tax voted positive by the voters of this county. Who would have thought that after what happened with the school bond referendums in the mid 1980’s that the voters of this county would have voted not once, but twice to have an additional one cents sales tax. Now with the action you are proposing to take tonight, you could literally dash those hopes of ever getting the voters to agree to that again.

There being no further comments from the public, Mr. Hawkins announced Council was to consider a vote to override the limitation and increase the millage rate on taxable property in Newberry County for 206-2007.

Mr. Adams explained the Auditor now has more accurate information on the value of a mill. The CPI hearing earlier stated the millage would be approximately 121 mills. With the more accurate value of the mill, we are looking at 125.8 mills. One of the reasons for this special meeting is in the interest of disclosing that to the public. The other reason is that the millage may further be raised by an amount necessary to fund the amendments Council will consider tonight. That would add an additional 13 mills approximately to the 125.8 total.

Mr. Hawkins stated most people get confused about millage and just want to know how much they paid last year and how much they will pay this year. To balance the budget we passed in June, on a $100,000 house at the 4% assessment, owner occupied, not someone getting the homestead exemption, it would increase $46.

Mr. Summer disagreed with that. If you are going to compare apples to apples, you need to look at what the rollback millage would be. When we raise the assessment, we have to roll back millage, and if you did the rollback millage on a $100,000 house, taxes would go up from $391.60 to $503.20, so it is over $100. That is assuming the $100,000 house is still $100,000, which it is not because we have had reassessment. When you have to come up with $2,500,000 to balance the budget because you took $2,500,000 out of the fund balance last year, that is a tremendous load on the taxes. We chose several years ago not to go up on taxes because we had money in the bank, and we have been spending the money in the bank. In 2003 County General Fund millage was 114.3 mills. The next year it was 114.3 mills, and then the next year it was 114.3 mills. If we had gone up 6 mills a year for those three years, we would have gotten the millage up to 132 mills instead of 114, and we would be still looking at maybe a 10 mill increase, but it would be a lot less than it is now. We wanted to keep taxes down but we have to pay the piper because when you take more apples out of the basket than you put in the basket, one day you are going to run out of apples.

Mr. Hawkins asked why the difference in the $46 figure and Mr. Summer’s figures. Mr. Adams stated both figures were accurate. When you compare this year’s tax liability with the prior year’s tax liability, there are two answers to that question in a year in which you have a reassessment. That is because the statute requires that Council calculate a rollback millage. If we had the higher property values that we have now after reassessment and we are going to spend the same amount as we spent last year, how many mills would it require? It requires less because you have more of a tax base. You have more property value to tax. You need fewer mills so you tax less intensively. The rollback millage to which we are comparing the CPI is 97.9 mills. The actual millage on the tax bills last year was 114.3 mills. The difference has to do entirely with the increase in the value of the property. A mill is worth more. A mill is one one-thousandth of the assessed property value for the county, and if that mill is worth more, you need fewer mill units to meet the budget costs if the spending stays the same. If the spending stayed the same, we would need 97.9 mills and not 125.8 mills.

Mr. Summer stated the budget this year was the same. The difference was last year we used $2,300,000 from the fund balance to balance the budget, and this year we don’t have $2,300,000 to balance the budget.

Nancy Owen, County Auditor, stated the County budget did remain as adopted June 30. The only difference in this year’s budget and last year’s budget is an average of $200,000 on an almost $20,000,000 budget, which is approximately a 1% increase. Last year in order to balance the budget the County needed $9,700,000 from tax revenues. The difference is this year they need $12,400,000 to balance their budget from tax revenues. That is the major increase in taxes. In order to balance that $19,000,00 budget this year, if the $9,700,000 needed from taxes had remained the same, instead of having to tax 114.3 mills, we would have been taxing 97.9 mills. That’s what is being referred to as rollback millage. How many mills will it take this year to bring in the exact same amount of dollars that the millage brought in for County operating last year? Instead of 114.3 mills, we needed 97.9 mills. What Mr. Summer is alluding to is in order to bring in the same dollar amount last year to balance the budget for this year, we need 97.9 mills, but in order to balance just the operating budget Council needs approximately $12,400,000. The major difference in that is last year Council took out a little less than $2,400,000 in revenue from the general fund balance to balance their budget. They don’t have that $2,400,000 to take out of the general fund balance because in two years’ time that general fund balance has gone from approximately $9,000,000 to approximately $4,100,000. They can’t take any more monies out of the general fund balance. In order to make up for that $2,400,000, County Council had to increase the only place that they have any control over to increase, and that is property taxes.

Another half million dollars in fee in lieu of tax revenue that has been used for a number of years to balance the County operating budget was committed by Council to pay off a loan for the property they bought on I-26 and 773. That half million dollar revenue is being used now to pay off a debt. That put us a half million dollars more short to balance the operating budget.

Going into this fiscal year Council, without discussing any of this they are discussing tonight, having not changed anything in the operating budget from June 30, 2006, the budget they had already adopted, had already back in June increased what was needed from property taxes from $9,700,000 to $12,400,000.

Mr. Hawkins asked if Ms. Owens agreed with Mr. Summer’s figure on a $100,000 house last year, the taxes would be $391 and this year they would be $503. Ms. Owen stated no. Just like Mr. Adams alluded to there are two answers to that scenario. Mr. Summer was trying to explain had we not needed additional tax dollars to balance this budget from $9,700,000 to $12,400,000, the rollback millage would have been 97.9 instead of 125.8.

The bottom line is how much did they pay on the $100,000 home last year, and how much will they pay on the $100,000 home this year. There are three parts. The other part we are leaving out for our citizens is that $100,000 home on the average, because reassessment is being implemented, is no longer a $100,000 home. Depending on where it is located, the average increase is running approximately 30%. The tax on a $100,000 home is not going to be applied to a $100,000 home now. It is going to be applied to approximately a $130,000 to $140,000 market value home so that is an additional increase in the tax. That part is due to reassessment. If your home stays relatively $100,000, then the $46 increase is exactly right.

If you want to complicate the matter, we can talk about the loss in residential exemption, which Council has absolutely nothing to do with because that is on school operating tax. There is also a roll back on the millage there.

There being no further discussion, Mr. Baker moved to override the limitation and increase the millage rate on taxable property in Newberry County for fiscal year 2006-2007, if needed; second by Mr. Summer.

Mr. Pope advised it is only to increase the CPI beyond what is needed for the budget that has already been adopted and we have already had the CPI hearing on that budget. This is only for the amendments to that budget.

Mr. Hawkins called for the question. Voting for the motion: Councilmen Hawkins, Waldrop, Summer, Dawkins, Morris and Baker. Voting against the motion: Councilman Caldwell. Motion passed by majority vote.

Mr. Dawkins moved to adjourn; second by Mr. Morris. Vote was unanimous.

Meeting adjourned at 7:09 p.m.

NEWBERRY COUNTY COUNCIL

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Mike Hawkins, Chairman

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Susan C. Fellers, Clerk to Council