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Officials rework property tax bill

Lawmakers seek votes for measure

By Adva Saldinger -

A controversial bill that would change property taxes is once again a topic of debate as supporters, led by the real estate community, work to find a version that could muster enough votes to pass and detractors, led by local governments, argue the measure would be detrimental.

The bill would remove the point of sale provision, which determines the assessed value of a property at the time it is sold and not at the value at the previous assessment.

Many Realtors say that the provision has resulted in a significant decline in sales and loss of business, especially on commercial properties, because potential buyers walk away after finding out the taxes. They say that the provision creates dramatic differences in the amount of tax two neighbors may pay - one based on the sale price and the other based on the last assessment - and is inequitable.

Cities and counties facing already strained budgets are concerned about a loss of revenue, the S.C. Budget and Control Board estimated that the governments would lose $54 million a year if the bill passes. A recent report from the S.C. Realtors association refutes that estimate.

"We're seeing a lot of investment opportunity, second home and commercial property especially, moving out of South Carolina into neighboring states," said Rep. Alan Clemmons, R-Myrtle Beach, who is a co-sponsor of the bill. "We have the studies in hand to show us that if we would change [the law] in the way it is proposed we could attract those investment dollars into South Carolina."

Last week the bill was put aside in the S.C. House of Representatives after it was determined that it would require a two-thirds majority to pass because it addressed a constitutional issue. Clemmons said that work is being done to change the bill so it would only need a simple majority vote to pass, but he declined to give specifics.

The bill would have to get a two-thirds vote by the S.C. Senate to be considered and put on the special order agenda. Last year a bill seeking to change the point of sale provision failed to pass the Senate after extended debate.

Clemmons said that with an election year coming up and the state of the economy there is a greater likelihood the bill would pass this year.

"Heightened attention to the economic plight is what will result in this positive economic change," he said.

Rep. Nelson Hardwick, R-Surfside Beach, wasn't as sure the issue would come up again and get the necessary votes to pass.

"Can we craft a strike-and-insert amendment that two-thirds will agree to?" he said. "It's going to take a good bit of luck to find that sort of thing."

The point of sale issue illustrates the problems in the S.C. tax code that will have to be overhauled at some point, he said.

Still, Hardwick said he would support a bill taking away point of sale because of the inequity it creates with properties on the same block that have different values for tax purposes.

"We've got to do something about it," he said, but added that taking away the provision would help the real estate industry but hurt cities and counties.

If the bill would pass, the city of Myrtle Beach would have less money and would either have to absorb the cuts in the capital account, restrict services or not add new services, said city manager Tom Leath.

Horry County also would also lose property tax income if the bill passed and it could force a lengthy process of recalculating some property values, said Horry County spokeswoman Lisa Bourcier.

Leath said the bill is frustrating for the city because it is a piecemeal fix to a flawed tax system that hurts local governments.

Tom Maeser, a real estate analyst for the Coastal Carolinas Association of Realtors, said that the group is also unhappy with the fix, which doesn't address the broader problems created when the tax code was last changed, which shifted more of a tax burden to commercial, second-home and investor-owners.

He said at this point there is no pleasant solution but investors are important so something should be done to keep them coming to the state, he said.

"To me the only answer is repealing Act 388 and starting all over, but politicians are afraid of doing that because of the increase in taxes," Maeser said.

Steven Neeves, the government affairs director of the Coastal Carolinas Association of Realtors said that no one is happy with the tax system, but he said removing the point of sale provision is a first step.

"The goal is to get investors reengaged in our marketplace to get properties moving, get construction started," he said.

The investment generated by removing the point of sale provision, and resulting property taxes, would offset the losses, according to a report released last week by the S.C. Realtors association.

About 35,000 jobs would be directly or indirectly created and there would be an additional $43 million in tax revenue if the provision was eliminated, according to the report. The report assumes that the provision led to a 25 percent reduction in commercial property development.

Nick Kremydas, the chief executive of S.C. Realtors, said there is pent up demand and that the economy was factored into those estimates.

"We're not discounting the other economic factors that are out there, particularly in the availability of credit, but we know there is investing going on right now that is making decisions specifically not to come to South Carolina, and in many cases, it revolves around purely the bottom line and return on investment and taxes are a deal killer," he said.

Leath said he's not sure he would want to depend on investors rushing in to generate the difference in tax revenues.

"I don't know that if we monkeyed with the point of sale that that would suddenly open the floodgate to property acquisition," he said.

The city also takes issue with the supporters who call the revenue from the point of sale provision a windfall because it was put in the legislation to offset losses from other changes, including a cap on increases for owner-occupied housing, Leath said.

"We're not getting a windfall. We're getting what we were due in the first place and what we expected," he said.