 Let me welcome everybody to the third meeting of the tax modernization group Serica where you just we've called the roll real quickly. I think the mayor is joining us by zoo There he is. I see him right there here yes, and It's it's it's a welcome tradition at the City of Columbia that we begin all of our meetings With invocation and if I'll ask on Reverend McDowell To delete us in prayer. Thank you so much Let us borrow heads For this day and for all you've done for us For this gathering here today as we continue to discuss the expensive growth of our city Touch us individually and collectively Reminding us that it's not us But it's our city That we are concerned about We ask it. We claim it in your name. Amen Thank you, Reverend McDowell. Yes, sir Again, let me welcome everybody Before we get started. I just kind of as an update We've had some very good dialogue over the course of the last two weeks is our last meeting Committee member James Bennett has made I think an extraordinarily good and and wise Suggestion and what we decided to do where our aim had been to originally try to come with a final recommendation today, I Think it's probably a quote and I agree with James our best our best effort is to really to end today with a final draft and Spend the course of the summer June July and August To allow to allow our mayor and members of the committee and others to engage other vested Interest in Richland County And to get their input and make sure everyone has a clear understanding Before we come back together probably the week after Labor Day in September and vote on the final So we will not have any committee meetings in the summer It'll be individual meetings and come back in September and And and and really come with a final plan that and a recommendation for the mayor to establish an implement implementation committee that goes across all entities in the county and And look forward to moving you'll hear mr. Trini talk a little bit about the Legislation in a second. We can't begin the legislative process until January anyway so I Think this is so important that to be able to take the next couple of three months and gain as much community input and As we can I think is a wise move and I thank you James for for making that suggestion. Thank you for meeting with me On that note We'll begin our presentations today, I think dr. Dr. Stephen Walters is going to Delete us I've for for those of us that are joining on YouTube and other things Let me just say dr Dr. Walters will begin by talking about a vicious or victorious cycle The impact of property taxes on community schools and people Welcome back to Columbia Dr. Walter. Thanks for having me back We've had some discussions since I was last here and I want to thank the members of the council that have been speaking with me as as We we developed these this proposal and as we talked about it more I I Had the sense that we should talk about What this is going to mean for the average citizens of Columbia and Surrounding counties and so forth I I Was reminded as we talked about this of a little Situation I ran into when I was having a lovely walk with my wife in one of our national parks one time we came to a fork in the road and On one side we saw a cute little bear cub And we were cooing and and oh isn't that wonderful and then on the other fork We saw the mama bear and we realized we were in between the cub and the mama bear Could have been the daddy bear. I don't know And we realized we were in trouble because that's not a situation you want to put yourself in and I sort of feel like you know, there there will be residents of the area There will be elected representatives and so forth who will feel a little bit that way when when you talk about Something like tax modernization and tax competitiveness and so forth you invariably will run across a sense that You're endangering very valuable and very very important public services if you start talking about this Where I come from I've been working on tax reform and a lot of other jurisdictions and where I come from the first question That always arises is well, what are you going to cut if you if you engage in in tax modernization or tax competitiveness? tax reform and So I want to start by you know talking about what I think is is a kind of false perception about how we get more we we We need to have a healthy local economy in order to have the healthy Government finances that can provide what we all want from government. We want more we want we want better We want more services. I'm kind of a stranger in town I Parachute in every now and then to talk about policy and so forth But being a stranger sometimes means that you can you can open up conversations with people more easily the last time I was here We had the big parade and the celebration of the national championship And and there were lots and lots of people that I could just strike up conversations with and I would always ask them What do you need here and almost invariably the answer would be well, we like it here. We like our schools We like I'm happy especially parents, but we could use more we could use more parks. We could use we could use enhancements to social services and so forth and and so we we want and we need a healthy government financial Sector system to provide that more and the perception is that high tax rates will get will get us that that if we if we Talk about tax cuts or tax reform that we're endangering Government finances and that that we won't get the more things that that we want that that that will get less services And and that is a dangerous misperception at the local level and the reason it's it's a Misperception is because at the local level we have mobility we have human mobility people move But more important we have capital mobility investment flows are directed at the local level to where they are treated best and The best evidence that that we have of that comes from Columbia itself. This is this is data from Dr. Goodmogson's Slides in the appendix to her slides on stealing her data But this this tells the story quite quite eloquently if you look at the at the blue Part of that that graphic that's those are the real per capita Or inflation adjusted per capita property tax revenues in in Columbia over the past decade And you can see that that that that those revenues have fallen by by over nine percent over a decade And that bespeaks a shrinking inflation-adjusted property tax base in the city of Columbia you you you simply can't finance more If the tax base is shrinking and the tax base is shrinking Because the investment that that is is the the crucial lifeblood of a healthy economy is being directed elsewhere That's the competitiveness problem that that this tax modernization is trying to solve so so that you know to go back to my Mama bear Papa bear bear cub metaphor that the danger here that that exists is you know When we when we face constituents who are worried about what might be cut if we do tax reform or tax modernization The inevitable reply to that should be The danger here is if we don't do this then cuts are inevitable then then a shrinking tax base a limping economy Will not provide the more jobs the more opportunities the the the better Parks and and and better schools and so forth that we all want Only with a healthy tax base only with a growing economy Can you can you finance the more that we always want and a high tax rate at a local level a non-competitive tax rate at a Local level is just just violates this this necessary condition for a healthy local economy So here's you know we talked about this the last time I testified in it in front of you This this is I think the best Data on on exactly how non-competitive Columbia Richland one and richland two are relative to some of the some of the cities that are competing for investment dollars and population location decisions and so forth especially Richland two if if you instead of look you know these these figures that those tax dollars again I'm stealing from dr. Gunn-Lagson's Hard work here, but this is on a hypothetical $250,000 home or not excuse me commercial or rental property That those are the tax liabilities in these various jurisdictions and if you if you locate instead of in Columbia Richland two or Columbia richland one you can see you get a get a steep annual discount on your property tax bill and The return on on investment is just much much more attractive if your property tax bill goes down by say 40% as it would if you located that investment in Greenville or 57% if you located that investment in In in Charleston So this this mobility of people and the mobility of capital is is the crucial factor that we have to consider When when people ask Well, aren't you endangering my cubs if you If you tinker with it with the current tax Structure the answer is no if we don't tinker with it if we don't make it competitive. That's when we're endangering the future of for your children and for yourself if we do nothing this is This is where we get into vicious cycles versus virtuous cycles if we do nothing Things get worse, but they get worse in slow motion so I mean this this is what makes inaction somewhat appealing to people the the the the vicious cycle it's it's not like you know people Strap their houses to their backs and leave and it's not that that businesses relocate immediately It's that investment flows don't happen over years and and and then slowly We start to perceive that gee when there's flight of population and flight of capital investment Everybody gets less productive with lower productivity. We get lower wages with lower wages We get relative greater relative poverty and so forth and then we get all of the social ill social consequences of that That vicious cycle and that that's where we are. I mean frankly, you know, Columbia City's data on its shrinking Real per capita property tax revenues is an indication that we we are starting this this vicious cycle and unless something's done The future is very much in danger I want to go to the West Coast a little bit to to to give a little bit more upbeat picture I don't I don't want to talk about vicious cycles as if You know, I'm a a prophet of doom or anything like that The good news is if you if you get it together and you get a competitive property tax policy in place things can turn around rapidly and and dramatically and and I just want to talk a little bit about the you know, my favorite example here is is San Francisco If you're old enough to remember like I do the old dirty harry movies from the 70s and so forth san francisco used to be An economic basket case You know the hippies my generation the hippies moved to hate ashbury In the 60s and 70s because it was cheap and dilapidated and and crime was high and and people Rents in san francisco were actually lower than they were in oakland and los angeles at that time It was people were fleeing the city rapidly you can see the in the data here from 1950 to 1980 The the the sort of purple pink line there is is the population decline in san francisco and then you know the the The miracle that happened it was sort of imposed on san francisco from outside the state imposed a property tax rate cap Proposition 13 kicked in and all of a sudden san francisco's property tax rate as you can see in the on the blue line They were kind of like where richland 1 and 2 are the property tax rate in san francis at least richland 1 and 2 are for commercial and rental property The property tax rate in san francisco is around 3 and prop 13 was a very very dramatic very very sharp Reduction in in in the property tax rate to 1% it was it was capped statewide at 1% The playing field was leveled for everybody in the state of california Every jurisdiction had to cope with a 1% property tax rate That was good because like I say when there's mobile population and mobile capital If if it's a 1 cap everywhere then then you know every place is competitive for those investment dollars and for that population Well once once san francisco's property tax rate was competitive and once once it started making sense When you did the arithmetic and on a new investment people started investing in in in san francisco You know it was a tidal wave a new investment and you can see the population started started growing and and uh These days pop um these days san francisco's population its municipal finances and so forth are incredibly uh Rich in in resources Sometimes it's arguable. They're too rich because they're doing some frankly silly things from a policy perspective But it turned the city around and here's the thing about the um The the vicious versus virtuous cycle in terms of urban finance, so It's impossible to overstate what a shock this was to to san francisco's government They didn't think that anybody would be so foolish as to vote for prop 13 And vote to reduce their property tax rate from three percent to one percent So they didn't know planning whatsoever for it They they campaigned against it and the state voters nevertheless imposed it on them So san francisco had had a tough time coping with that for for the three years after prop 13 With a two-thirds reduction in the property tax rate from three percent to one percent Also assessments were rolled back from the 1978 levels back to the 1975 levels to to make up for the The rapid inflation of those days. So this was an incredible fiscal shock So san francisco really had to tighten its belt for three years But during those three years new investments started to flood in New new populations started to flood in people started paying not just property taxes, but uh wage taxes and hotel taxes and other kinds of Ancillary revenues started to accumulate So san francisco was out of the fiscal woods and was growing rapidly in terms of the municipal budget by the fourth year After prop 13 these these data are in real inflation adjusted terms By the fourth year san francisco's Spending was 60 higher than it had been before the tax reform Of prop 13. So that's the that's the the virtuous cycle in action When you reverse the outflows of population and and capital investment The dynamic here is very favorable to the production of more You can afford to to invest more in your children's schools You can afford to invest more in parks and recreation And libraries and zoos and so forth with with an expanding tax base this virtuous cycle Uh Actually contributes to further reductions in in tax rates Following prop 13 in my home state of massachusetts where I was raised Prop two and a half was it was an imitator of prop 13 and the same thing happened there Boston was rejuvenated by by this property tax reform And as people started to come back and as new investment flows started to come in Boston has had successive since prop two and a half has had successive property tax reductions simply because The greater flows of investment brought people To that Economy and As the tax base grew More services could be provided At lower effective tax rates so Those are the stories of success of reversing vicious cycles to virtuous cycles with Uh essentially Just one policy stroke you you transform a non competitive tax system into a competitive tax system And people will come and investment capital will come and the tax base does start to grow and then as it as it grows You can you can provide more services the quality of life improves. There's more amenity Investors start doing things like bringing grocery stores to neighborhoods that are currently food deserts and so forth Because it makes economic sense once again to invest that you you don't have to do it with special subsidies. It happens organically and More or less automatically Here our job is a little bit more complicated because we've got a little bit more complicated state Tax situation. We've got act 388 we we've got We've got kind of in addition to having a vicious cycle with respect to a non competitive rate on commercial and rental housing we we've also got kind of a An odd situation for schools I really would would reach out to to members of school boards and so forth and say This is especially important for school finance because the tax base The the sort of the foundation on which school finance is based is is much narrower here in south carolina than it is In a lot of other jurisdictions primarily because of act act 388 and the exemption on on primary residences So it's it's really important for that rental and commercial property to be Cared for and and for the investment climate for that property to be healthy Or that's going to endanger school finance there again The cubs are in danger the children are in danger if we don't take care of that Cornerstone of of municipal school finance It's all based all of the school operating budgets are highly dependent on the health of that commercial and rental property sector So you you've really got to pay attention to how competitive you are at the local level on with respect to those things You've also got some some complications having to do with multiple jurisdictions. So so The the degree to which this is going to involve legislation at multiple levels and Lobbying and and convincing and education at multiple levels It's it's going to be a much more complicated job than it was in in say massachusetts or california To get a competitive playing field for for this type of investment, but but i think it can be done And Here's here's the um, here's the way to get that virtuous cycle Going we i mean first is is an education effort everybody has to understand that this is a necessary condition there's There's no way around this I I think i said this the last time i testified I've been studying cities for 40 years as an urban economist and i've never ever found a healthy city economy In a place where there was an unhealthy investment climate and a bad tax climate. It just doesn't happen At the local level when you have a non-competitive tax structure and you're repelling investment, you're going to have a slow motion A vicious cycle that's going to damage The flourishing of citizens everywhere in that city So it's got to be taken care of and the education effort has to make clear That this necessary condition has to be satisfied um, then you know and this is i'm just sort of setting the stage here charlie Terrenny is going to talk about The legislative strategy and we're moving towards kind of a final plan a final game plan for for getting this done, but the The basic plan in summary form is Rather than like in california or massachusetts or the many other states that have prospered by having by leveling The playing field on with respect to the property tax here The the strategy has to involve equity on the assessment rate The commercial and rental property has a six percent assessment rate and and primary residences have a four percent assessment rate So the goal here is to go from six percent to four percent assessment rates on that commercial and rental property Over a transition period and that's the that's the key thing That's that's the the major advantage while the san francisco or the california situation is very simple legislatively The the one disadvantage that they had that that the columbia has that richland county has over them is We have the time to do this In an orderly fashion we can have a transition where we can delay the phase in of And and have a stepwise reduction in this assessment rate so that we can build towards a competitive property tax rate In a way that doesn't do any violence to any municipal services in the short run and allows those municipal services to grow in the long run That's the um, that's that's the the basic plan for a couple of years after the legislation allows this this option We would have a period when People start to realize that a that a competitive tax rate is in the offing People start to to get in on the ground floor. They start putting projects on the board that that As we heard in the last meeting There are there are people right now as we speak taking a pass on columbia because of its non competitive property tax rate Well projects get put on the board immediately during this phase in period And we start to build up a little escrow account that we can use when when the rate when the assessment rate reductions start to To come in over the the succeeding Years, that's when we draw on the escrow account to make sure that that the that the services that we're accustomed to Can be financed and in point of fact as as the tax base starts to grow the All the evidence points to the fact that those municipal services can be enhanced at a at a more rapid rate So that's the path to virtue. That's the way you that's the way you turn A vicious cycle into a virtuous cycle where More investment more population and so forth Contributes to a healthier local economy healthier urban and county finance and a greater flourishing for for citizens Mr. McDowell, I think you had your hand up and I talked over you. I apologize for that Do you have a question before I cede the floor to I'm I'm done. I I was about to turn the floor over to charlie at terreni for for discussion of the legislative strategy, but Thank you. Dr. Walter. Thank you, mr. Chairman This is my time. Yes, sir Dr. Walter, let me ask you a question relative to the shrinking tax base Comparatively and we've looked at We've looked at the structure We also looked at How it varies from say in our school systems from one districts one and two When we look at that and we look at that shrinking tax base I guess the thing that sort of rings through my head is I think you've given us a pathway I guess my next question is And I the next speaker may do that How do you do that? I also heard You know, we talked last time about that s about the escrow account And how long it's going to take for that to take place And to lock itself into place Talk to me a little more About the shrinking tax base. I know the consequences of that Everything fails not only schools But communities The same thing happens there. Could you talk to me a little bit about that? Yeah, the um, I'm sorry The hard thing about this is A slow pace At which these consequences become clear to people So when I talk about a shrinking tax base That's invisible On a weekly monthly even annual basis In in in baltimore where i'm from we reassess property every three years here apparently it's done every five years So there's a lot of inertia built into valuations and That can that can hide some of the some of the bad consequences of a bad investment climate You may property values may be falling due to the high property taxes and and In reduced amenity levels sometimes in in certain certain areas But but you may be stuck with your property tax bill for say five years during which We're we're pretending that property values are are are where they they used to be That data shows that the the shrinking Uh amount of investment relative to changes in the ordinary price level and changes in population You know over a decade things become obvious that aren't obvious annually or or monthly And so that's that's one of the things that makes this discussion very difficult for me I'm talking about things that people look at in the short run and say I I don't see An immediate reduction in my property values when as a result of the property taxes or As a result of somebody's investment to say, you know When when people pass you over when when they don't invest in your town They don't build that grocery store or start that business and they they usually don't tell you That they that they're not that they're passing you over we heard some great testimony a couple of weeks ago from some people who You know got emails that that we're telling I I can tell you that's exceptional Usually people just move on If if they do tell you a no, they usually don't want to tell you the bad news of why Um, they'll just well it makes more sense for us to go some someplace else but when you when you do the the careful analysis across Years and decades and and you look at the the historical examples of places like boston and san francisco and And lots of like I could go on and on about Cities and states that have benefited from from this realization that gee. Yeah, we got to be competitive. It's um It it becomes clear that this is not a choice. This is this is the the danger here Is of inaction The perception that things aren't changing is just kind of a an illusion because of the slow motion nature of the problem The other thing I want to bring up is We can also Miss the fact that there is a wealth effect here That high property taxes on commercial and rental housing mean that that the startup the business startups and and the and the uh, the the entrepreneurs who are who want to you know Maybe risk a quarter million dollars that they've saved up over years to start a business um Every dollar that you invest in a high tax Environment has a lower return than in a than it would in a more favorable environment So this is this you know, I've written about this in in uh cities like detroit and my hometown of baltimore And so this is a great impediment to wealth creation And again, it's it's hidden. It's disguised because these these reduced Property values and the reduced rate of wealth creation happen slowly over years or decades. So I'm really I I'm probably not answering your question because it's a difficult question It's you're talking about things that happen um in a way that Is very difficult to perceive But it's very tangible and it's very important and it's it's sort of like, you know The lifeblood of an economy is how how how many businesses are starting? How many jobs are those businesses creating? How are your property values improving? Over time because the amenity level and the quality of life in an area is improving All of these things are related to the investment climate and the investment climate is crucially influenced by the property tax rate I think mr. Bennett has some questions. Yes, sir. Dr. Waters waters I agree with you totally when you say that uh the danger is Not doing anything at all But I do think it's important that we understand one how we got here and Decimate that we're in and how we bring others with us for that action because if you don't That could be worse than no action But um, you mentioned this earlier about act 388. I think it was 2006 when it took the burden of school operations off of Honour on occupying now. That's a tremendous Burden for everybody else or every entity to bear also In the city of columbia in particular we talked about it many times from Port Jackson state government city government county government school district all of that is off the the tax records not to include a religious organization and non-profits and so it comes down to Non-owner occupied investors and things of that nature um, I can't remember if it was councilman tailor that mentioned at this meeting or in a separate meeting the point about school board budget Tends to be higher in some cases than the growth in the area. Well, you know, maybe matching that to mean sounds reasonable But it's hard for us to move forward with that without engaging Our stakeholders and and the stakeholders are plentiful You know, whether it's the sessors the auditors the treasure I guess we have three school districts One two and three. I mean one two in lexicon five And and then the superintendents hard of the um The economic Progression is the idea of rise and tide lift all boats also. So we do have to trust that but we also have to Create confidence within our community and and again, that's why I say the collaboration Is so important Because if we look at the city of columbia, it is the tale of two cities and The confidence for those at the bottom may not be as high or as bright as as as you know, the middle and upper and so I think if we can Continue to cast this net wider And and we've gotten by in today Councilman Taylor has acknowledged that but I think when we start having conversations uh with our stakeholders because the pie Isn't but so big And and so it's uh, it's an obligation Uh that we all have but what what people are hesitant of is is when we tell them That we're going to take that piece of pie. It's a whole lot better if they decide I'm going to give you a piece of what I have And and so I think uh, that's that's where we're Edit and and I hope and trust the process that we will We will achieve dividends from that process That's a great way of putting it We and I think this maybe gets more at the nature of your question about how does What are you talking about here on a We tend to think that pie is fixed And and it's just a question of slicing it up in a way that that we like And so how we get here is we say well, I want more I want I want maybe smaller classes or I want More more parks or And the way to get that right now is we raise the tax rate And when we raise the tax rate, there are hidden investors and and people who are thinking about You know locating their businesses or their apartments and and they look at they do the math and they say no and then So so there's that data there on the shrinking tax base That only becomes perceptible after a decade, but we keep wanting the more so we we keep going back and Reslicing the pie And it and it tends to shrink It's not fixed and given and and the goal here is to transform it from a shrinking to a to a growing pie And it can be done and and that's why i'm highlighting, you know historic examples of of dramatic turnarounds in in in cities that You know just just followed This this logic that gee yeah, we like any business we have to price our ourselves competitively or or we die That's that's how it happens and and you're you're absolutely right every all the stakeholders all the mama bears and the papa bears have to understand In the long run The fate of our children here is crucially tied To a healthy economy and and at the local level you can't be healthy unless you're competitive It just doesn't work Except in the in the extreme short run it does I mean, you know if we if you could raise the tax rate on a lot of things today And and there wouldn't be you know for for a year or Some months or whatever you wouldn't notice, you know Main street wouldn't wouldn't evaporate overnight. That's the thing about this though Um in in more than overnight This is how we get into that uh that shrinking Real for capita revenue stream and when the shrinking revenue stream Translates into I can't afford more parks. I can't afford better schools. I can't afford Fixing the potholes and so forth. That's when people start to realize. Oh Yeah, this formula doesn't work Mr. Taylor you got Yeah, it seems to me that the examples given in the conversation we're having right now That the the conversation going forward we need to include examples of people Who have not invested in recent times and we had examples of that at the last meeting And maybe maybe we can You know, uh, do a better not do a better job But but um come up with more examples of those for the conversation going forward with the folks that will be Right, right I think mr. Bennett's point is right is right on target In terms of making it collaborative, but also making it where your stakeholders Become a part of that pie Not the whole pie itself because you may eventually have to uh Make a larger pie and and do we want to do that? Yeah, uh, do we want to section it off? Or do we want to collaboratively? Allow the stakeholders to say this is how that pie Or to be divided a cut off Give me a piece of the pie Yeah, the the the growth of the pie is in everybody's interests. That's correct and and and we We just need to to talk about this more and more more broadly And and convince people That their interests whether they're school board members or parents of school children or retirees whatever all of all of their Individual interests should be united behind a competitive Tax climate I like to just maybe make a couple three points and ask ask a question Number one on act 388. We all need to acknowledge That's not a universal. I mean that's a universal across the state every County deals with that. So when we look at our competitive disadvantage when it comes to taxes We have to understand although these other counties are also dealing with 388 It's not necessarily what what is driven. It's here, but I think james asked an important question About how do we get here? And and and I think it took a couple of decades frankly for us to to get in the situation we're in And and what I would ask is If I want to make sure I understand correctly that they're you know, you have governmental inflation Just like we're seeing in the consumer economy now And I would say history historically government inflation Can actually run even a little bit higher than than say the consumer inflation And so what doesn't that mean that If you don't attract enough new tax base every year to cover that inflationary cost of government You either got to cut government or you got to raise taxes And I think what we've seen in in richland county and I don't you know, you know, I don't want to make it clear I don't think anybody gets to point at any one person or any one entity. It's just It's just one of those things is that we have not recruited enough investment annually to overcome and I think that's particularly what you see in richland district two To overcome that inflation. So we've raised the millage rates And I think one of the things that we've been fortunate enough To get a get a look into and I don't think and I think this is what dr. Walters I don't want to put words in your mouth, but I think this is what I heard you say earlier In most places where you don't see the investment happening Nobody says anything. They just go somewhere else We two weeks ago, I saw hands go up in this chamber When that question was asked not by me, but I think by a mere recommend If we fix this who's going to do additional deals I think the committee has seen emails and emails From folks. I think we have some folks here right now That are saying I want to do business in columbia But I can And I think I really do believe and I think you know having served as the secretary of commerce And seeing how these decisions are made I feel Extraordinarily confident in that san francisco model of what we'll see here In richland county when we fix this And again the message that we all need to get comfortable with is If we get our soil conditions right And bring that new investment in We'll have more money. It's not a mountain. I mean the pie gets bigger not in the slices get bigger It's nobody nobody's slices get smaller. Everybody's slices get bigger better schools better infrastructure And the whole shoot man because I have to tell you It to me it's stunning The amount of annual new taxes That I have seen us miss Just as we started this committee for folks I mean, I mean millions of dollars where people said I would do this or I would do that um So we've heard we've heard I think From folks and we haven't touched on this during this discussion But I think it's important. We talk about new investments We talk about growing our small businesses But the impact this has on housing affordability and affordable rents And the least among us this is not more about the most among us. This is about the least among us This is talking about looking after the little guy You know and uh, and I just think that's that's one of the things that we we have to talk about I mean at the economic development and community development committee being this past this past week Ryan Coleman mentioned And I never thought about it before That in the city center of Charleston and Greenville they have 9 000 people living there. Here we have 3 000 We need to get this right Where we can build apartments and build houses and new things that are affordable in our city center Where people are coming back spending more money generating more, you know, the what we forget Too many times is The state gets all the income tax You know, we we have to survive here on local option sales taxes Hospitality taxes accommodations taxes property taxes So the things that we need to do To make those things grow. I think again makes the pie bigger the slice is bigger And uh, and I would have just wanted to again acknowledge mr. Bennett. I think his advice was was very good uh, but Also say and this is why i'm so proud of of mayor recommend and each of y'all Somebody had to start the conversation And I want to commend you on your necktie, sir The the good news I I just want to stress one of the things you said So when I go and talk to people about this sort of thing they they never know what they're missing because usually people What's invisible? We're unaware of what we're missing the fact that so many people have come before you and talked about That they would like to be here indicates what a tremendous opportunity exists here. This this is a huge Opportunity waiting to happen Very much like san francisco was you know, I'm sure investors looked at that in the 70s and said, oh my god It's cable cars and it's california and and it's it's been ruined And and to some extent columbia is really poised for for that kind of takeoff And and it's rare to see so many people saying i'm ready Just just fix this So maybe that's the proper time to just segue any other Thank you, sir Your contribution to this discussion has been immeasurable since we since we began Really a couple of three years ago When you first came and met with our city staff and and the business community and the community in general And I thank you because you've done most of that on a volunteer basis every time I come to columbia I just love it more. So i'm a big believer. Thank you. Thank you Dr. Walters dr. Walters just let me just say a word of thanks You've given me a new A new concept in terms of the pie structure It's a great fixer pie It's what you put in it And I think what you're doing and what you've said to me today What impresses me more about that is that you've given us The pie The shale But it's very important in terms of what goes into that pie And what goes into that pie sort of indicates how deep and how wide You're going to cut that pie Investment opportunities investment values and that sort of thing. I think it's critical And a part of putting The ingredients into that pie shale As a lot to do with those components. So I I thank you for that sir. Thank you, sir. The ingredients are great here Thank you, dr. Walters Chalk tyranny You're gonna tell us it can be done And you're gonna spend some time this summer figuring out exactly how to do it, right? sir, mr. Chairman First I should introduce myself to some of you may not know me My name is trolley tyranny I've lived in columbia for 47 years I'm a homeowner in the city of columbia I've been a business. I am a business owner in the city of columbia I've practiced law in this town for 32 years I've practiced focused on business government and public utilities So I have skin in the game I have an interest. I have a vested interest in this town's success Have moved I've stayed And I plan on staying So, um, I I come to you and I thank you for the opportunity to work on on this project. It means a lot to me The Title of my presentation has been roadmap for tax return and you'll notice the picture up there is of a roadmap And I want to emphasize it's a roadmap. It's not a gps Because this is going to be a little bit like when your mama gave you directions to to get to The store or something you have to turn left at the big tree or you know Go around the gas station We have a good concept and We I'm confident we can develop it But Councilman McDowell, we don't have been it. We don't have all the answers I certainly don't But I think we have a solid foundation to work on we start With identifying what we're trying to deal with and that's the south carolina constitution The six percent assessment rate Is enshrined in the south carolina constitution All property other than residential Then agricultural or manufacturing is assessed at a six percent. It's kind of a catchall It's codified also in our laws And this includes commercial property, but as you mentioned councilman taylor significantly It includes non owner occupied housing Which the census tells me is about 39 percent of richland county Which means that 39 percent of richland county It's good lockson is Dr. Gunn lockson has shown you in her calculations That if you take a $250,000 house in richland county The tax bill is roughly three times What it would be for occupied or not on owner occupied And landlords have no choice but to pass that on to their tenants So basically people that are renting homes in colombia Are paying three times the taxes We should pass a city ordinance That makes landlords itemize it I mean because that would drive it home, right? So what do we do about this? well The south carolina constitution article 10 section 3 Allows the general assembly to exempt some property from taxation Not easy to do takes two-thirds votes of each house to do it So it's a heavy lift But the general assembly Has shown itself over the years repeatedly willing to pass tax exemptions As a matter of fact the exemption that we are going to talk about Is number 52 in section b of the code granting exemptions so the legislature Is willing under the right circumstances and with the right argument grant a tax exemption And as a matter of fact what we are looking for is our solution is a tax exemption Is modeling our solution after a tax exemption that the general assembly has already adopted In act 40 of 2017 Which is known to most of us as the gas tax bill Was included a tax exemption of 14.285 percent of the property tax value of manufacturing property Now what's the significance of 14.2857 percent? the significance of 14 2857 percent is that when you apply that to the 10 point What is it nine five or 10.5 percent rate on manufactured property? On manufacturing, excuse me on manufacturing property, you know industrial It reduces the effective assessment to nine percent so And councilman taylor had this idea originally What happens If we do the same thing for non-unoccupied property And that is essentially the concept we have to phase in an exemption now I talk about phase ins if you look at that code It says 14.285 seven percent, but the code doesn't tell you how you get there the original act does And what the general assembly did was they said well, you know, we know we can't shock the system By cutting the assessment ratio by one and a half percent in one year So what the general assembly did is said we're going to phase it in We're going to phase it in in six equal installments So by 2023 we're in year five of this The tax exemption is being phased in It will be fully phased in like Like act 40 We could do the same thing now there are some wrinkles to it But we could do it we could include some revenue safeguards in there We're concerned about revenue streams falling or not growing as much as they can And there are other states like north carolina that have indexed their income tax cuts to revenue growth And that's how they call that a trigger But it's also a safeguard because if revenue doesn't grow as quickly as you want it to you can delay The income tax cuts so government's not deprived of its money for vital services and that's important And I think mr. Dr. Gunn-Loxons is going to talk about that So we can include safeguards like that. Now, how do we get there and let's be honest This state has been Much better at finding ways to raise taxes and finding ways to cut them The so this is not a concept that we go off with charlie terrain. He's saying it's good to do We develop it. We develop it with the stakeholder meetings We vet it with other Lawyers the city attorney's office was very capable. It was noxious here And she has a wonderful staff the fiscal staff Of the city should be involved in this bond counsel Certainly their provisions and the tax exempt in the tax exemption statute that protect bond revenue We're gonna need to do the same thing Local and state officials. We're largely dependent on county council doing that So I mean I may be preaching to the choir here I'm not sure about richland county council But I I think once they see the idea developed they'll be receptive the business community, of course, which is represented on this committee Our got a good little legislature So your government your government relations staff would certainly be important to this and other members of the community People that may represent the less Advantage of of the city that could understand the benefits of this plan Not only in terms of commercial development But also in terms of leaving the burden on their housing costs, which I think is a critical component of this of this plan So in conclusion, I thank you For the opportunity to to work on this project as it said it's a It's a roadmap set of directions. It's not it's not a gp s you can't can't program it into your phone and get there from here right now But I'm confident that by the end of the summer We can come up with a plan that we can take to the legislature and And hopefully make some progress there. It's a whole other world. We'll see but I'm confident in it So, thank you very much for the opportunity to work on this Thank you. Charlie And I and I would say we're going to spend some time this summer with senate finance and with the houseways of means committee We're very fortunate to have Two member two local members of the houseways of means committee Kirkman fendley and michael caskey and And I think our new senator from From it's going to get five points in the university is the ranking Minority member on the senate finance committee. So I think having their input is going to be but The key today is to know that there is a method that it can be done And that other places have used the triggers that I think we're going to hear one more review of in just a second To effectively lower the taxes in in a in the least risk Risk-adjusted way. I mean again, I think I think what the What we'll be doing is with the escrow and triggers We we protect our entities And safeguard anything negative any questions from mr. Trini I just have one yes, sir Charles and I would assume that our approach would be we would approach our local They will be part of the the summertime discussions absolutely And and several of you know, we've had we've had conversations a little bit and and you know Again, we try to make this as public as we can But no absolutely over the course of the summer I think we'll meet with every member of the delegation And and and one of the decisions that we'll have to make is do you know Is it's going to be a local legislation or is this Or is this should this be something that is offered statewide? For every county and my guess is my my guess is it will be something that every county would want to have the option to do Any additional questions mr. Trini Thank you Charlie. Thank you Dr. Gunn-Logs Thank you for having me back again It's always a genuine pleasure to talk about taxes And i'm always thrilled to be able to follow dr. Walters Because he does such a great job of explaining the long run effects of This type of tax climate on our economy and our social fabric and our All of the amenities that go along with it their communities and people It actually reminds me of He calls it the vicious versus virtuous cycle Which is really so good because I just kept calling it a continuous loop in the 2020 tax study But you know, essentially We have the situation where we have high tax rates. It leads to slow growth for property valuations Which in turn leads to smaller tax revenues, which prompts our city leaders to raise taxes Which then further deters growth and depresses valuations And so we we're stuck in this sort of negative continuous loop and what we want to do is flip that So that we have low tax rates that lead to high growth and higher valuations Would lead to higher tax revenues which prompt leaders to be able to even reduce the tax rate further Without sacrificing the revenues that are coming in and I completely agree I love the example of the pie Because this is not something we want. We don't want the pie to get smaller We don't want to even change cut the pie and give one person a different slice. We just want to make the pie bigger and this Being able to flip that cycle to a positive continuous Feedback is the way that we do that Um So I know you you saw this but I I also love dr. Walter's example of uh san francisco So san francisco just ripped the band-aid off and they ended up with three years of The three years of deficits and hard times But then it rebounded and and we don't want to do that. We want we're doing this slow method over uh Facing this out over a 10 year period starting with two years of building up escrow's so that if there are any slight deficits We can fill that in with the death of the escrow's now the other thing is you saw that in san francisco after year three There was a huge increase in revenues because as soon as um, all of everyone realized that the tax rates were being cut Um, all this development started flowing in and therefore all this revenue started flowing in too So that's why we want to use triggers So if we do And I should say when we do see all of this additional revenue coming in We don't have to take the entire 10 year period. We can shorten that and uh, you know, bring it down to Whatever matches the inflow of new revenues So so today I actually I wanted to talk a little bit more I was asked to talk a little bit more about the school districts I know that's that's a big concern and dr. Walter's touched on that too and So I'm going to go through a couple of scenario examples of this 10 year implementation cycle But I'm going to look at it sort of the worst-case scenario. What happens if we don't see all this brand new growth We just continue to see the same Slow stagnant growth that we've been seeing over the past 10 years Now if you recall schools have they let me two millages one is for To fund school operations And owner occupied housing does not pay that and the second one Is to repay bonded debt and all properties pay that so I'm going to break those apart So you can see each of those So I'm going to start with the debt service fund because that's the easiest one Now I know you're looking at the slide and you're like, wow, this is packed with so much fun data But I'm going to try to Go through it very slowly. Can I make just a quick comment because I All the slides have already been posted online. So don't worry about taking pictures of them. You can download clears a bill straight off the city's website Right now if you want to so Sorry about that. Yeah, no, no, thank you or you can take pictures too. I Just let me know But um, no, so what I'm going to do I'm going to start on just the left hand side because that's historical growth from 2011 To 2021 and then we're going to start up at the very very top Okay, so there you see the historic debt millage for richland school district one and you see back in 2011 It was 53 It pops up, you know, a couple of years in 2015 and 2016 up to the 66 And then in 2019 the county has its state required five-year reassessment And under state law if the property values go up you have to reduce the millage to be at revenue neutral So you see that at that point then it pops back down to 64 and it's been there ever since Um on a compounded annual growth rate. It's growing at 1.9 percent Now right underneath that you're going to see the revenues into the debt service fund and the debt service fund is almost entirely Made up of property tax revenues There you can see it's almost exactly followed our property tax The actual property tax rates It's only grown at 3.38 percent again 1.9 percent each year was due to property tax increases So already you see we don't have this rapid growth over this period of time It's really only been increases in tax rates that's been able to get us new revenues for our schools And then finally at the bottom you're going to see students in richland district one And you can see that those have actually had a relatively Steady, I mean a couple ups and downs, but a relatively steady decline And I know that at the very end a part of that is due to the pandemic And it does pop back up a tiny bit after The next year, but but not that significantly much Okay, so that is um, that's historic. So now if we go into the right-hand side This is what we're projecting for a Again base case worst case scenario of if we slowly implement this phased in tax plan So first of all you notice we're not planning on increasing the millage rate or decreasing the millage rate the millage rate just stays the same Uh now the next one down is the revenues and in here you see the revenues again grow At a steady rate total revenues of you know 0.63 Percent compounded annually Now what I did was I broke down those revenues Into commercial and rental property tax revenues And property tax revenues from all other properties And so you can see that that as we implement this if we're at this worst case scenario We do see declines in revenues from those commercial and rental properties But we still see growth in all of the other properties. That's enough to make up for That um decline In in that and again, this is the worst case slowest implementation No new growth which is again from all of the past studies around past Instances around the united states that have done this Was not what we would expect But even under these circumstances we do not see A decline in revenues Now the the last one that I did is about students and and the reason I put this in here is first of all I don't love forecasting That is just not my favorite thing to do because something always happens that makes the forecast wrong But um, I know a number of you know people have asked well, what is a what would the per pupil? amount look like and the problem is that recently one has been seen a decline in students And if we keep projecting that out under this worst case scenario, you're just going to see these huge increases in per pupil revenues, which um, you know in some cases That's that's wonderful And it gives you opportunities to make yourself more efficient and in some cases you have fixed costs and you can't do anything about that But the other thing I think it just really speaks to you know, I think what dr. Walters was talking about is The vicious cycle and the economic Components running along with the social fabric and those just follow and so That is not what we would necessarily expect if we are able to Swap to flip that continuous loop upside down turn it from a vicious cycle to a virtuous cycle where we see more investment more More more people more More economic activities So so I just put that in there because it tells you just how difficult it is to Um, project out a per pupil. I think it would require much Deeper analysis from that standpoint. All right. The next slide Looks at so we just went through the debt service fund. This is the general fund now The general fund this is the this is where all of the operations Um Millage rate flows into now the school districts have other funds. They have a special projects fund. They have an education improvement act fund They have a food service fund. They have a capital projects fund. You already sort the debt service fund But this is the one specifically into which the property taxes flow So I don't want you to think that these are the only revenues that they're receiving But this is just the general fund that receives the property tax revenues Okay, so again We'll start with the left hand side look at the history and start at the top and you see the millage rate has increased You know from 235 back in or 236 back in 2011 multiple times over and it's gone up a total of 1.25 compounded annually over that time period Now if you look at Revenues into the general fund now This is a little different than what you saw in the debt service fund because here there's there's two major sources One is property taxes, which is in blue The tan is state aid now It's not all state aid, but it's the state aid to the general fund again. They get a lot of some they get the stuff into the education improvement act fund or some other funds, but this is State aid and then so you can see that over the course of this 10 year period Property taxes have grown at 2.95 percent Impended annually and state Funds or revenues have grown at 4.02 percent. There is a little bit of federal and other, but it's so little You can't even see the bars on on the graph Okay, so now if we look you know projected what would happen again if we implement this 10 year implementation program So again, we assume that there's no change in the millage rate And we then you know calculated out based on the same percentage growth that we've seen in properties over this time and We separated it out state Continues to grow at the same rate property tax total grows at 0.6 compounded annually again, we do see a decline in the Commercial again under this this worst case scenario and but again It is made up by growth in other properties The next slide does the exact same thing for richland district two and There you can see they have a higher much higher debt service millage rate they've and And it's and it has grown it's grown a little bit faster than richland district one Revenues, you know similar situation where the revenues have mostly grown as a result of Increases in tax rates Now their student situation is much different They've seen growth in students whereas richland one seems declines in students And I know we talked about that a lot already that we have this Two districts we have a lot of student a lot of people that are building houses out in richland district two But they're working in richland district one So all those new houses are not necessarily adding to the operations tax base They help with the debts tax base to build new schools, but not with the operations And then so on the right hand side again, you know, this is just a fairly similar You know analysis or exactly what you see in richland one We're we're assuming we're not changing the millage rate The revenues will grow at a similar Had a historic rate And then The students, you know, so again the the problem with projecting out students is that historically it's grown at you know 0.68 percent compounded annually, but we might see something different going forward question, yes If the higher the value of property value of the lord of millage rate Shouldn't we expect that the millage will go down? Okay. Well, so Um Yeah, so what we're doing. Yes, so I would say so the answer to your question is Generally if we get in more revenues and it's more revenues than the school district needs to spend or the county needs to spend Or the city that yes, that's the opportunity to lower millage rates But during this phase in period When if we're for lowering the effect of assessment rate, we're Trying to get all of the excess revenues to fill in Um that gap that's left by lowering these there's two ways you can lower tax rates either the millage rate or the assessment rate So we're trying to just hold one constant while we lower this one now If we are able to flip that vicious cycle to a virtuous cycle And you know, we've gone through the implementation period and we are seeing all of these revenues come in then We hold the assessment rate Constant and then we can start lowering the millage rate. Yes. So it's one of those two levers you can use Okay, so and then um, oh the last the general fund Again a very very similar Look as to what you see in richland one, uh, their millage rate is is significantly higher It's grown significantly faster And but I want you to take a look at the revenues because I think this is pretty telling The the dark blue at the bottom you see Has not again not grown Much has grown primarily as a result of increase in tax rates But you'll see that you know in the past year It actually had a decline in property tax revenues So And the the millage rate didn't change so that's That's indicative of this virtue of this vicious cycle That we are seeing depressed Values and slower growth and it's bringing in lower revenues And As a school district, you know that you know, it's any entity. I think your initial Reaction is well, we just need to raise rates more which again will just further depressed growth and And lower property values and again, you're stuck in the vicious cycle Um, but Here would be again the again the the slowest case Implementation scenario over 10 years And you know, I assumed Again, I Projection projecting this difficult But you know, we we just assumed that state revenues grow at the same rate as they've had for the past 10 years Property growth occurs at the same rate It's has for the past 10 years and you see that you know total property tax You know while we do see a decline in the commercial property tax revenues Total property tax still grows 1.07 compounded annually and And that still you know makes up It is interest It makes up a less the property tax overall makes up a less portion of the general fund for richland 2 that it does for richland 1 So so that's essentially it for for this Um This deeper dive into the school districts I'm happy to answer any questions It is Well, I have I do have been a couple other general questions. Okay. Sure. You're right. I just a couple of things because I want On your original tax study, which really led to a lot of a lot of what we're doing today You compared the non property tax pay in real estate And us in our pure cities I mean, do you have that? Just off the top of my head. I don't need the exact numbers, but if I remember correctly It was not a consequential impact that drove our taxes No, that that is correct. We we were able to get data from greenville and from rock hill And um, we did have slightly more acreages acreage that was exempt Than the two of them and we had slightly more Just number of parcels that were exempt than the two of them But it wasn't enough to drive the disparities in tax rates that we see between us And and those two cities So um, so yes, there is there is columbia was slightly higher But it was again, it was nowhere near enough to drive the discrepancy and race And would you agree or disagree that An entity like the university of south carolina while it doesn't pay taxes It certainly has driven a huge amount of six percent assessed Property in and around the university that we would not see if it were not for the There's no question about that. I you know, I think usc may be one of the usc and honestly state government Or two of the biggest Um, you know Entities that columbia has in terms of generating Consulting firms or other businesses or other properties, etc And one other clarification, um The percentage of homes or the percentage of people that rent their residents In the city of columbia. Do you remember what that number was? Yeah, then it is in the supplemental materials, but um, so And I I think it's like 46 percent of People who live in the city of columbia own their own home and have it own their own home So it'd be 54 percent rent. Yes, and the county fairly similar The county the county would be uh, the county by there'd be a greater proportion of homeowners than to renters than So it's like slightly more in the county And I would I would agree with what mr. Tarini said earlier I'm afraid if we asked landlords to disclose Or not asked but compelled them to disclose on their rental and lease agreements How much of their rent was property taxes? We might have them surrounding this building right now with picket signs demanding change. So I mean, I think I really do think again And I'll bring that up because I do think it addresses we're talking Not just about investment growth and opportunity growth and job growth We're talking about affordability and attainability For over half of the population in the city and the county and uh so I do think a lot of times when we talk about Tax modernization The assumption is is to benefit You know the rich when I think frankly what we're talking about today has a disproportionate positive impact On the working people of our community, which is one of the reasons why I'm I'm so keenly interested Mr. McDowell you got a comment Well, I was going to talk a little bit about I think mr. Tarini brought up the subject matter of 39 to 40 percent Of the in greechling county of those homes Unoccupied homes Is that was that correct or did I hear it correctly? So on the flip side is 61 Is that what I hear? Yeah We look at that None occupied How does that compare With r1 and r2 Richland one richland, so that's interesting. I don't actually have that broken down by school district so I can look into that I'm sure that is available somewhere in the census, but I don't actually have it broken down by school district Could that information avail itself because when we get to talking about when we get to talking about Stakeholders And us talking them through some stuff It's going to be real necessary that we have that kind of configuration on hand if you could help us To provide that kind of absolutely. Thank you. Thank you, mr. Tell dr. Gunn locks and I People richland county city club are indebted to you for your service I mean what you what you've what you've done to help us create a competitive economy, I think for our for our children and grandchildren and ourselves is Is just really truly something We're at a point Now where I think We see what our our final draft is and While we won't really vote on anything I would like to really start with you Mr. Bennett, are you comfortable with with this as as as the draft to take to the community and begin the discussions Yes, I am and as I've said to you privately and In this meeting today, I think we take this draft and utilize the time this summer To get our stakeholders and get by into the initiative Mr. Cannon, are you comfortable? I don't see after somebody goes through that's how they can Well, it's Don't go as we will go all the way to the other end Say the best for last mr. Taylor I absolutely agree. Um I look forward to showing it to folks to get some people on board Mr. McDowell, and I think that's the key to it all. I'm all for it I think that there is some steel. I think that they're they're still, um concerned about diving deeper into the Substance of most of these issues And of course this gives us and sort of pave The way for continued conversation. Yes. Yes, sir Thank you Well, basically on that then let me say this as we we will begin the discussions I'm out in the community Over the course of the next two or three months. We'll plan on coming together in september Early september to finalize and hopefully create an implementation committee that the mayor will put together Um, I would say as As our community and the public encounters things and questions We'll invite email feedback or whatever throughout the summer Suggestions thoughts people that you think we should we should talk with and discover and um Miss Hughes felt a little under weather and had to excuse herself and the mayor had to um Just drop off to attend the next meeting. So again, let me say thank you and uh If there's a motion to adjourn, so move mr. Chair second, we'll consider ourselves adjourned. Thank you