 Good afternoon. I am Howard DeVall, At-Large City Council member of the City of Columbia, and joining me on the Tax Study Committee today is Tamika Isaac Devine, also At-Large, and Daniel Rickerman, who represents District 4 in the City of Columbia. In early 2020, pre-pandemic, the City of Columbia put the bulls by the horn and hired Rebecca Demslocken with Acuytus to do a study of the property tax capacity of the City of Columbia to try to answer some of the questions that have been brought to the public's attention through various news organizations and from our own observation of the high tax rates that we have in Richmond County and that they apply to the City of Columbia. We have both an executive summary of that study and the full study itself. The Tax Study Committee has decided to invite three distinguished economists to look at our study and to give us their evaluation of what was reported by Dr. Demslocken, and we are looking forward to their presentation. We've asked the three presenters to take about 15 minutes each, and after that we will have questions. So if you have questions for a particular presenter, council members, if you will kind of jot them down and wait till we get into the discussion panel to get in there, I think it would be better than interrupting the speaker as they go. Our first presenter this afternoon is Dr. Stephen Walters. Stephen Walters is an author of Boomtowns, Restoring the Urban American Dream. He is Chief Economist at the Maryland Public Policy Institute, a fellow of the Institute of Applied Economics, Global Health, and the Study of Business Enterprise at the John Hopkins University, Professor Emeritus of Economics at Loyola University of Maryland, and an adjunct scholar at the Kato Institute in Washington, D.C. Dr. Walters is an applied micro-economist. His field of expertise include urban economics, sports economics, government regulation of business, and the economic analysis of law. He earned his BA in economics at the University of Pennsylvania and his Ph.D. at the University of California, Los Angeles. Dr. Walters, we welcome you to a Zoom portion of the city of Columbia and look forward to your remarks. Thank you very much, Mr. Duval, and thank you all for being here. Thanks for the invitation. I'm going to try the technology of screen sharing here while we get going. So let me see if that worked. Are you looking at my slideshow a little bit now? We are. Yes. The only thing I can't do is actually get to the... I think if you hit this hide slide, Erica, should you hit this hide slide? There we go. All right. Well, I'm hopeful that I don't use my full allotment of 15 minutes because I plan in this introductory meeting to sort of hit some highlights of some of the work that I've done in this area and give a little bit of a sales pitch for what I think is both an equitable and a workable plan to make Columbia reach its potential as a city of greatness. Just about two years ago, this time pre-COVID, I was invited down to give a talk about my book and so forth, and I really loved the city and saw its great potential. But it does face some challenges in terms of its tax competitiveness. That's one of my main points today. I'm just going to try to hit three main points briefly and hopefully not too superficially, but I don't want to get too deep in the weeds. I want to talk about the fact that reforming the tax system is absolutely necessary. It is a deeply equitable policy and it is eminently doable policy. I'll talk about some of the usual objections to tax reform in the course of this meeting. Mr. Duvall said, hold your questions, substantive questions till the discussion point. But if I say anything that's too either obscure or stupid, feel free to wave your hand and stop me and ask for clarification because I sometimes wander off into the weeds a little too deeply. So give me a heads up on that if I'm going in the wrong direction. And if you do have questions that you want to pursue more deeply, there's my email address right to me and I'll get back to you as soon as I can. So the absolute necessity of this I think was well demonstrated by Dr. Goodlodson's report. She did a wonderful job. Dr. Elbrook and I were talking a little bit before the meeting about the state of South Carolina has among the more complex tax systems in the country and the city of Columbia's tax system is very, very complex and wading through all the details and making sense of it was stellar work on Dr. Goodlodson's part. I'll leave it up to my esteemed colleagues to go into more detail about some of those details. The basic problem here I think is well summarized in this table that I produced when I was down in Columbia two years ago. This is for commercial property. The same numbers would apply of course to rental property, but you've got a competitive disadvantage problem in certain of the districts of Richland County and the city of Columbia. And so as Dr. Goodlodson summarized, relative to some neighboring counties, the property tax bill per $100,000 of assessed value or market value can be almost twice as high in some districts of Columbia as in others. And when I was writing the book Boom Pounds, every time I looked at a city that was at a local competitive disadvantage vis-a-vis its neighbors on the tax front, that city was handicapped in attracting investment, in attracting jobs and providing opportunities for its residents. If you want the citizens of Columbia to flourish, you have to create a competitive tax environment within which the city's economy will thrive and the citizens will thrive. I haven't found any city in the land, large or small, that had a significant competitive disadvantage on the tax price front for its services and made it and prospered. Now the other thing that is at issue here state has this deeply complex property tax code and there's another study that we may get into a little bit today from the Lincoln Land Institute on the state's problems and how they might be rationalized. But I guess what I would stress is even if all of those state problems get solved and the politics, they're going to be very complex, Columbia still has to address its competitive disadvantage problems quite apart from what the state does. It really needs to become competitive vis-a-vis some of these local areas to which a lot of investment tends to be flowing during these times. The good news, when I have studied cities and their tax policy and how things have played out over time, the good news is that when you do reform a non-competitive tax system and you make it more competitive, the effects are favorable, they're immediate and they're dramatic. I'm going to highlight a couple of cities that are near and dear to my heart because I spent a lot of time in them. Two cities by the bay, two larger cities than Columbia and they're more extreme examples. I'd be the first person to admit that my hometown of Baltimore has a much more severe tax competitiveness problem than Columbia has, but sometimes looking at a little bit more extreme problems can show you where you might be headed if you don't hit off the problems. This is a 50-year history of San Francisco on the tax front and on the population front. If you notice, from about the year right after World War II, from 1950 through about 1980, San Francisco tried to address all of its problems by taxing its citizens more aggressively and predictably on the other scale, you see this series, the citizens objected by essentially voting with their feet and getting out of town. What they were doing was they were following investment flows. It wasn't just people were leaving, it was investors were fleeing, taking with them jobs and economic opportunities and so forth. Then there was a radical reform in California right about 1978, a guy named Howard Jarvis led a tax revolt in the state of California. The city leaders of San Francisco didn't think that it would pass. They made no attempts to prepare for it. They predicted disaster if it passed. It passed two to one, so San Francisco's property tax rate was cut by two-thirds and almost immediately investment started to flow back into San Francisco and population started to recover in San Francisco for at least a few decades until it started to make some interesting policy choices that we don't need to discuss here. San Francisco was widely regarded as a superstar city through most of this growth period, while the times that I spent there it was regarded as a declining city that had troubles. Contrast that with my hometown. The good news is if you do something, things improve and they improve fast, but the bad news is if you don't do something, if you don't correct the non-competitiveness of your local property tax system, the flight will just get worse. I haven't updated this exhibit for the new census in the 2020 census. My hometown Baltimore actually dipped below 600,000 in population. We now have fewer people in my hometown of Baltimore than we've had for over a hundred years. People just keep leaving because it's a hostile investment environment and in a hostile investment environment, capital flows out and jobs leave and people follow them and problems, social attendance, social problems, things like poverty and crime and so forth get worse and worse. The fiscal capacity of the city is impaired and it's not a pretty picture if you don't treat the problem when you correctly diagnose it. Okay, point number two. So in addition to being a necessity for the viability of the local economy, I would argue also that tax reform, property tax reform is deeply equitable. Whenever I go around town and talk about tax reform, heads immediately start to shake and people start, oh, you're just trying to give benefits away to businesses and you're trying to make life better for the well to do and so forth. Actually, that's not what I'm trying to do. I'm trying to make it easier for people of modest means to build wealth. I'll do a little self-promotion here. I wrote an article in City Journal back in April about the problem of tax capitalization and how it affects the process of wealth building for people of modest means. The articles titled Detroit's Black Wealth Tax, I chose Detroit to write about because Detroit has, of any large city, Detroit has the highest property tax rate in the nation and Detroit's bankruptcy in many respects can be blamed on the flight and the fiscal problems and so forth that attended its overaggressive property tax policy. And if you're trying to build wealth and the way most people of modest means try to build wealth is first with real estate equity, oftentimes with sweat equity. You sometimes scrape together enough cash to buy a fixer upper and you put your own blood, sweat and tears into it and you hope to build wealth by building capital gains, but a property tax is a tax on those capital gains. It's a tax on the wealth that you build sometimes by your blood, sweat and tears. And if the property tax system is not competitive, if it's excessive, then you're putting an important barrier into the process of wealth creation for those of modest means. So it's very equitable to pursue property tax reform. I'll give you an example. This is based on Dr. Gunn-Logson's work in the report. I'm using her. She calculated the effective tax rates on owner-occupied home worth about $150,000 across various jurisdictions in South Carolina. Now, the big problem with tax competitiveness is what can owners or investors get for their money a few miles away? That's my problem in Baltimore, where I live, the property tax rate is twice as high as it is four or five miles away in the surrounding county. So we really, for this hypothetical example that I'm about to do, we'd really like to look more closely at neighborhoods and counties that are within shouting distance of Columbia. But just to use the data in that study that was most available, let's compare a house in Charleston that's worth $150,000. And let's suppose we had an identical house in Columbia. So if there's a $150,000 house in Charleston and you put $0 down on a 30-year mortgage at the current interest rate of about 3%, your principal interest in taxes would be about $719 a month. If you put this kind of property on sale, that would be sort of the benchmark of what people would be willing to pay. They'd look around, they'd say, well, house is in this market. I can buy them for about 719 a month principal interest in taxes. Now, if you had an identical house in Columbia, that is to say not just the same number of bathrooms, but the same amenity level in the neighborhood and social services from the government. So if you had the identical house in Columbia, you might like to say, well, if it's identical, it ought to be worth $150,000. But if you paid $150,000 for it in Columbia, at Columbia's tax rate relative to Charleston's, and again, this is for owner-occupied. So Act 388 is in play here. This is not getting into the school tax issue. Just the real estate taxes in Columbia vis-à-vis Charleston, the monthly principal interest in taxes would be $783 on $150,000 house. So you'd be asking Colombians to pay $64 more per month or $767 more per year. And frankly, if markets are efficient, they're just not going to be willing to do that. They're going to say, well, that house really isn't worth $150,000 in this market because I have to pay significantly more to own it. And so its price would have to fall to make it comparable to that $150,000 house in Charleston. This is called tax capitalization. The higher taxes will be capitalized into a lower price, diminished property values in the high-tax city. This is why it's a barrier of wealth creation. If you're trying to get on the economic ladder and build wealth through real estate, through home ownership, Columbia is making it harder for you to do that. So if you calculate, if you do the math, what you find out is that the same house, because of the higher tax rate, the same house would have to sell for only $137,900 in Columbia as the $150,000 house would in Charleston. So that's about an 8% wealth tax. And every time there's any ordinary inflation or any time you put some sweat equity in, you build your own bathroom or kitchen and you improve the value of your property for every for every dollar that that would have generated for you an extra wealth in in Charleston, it'll generate 92 cents in Columbia. That's an enormous barrier to social advancement and wealth creation. And it has to be corrected for Colombians to be able to create wealth for themselves and to flourish. Now, I won't go into Act 388 here because again, that's kind of a state issue and we're a city thing. But because renters are taxed like commercial property for school tax purposes and so forth, what that means is that renters cash flows are very, very adversely affected and even more affected by this non-competitive tax rate. And what that means is the renters cash flows are diminished in the high tax jurisdiction and they will find it much more difficult to build the nest egg that gets you started in the wealth creation process where you buy that first home and so forth. So that's something that I think we should just file away and and and bring to to the state tax reform discussion, but surely will eventually be part of this. Okay, so here's here's I think what I hope is anyway, the big takeaway from this discussion for me, the the big objection to tax reform when a city sort of paints itself into a corner and taxes real property aggressively in order to fund programs. Trying to get out of that corner is difficult because the first objection is always we just can't afford it. We need the money that this tax generates in order to fund the programs that people value. So don't talk to us about tax cuts, we just can't afford it. And you know the usual rebuttal to that is that well eventually when you cut taxes to a competitive level, the tax base grows. So eventually you can replace the revenues that are lost from the from the reduced from the lower property tax rates when you do tax reform. You know you just have to wait for the long run and the second objection that usually pops up as an old quote from John Maynard Keynes, yeah in the long run we're all dead. If we wait around for the long run to to arrive where the tax base grows sufficiently to offset the reduction in the tax rate, well you know that's that's several political terms after we've been blamed for we've been blamed by voters for diminished social services and so forth. We just can't afford it either economically or politically. Well let me answer that question by again going back to some history and the studies that I've studied. Let's go back to San Francisco. What we see is that the tax base actually starts to grow fairly rapidly. When when when the tax rate is cut and more important for Proposition 13 in California, everybody understands in California that Prop 13 is kind of the electrified third rail of California politics. You don't touch it. So it's a it's a sort of sacred and viable promise to property owners that you won't expropriate some of the value of their property by taxing it aggressively and seeing its value diminished through tax capitalization. So it's a property rights issue as well as a cash flow issue but when people are reassured about their property rights that way and when their cash flows improve, they start coming back to the cities that they've been abandoning. They bring with them a lot of economic activity that is taxed. There's a lot of activity in the real estate market as people start to get in on the ground floor and start to buy up and rehabilitate this property. So San Francisco's record on on growth of the tax base was actually quite inspiring. Here's I they hadn't digitized when I did the research on San Francisco, they hadn't digitized any of the records. So this is these are numbers that I had to dig out by going through dusty old budget tomes from the 70s and 80s but this these are real inflation adjusted revenue numbers for San Francisco. In 1978 when Prop 13 kicked in the property tax rate in San Francisco was cut two-thirds from about three percent to one percent. They also rolled back the assessments to 1975 levels because the inflationary 70s had priced a lot of elderly people out of their homes. So you had a real huge hit to the to the property tax receipts portion of San Francisco's budget. So that went down a lot and the thing is it started getting offset almost immediately by increased transfer and recordation taxes, new investments started to flood in, you know, hotel and other kinds of sales taxes started to go up. San Francisco had a little bit of a wage tax job started coming back. San Francisco's belt tightening lasted only three years. By the fourth year San Francisco's real revenue was actually greater than by 66 percent, greater than it had been before Prop 13. And San Francisco was rolling in dough for most of the next several decades and as its population continued to to climb, everything got better in San Francisco, more more fiscal resources to produce better schools, lower crime, nothing else changed. You know, you didn't have to do some radical school reform or anything else to attract people back. Once the property rights were secure, once it made sense to start investing in San Francisco, people did and they started coming back. Now, here's the thing that we can do better than than San Francisco or our other cities, all of the West Coast cities, by the way, that we considered being prosperous super star cities, all of the states, by the way, have property tax caps that were imposed at the state level. Massachusetts and Boston have property tax limitations. This is no coincidence. But we can do it better than California, for example, did it, or other tax capping states because what we can do is have a transition. San Francisco made no plans whatsoever for this tax cut. So they were surprised by it and they had three years of belt tightening. But we can have a transition period if we want. I think I call this strategy the cash on delivery strategy. One of my former students described it nicely. He said, we can build a financial bridge before we have to cross the river. If you want to do tax reform in a high tax jurisdiction, here's what you do. You cap the property tax rate at a competitive level as soon as you can. But you don't deliver it immediately. You don't deliver it as soon as you can. You cap it today and you promise a delivery date at some future date certain. The plan that I'm advocating in my hometown of Baltimore will involve a passage of one or two reassessment cycles. We reassess property every three years up here. I guess you do it every five years in Columbia. But over the course of that one or two assessment cycles transition, what will happen is people will come back. New investment will occur. The tax base will start to grow. People will start to get in on the ground floor. And so all kinds of revenue sources will start to grow above their trend level. And what you have to do is you have to exercise just a little fiscal discipline. You have to hold budget growth to some modest level. And this is a simulation that I did for my hometown of Baltimore. I haven't delved into the Columbia budget in the depth that I need to do something for Columbia yet. But this line describes how expenditures can continue to grow. But when you tax cut a future date certain, in the short run, the tax base is going to start to grow immediately as people start to reinvest, as property values start to rise, as people move back to the city and pay things like sales taxes and other entertainment taxes and so forth to increase city revenues. What you do is you bank that extra revenue in an escrow fund. And you build up an escrow fund over this transition period. That's this little area that I'm pointing to here. And then when the tax cut arrives, you spend from the escrow fund. That's the cash on delivery fund. You have built the financial bridge before you have to cross the river. And you can calibrate the transition period to have suitable length that you will have enough in the escrow fund to pay for the tax cut when it arrives and accommodate the diminished receipts from the lower tax rate that you embed in the city charter or the state constitution or whatever the jurisdiction that you're using this cash on delivery plan to reform. So you can do it in three steps. And you don't have to cut spending on the schools. You don't have to cut spending on infrastructure or street maintenance or things like that. You can maintain modest growth in spending while you're building the escrow fund. And then when the tax cut is delivered, no pain. San Francisco had three years of pain, but in the fourth year, they were rolling in dough and the then mayor of the city, Diane Feinstein, was running around the country during a period of macroeconomic recession everywhere else. She was talking about how fiscally responsible they had been in San Francisco and now the city was in recovery. So we've learned a little from history in terms of how investors respond to competitive tax environments. And like I say, it's good, it's immediate, and it's long lasting. So that's all I have to say. I hope I haven't talked way more than my 15 minutes. I guess I would just sum up and compliment Dr. Gooden-Logson on her report. It articulates the problem very well. It's a necessity that we solve this problem. And even though there's other work to be done at the state level, it shouldn't keep us from doing the work at the city level. This local competitiveness issue is a necessary condition for the city to thrive, but the good news is it can be done without doing terrible violence to the city budget. And it can really enable the citizens of Columbia to flourish in a way that they're not able to do right now given the investment environment and the tax environment in the city. That's all I have to say. Thank you very much for your attention. Thank you, Dr. Walgreens. Very interesting. We now move to Dr. Jim London. Jim was going to represent the University of South Carolina and Clemson in his resume. So I will be glad to say that he has his BS in Business Economics from the University of South Carolina. He's got his Maths in Economics from the University of South Carolina and a PhD in Applied Economics from Clemson University. He has been the Director of City and Regional Planning Program for Clemson, Associate Dean for Research and Graduate Studies of the College of Architecture, Arts and Humanities at Clemson, and he is President of London and Associate Consultant. The most intriguing part of his resume is on the back page where he opened Chubby Fish Restaurant in Charleston, South Carolina, June 2018. And Jim, I hope it has survived the pandemic. I want to come down and eat with you. And it was named one of the top 50 new restaurants in Bon Appetit in September of 2019. Dr. London, we'd have you with us. Thank you, Howard. It's good to be here. Yes, the restaurant is doing well. We spent a fair amount of time with it, worrying with the pandemic, but the restaurant survived. The pandemic is doing quite well now. Started doing special events while they were closed down and continued doing that as well as the restaurant has a line out the door every night. And right now is starting work on expanding into the building next door. So we're pleased with that. But anyhow, it's good to be here. Thank you for having me. I was not sure what the format was. I thought we were just going to do a panel presentation, but I don't have my thoughts laid out as well as Dr. Walters did. Going through the Akita's report, I agree that they did a good job of laying out the issues. A couple of things that jumped out off the page right off the bat was the comparison of tax rates in Columbia, Charleston and Greenville. If you look at city tax rates, Columbia is not very much different from Charleston or Greenville. 93.8 versus 86.6 in Charleston or 85.3 in Greenville. The big difference is the county as well as the school board tax rates. So that's obviously an issue where the city is hemmed in a little bit by what's going on around it. And that certainly has to be worked around. In terms of the four possible causes as I started to read through the document, in the back of my mind, just going through, but this, this and this, and basically the four things that they laid out were the things that were bouncing around back in my head. Tax exempt property. Columbia does have tax exempt property. And that tax exempt property happens to be right in the heart of the city. It's state government. It's the University of South Carolina. That's prime real estate. And if you look at the comparison of Columbia with some other cities listed, there's a higher percentage of tax exempt property in Columbia than there is in Washington DC, which is rather striking. So, you know, obviously that's an issue. And I'll come back and talk about that a little bit more in a bit. Lower property valuations here. You know, that's an issue when you compare it with with pure cities. The pure cities you're comparing it to in Charleston and Greenville are two cities that are doing fairly well. I mean, if you look at medium-sized cities around the country, those are a couple of cities that are doing well. So, it's tough competition to compete with there. When you start looking at other cities around the state and region, the comparison is not quite as sharp as that. Obviously Act 388 has affected Columbia and other municipalities and counties in the state. And that's something that certainly comes into play. And the early appraisal in 2014 exacerbated the situation. When you look at revenues per capita that shows up page 19 of this report, revenues per capita in Columbia versus Charleston and Greenville decidedly smaller in Columbia than the two other cities. So, that creates some issues. Obviously, with property taxes an issue, you want to be looking at other alternatives, accommodation taxes. I'm glad to see that the Columbia, the accommodation tax is with the city and not the county. A number of counties collect the accommodation taxes. So, I hope that that is working out. If there's any opportunity to push that up, Howard, you would know better than I. With the visitation into Columbia, max out what you have there. You want the non-residents to share some of the burden provided. It's like the state of Florida and their toll roads. They're going to hit the visitors to support their highway system. Let me see. What else? Millage rates for the city of Columbia versus Charleston and Greenville. Not a lot of difference here. 93.8 in Columbia, 86.6 and 85.3 in the other two. So, at the city level, there's not a lot of difference. At the county and school board level, decided differences there. And the issue of school district one and school district two that's discussed in some detail here is obviously an issue to deal with. School district one has more commercial property. But school district two has the owner-occupied property that has been bumped down with act 388. But yet that's where the number of students has increased decidedly. In terms of solutions, the point brought up about know about the assessment ratio. I'm not sure that decreasing the assessment ratio to 5% from 6% for commercial property does a lot. You can work with your millage rates on that. I'm not sure that unilaterally, that's something for the city of Columbia to go that route versus other entities. Yes, certainly to Multicounty Business Park and expanding the economic base. I do have something if I can share screen this table. Share screen first. Okay, let me see. I'm having trouble pulling that up. Let me explain what I did. I compared, I did an economic comparison between Columbia, Charleston, Greenville, Lexington, Irmo, Rock Hill, Spartanburg in the state. In terms of per capita income, Columbia is about 75% of per capita income of Charleston and Greenville. It is compared to Raleigh, Charlotte, and Atlanta as well. What we see, I'm wondering, is there a way that, how can we pull this thing up? You want to email it to me? Was that easy for you to do? Just email it to Erica Hammond, if you do require for one of the emails. Let me do that. Thank you. Okay. I just sent that to you, Erica, and maybe once it gets to you by Pony Express, we can pull it up. I'll skip over that and talk about a couple of other things in the meantime. There you go. Okay. Thank you. Okay. There we go. If we look at, okay, I'm sorry. If we look at Columbia in comparison to pure cities Charleston and Greenville, as well as some other cities close by or elsewhere in the state, we see that on a per capita and a median household income, Columbia is lagging Charleston and Greenville, as well as the next door cities in towns of Lexington and Irmo. Poverty levels somewhat higher. If we look at others, Rockhill and Spartanburg as well, if we compare with Raleigh and Charlotte, it's difficult to work through, we see that similar sorts of things. If we look at housing, can you scroll down? Yeah, that's it. That's what we need. If we look at housing base, median owner-occupied housing values, Columbia, they're a little bit less in Charleston and Greenville, comparable to Lexington, a little higher than Irmo. If we look at Raleigh, state capital of North Carolina and Charlotte, we see that they're a little bit higher still and Atlanta as well. Rent levels, not as much variation there, but what we see is in terms of values, the values are a little bit lower and the income levels are a little bit lower as well in terms of supporting services. Okay, that's all we need to do on that. Okay, thank you. So obviously, in addition to dealing with the tax issue, making Columbia competitive is obviously important in terms of property taxes or out of balance, but making things competitive. The economic base includes state government, the University of South Carolina at one time for Jackson was a larger contributor, but manufacturing is not a particularly important part of the economic base in Columbia relative to some other areas. But how does the city with a major university tap into entrepreneurship innovation? One of the striking numbers that comes out is the percentage of individuals in the 25 to 54 year age cohorts, where Columbia is decidedly low compared with pier cities within the region. And that's unfortunate. It suggests that Columbia is not captioned enough of those university graduates. So how do you do that? How do you become competitive? The VISTA was a major effort to renovate the downtown area and to provide that environment. Continuing to develop capabilities there are important. How do you keep those young, talented individuals in the city? How do you enhance your coolness factor as Bruce Shandel as referred to it as being that causes those young, bright individuals to come or either stay or come to the city so that you can stimulate that as a base? At some point in time in the future, perhaps with sea level rise, Columbia will once again be an oceanfront community, but we're going to have to wait a few years on that yet. Collaboration with the county and the school boards is obviously important. The lion's share of the local property taxes are coming from the county and the school boards. Taxes and properties, that is an issue. A number of years ago, if you can see this thing here, back in the middle 80s, Joe Riley in Charleston put the squeeze on the medical university in the College of Charleston to get them to make some payments in lieu of taxes. I was asked by the medical university to do an impact study for the medical university to show what impact it had on the community to turn back the city. In the end, the medical university did provide some enhanced indigent care services for the city, which was a major benefit to the city. So with the amount of tax exempt properties, particularly the University of South Carolina, there, Columbia College, Trident Tech, anything the city can do to work with those entities to help support some programs to do perhaps some level of service look at the services provided for university students that happen to live in the community. And I suspect at the University of South Carolina, it's the same as it is at Clemson and other universities around the country where the universities are not building dormitories. The students are living out in the community. And so they're going to the entertainment district in five points and other places that the city provides services for. So certainly that is something to look at. Petitioning the General Assembly for some reasonable allowances in terms of caps on local property taxes certainly is something to be pursued. Howard, you have a much better understanding than I do as to what's going on there. I'm sure the municipal association, the county association are on top of that and doing what can be done to try to bring some reason in terms of those local property caps. But anyhow, those are my thoughts, observations. Be happy to talk a little bit more as we get into a general discussion. Thank you. Thank you, Jim. Good presentation. Our third presenter is Dr. Holly Obrick and she's an alumni distinguished professor, American economics at Clemson University. She holds the BA, MA and PhD degrees in economics from the University of Connecticut and a master of theological studies degree from Emory University. Her field of specialization is state and local public finance. She is the author of 16 books and numerous reports and has worked as a policy analyst at all levels from municipal municipalities and school boards to the federal government and the World Bank. She was a senior fellow at the strong Thurman Institute from 1984 until 2017 when the Institute was closed. Pleasure to have Dr. Obrick with us. Holly, unmute. Trying. There, thank you. There's some advantages and disadvantages in being the third person on the panel. You can either reaffirm, argue, or at least support and I want to just begin with Jim. I agree that the biggest problem facing Columbia is Richland County and the school districts who have collected the lion's share of the taxes and I'm not sure what they can do about that, but it's certainly something worth pursuing. As far as other resources, the accommodations tax really does not help because there's such tight constraints about how you can use it. There's a little relief from the sales tax, but again a lot of that's dedicated to other purposes. Fees and charges, if you run them up too high, it's burdensome on low-income fees and it's just as effective in driving away prospective business as an increase in the property tax. I don't know about alternative revenue source. I think Columbia suffers from what I call capital city syndrome and I was really excited that you had the figure that said that Columbia actually has a higher percentage of exempt property than Washington DC, which is the perfect example of something that gets constrained by Congress. That would not happen with our state legislature and also it has so much exempt property that it's hard to property tax revenue. It also has the advantage of a capital city. It has an attraction. Charleston has the beach, Greenville has the mountains. We have the source of power, which is the General Assembly and that's an attraction and it's not only an attraction to people who work for them. It's an attraction for all of those entities, all of those statewide organizations that need to have their headquarters in Columbia so they can lobby the legislature and also it's complicated by the fact that it's right at the geographic center. So while it doesn't have the advantages of beach and climate and mountains and things like that, it has the advantage of being convenient to the people that you need to talk to and the network that you need to be a part of and so it might be able to command a small premium over a comparable house in another city for that reason. The interaction between the tax base, the tax rate and the third member of the equation, public services is not a simple one. And if you cut property tax rates but then services decline, garbage doesn't get picked up as often, the downed trees don't get cleared off as fast, all of the things that people depend on the city to do, there's going to be complaints about that and that's going to reduce property values as well. So the three are interactive and the big elephant in the room is home rule. I'm sorry, as Howard knows I'm somewhat obsessed about the subject of home rule. I don't get anywhere with it because you go to the legislature and say hey you have all this power how about handing some of back to cities and counties and school boards and they say thank you for sharing and go on doing that thing but that is really the problem and I suspect that what happened in San Francisco or in Baltimore was not as much impacted by states telling exactly how much you can raise rates, how do you have to spend your money, the amount of legislative control over city, county and school budgets is staggering. So I think a large part of the problem lies with the three different entities tapping the same property tax base without coordination certainly, but a bigger part of the problem is all of all of those things in Columbia that well I think they go on in Columbia that we hopefully will be talking about more when we delve into the Lincoln Institute report because it really does lie at the state level and the two sources of the millage disadvantage in Columbia. One is schools and the other is the state government and the associated entities that depend on the city for services. That is Columbia's industry, state government, I mean hotels, motels, restaurants, everything all of those other services people patronize them because they come to Columbia to do business with state government. So that's its industry and it's unfortunately unlike an electric utility, unlike a manufacturing plant, it doesn't generate any tax revenue. I know that in the Lincoln report they put a lot of emphasis on the issue of payments and taxes and we're not the only state that does not do that. Now I got my education in state and local public finance in the little town of Stores, Connecticut and I discovered that there was a pilot for schools because in Connecticut they didn't have a state income tax they had horrendous property taxes and little towns 90% of the budget would be for schools. Well in Stores, Connecticut, this little one-horse town that had state university and our public services consisted of a part-time constable and snow removal and zoning restrictions that made sure that your well didn't affect your that your neighbor's septic tank did not affect the performance of your well, things like that. But schools were actually fairly well supported because they recognized the impact of the university on the schools meaning people living on campus or people working on campus that were not paying taxes that its industry was the university and so the state did make payment in lieu of taxes for its impact on the schools and the federal government does that as well but it's not an idea that has gained a lot of traction in South Carolina. So again we keep going back to the state as the source of a lot of our problems in terms of the kinds of constraints that they impose on city governments. And I'd just like to mention some of the ones that have really I think impacted Colombia. The assessment cap is certainly a huge problem. It's an equity issue as well as an efficiency issue prevents a normal increase in property tax with inflation with growth and so forth. Things like the long delays between when a property is finished and when it throws up on the textbooks that hurts anything that's growing. The residential thing it's an issue created by state but it particularly impacts a city like Colombia which has a high proportion of lower income families and it affects affordable housing. If I was an investor why would I invest in affordable housing when I can make a much higher return on investing in big mansions. And it's rental property so it's paying a tax it's paying property taxes three or four high times as high as I would pay on my comparable owner-occupied property. So excuse me let me get rid of this. Okay so I think that disadvantageous cities as Jim pointed out that have a lower income and higher property rate in terms of being able to attract necessary workers in terms of them having to move out into the county and bring some of these urban problems to the county which isn't equipped to deal with them. I mean there's a whole lot of interactive things that flow from decisions made in the legislature that are not always well thought out in terms of their consequences. Richland I suspect I'd have to go back and look at the data that we did because we did a whole lot of work over the years on the impact of Act 388. I think Richland probably is one of the counties that did not particularly benefit from Act 388 in terms of the amount of revenue they received from the sales tax as opposed to the amount of revenue that they lost through the property tax. A lot of the disadvantages of the state do not necessarily impact cities as much as they do counties in terms of these most industry realistically is not located within city limits. Most industry chooses where the land is the larger plots of land and it's they don't depend on as many city services they dispose of their own waste for large parts. So I would say that Richland County is impacted by by the high property taxes on industry that we call that Daphne Kenden in her report called Detention Tude and if you know if we can resolve that problem at the state level if we could make business taxation more efficient then Richland County might be able to lower its property taxes and schools might also be able to have lower property taxes and that would benefit the city of Columbia probably more than anything that the city could do on its own or independently. I think I think the five-year assessment thing is a real issue it's particularly an issue in the areas that are growing and the demand for services increases at a more rapid pace than the ability to pay for them through property taxes and given the limitations on other revenue sources the accommodations tax the sales tax fees and charges that's pretty much what cities have access to it's really hard for them to maintain the level of services and they've they've had a lot of pushback on the use of impact fees on developers again that's that's a revenue source but it's not a revenue source that helps you fund existing services it just helps you find increasing costs for infrastructure and special services so I there's not a lot of tools available to cities in a state where all of the decisions that are really important about revenues are made in Columbia if they could ease up a little bit on the restrictions on mill rates that would be great if they could use some of the education finance reform that's been talked about in fact I did a presentation and it turned out that what I was proposing which we had developed working with the state department of education in 2007 and 2008 and I think Howard you may have been a part of that process uh and yeah newer the revenue fiscal affairs is proposing something fairly similar which is ruling it all up guaranteeing a certain amount per student this is how much you you can raise at a some uniform statewide rate on your own this is how much you get in the way of straight grants and we fill it up and it would without repealing Act 388 reverse some of the distributional harm that has resulted from it so I appreciate Dr. Walsh's optimism I think that certainly uh lower taxes can have an impact but again when you decide to locate in Columbia rather than Charleston the price of the house is certainly a consideration and the price of the house does reflect the capitalization of the tax way but it also reflects the fact that I want to be on the beach or I like the culture in Charleston or I need to be near the state government and sometimes those or I there's some other particular services available only in a capital city so it's the whole package and it would be really interesting to know why people who are flexible about their location would choose one over the other uh and if that and that may have changed in an era when people are more likely to tell it can you okay so we're doing right now meet by a zoom it may not be quite as important but I think anybody who's lobbied the legislature and I know that's true not only of Howard but other people on this panel there's nothing quite like a face-to-face encounter uh compared to uh and a one-on-one encounter and it's very hard to do that from a distance so I think Columbia has some real advantages and yes Jim they may eventually become a beachfront city but I don't think we're going to see that in our lifetime it just seems to be coming a little faster than we thought it was going to uh but I think he has some advantages that enable it to be competitive despite the rate and I think really there needs to be some dialogue between the school district and the city and the county about the role of their shared primary financial resource which is the property tax and one last thing I have to say this for Howard they they kind of stuff messing with age subdivisions that's okay state hopefully we got that solved did you okay there's a compromise and this year they did as well okay okay because it wasn't for quite a while I did I'm glad to know that they they have seen the error of their ways okay that's really all I had at this point I have a lot of thoughts about the Lincoln Institute land property but land policy report which I think is very interesting uh and and I think deserves a careful read by everybody but as far as for now I think that's pretty much what I have to say thank you thank you Holly and all Dr. Walters and Dr. London and Dr. Obrick all three of you thank you uh for those presentations now I want to ask my colleagues on the council to take a minute or two and give us a reaction to make you want to start off on that sure first I want to thank all of you for just great work great insights I think there's a lot of information that you've given us as well as Dr. Galatson to to dig into and I think with a lot of studies what it does sometimes it doesn't give us answers but it gives us a lot more questions and I've got a lot of questions and I really Dr. Obrick I want to lift up what you said regarding you know a dialogue between the other taxing entities because I do feel like I'm far too often we all operate independently but we have a joint constituency and we are joint taxes and we've got to bring the other parties to the table um let me start with Dr. Walters you well really all of you could react to this but Dr. Walters I like that you talked about equity and understanding how if we address the tax issue it has to be such that it is equitable and everybody benefits but you also in your chart you talked about the high level of poverty that we have in the city of Columbia and we do we have you know 21% poverty rate as opposed to the other cities that we're talking about and then when you look at again going back to the school districts and the the children that they serve they have a lot of children who are living in poverty also I know Richmond one particularly has the highest level of special needs um and education children and so I just kind of wanted to know from from your your standpoint especially Dr. Walters you talked about other cities and I know Baltimore um has similar challenges with high poverty and and things like that what are some of the thoughts that you have regarding being able to address the tax issue but not taking necessary resources away from education and children that we serve well thank you um I don't want to get too far in the weeds here but I see the the tax issue as inextricably linked to the poverty issue and the opportunity issue and ultimately to the school quality issue because it's a it's a fiscal capacity issue um it I as I've researched this I sort of felt like somebody who has been buried in an avalanche and started to you know pick through it and it's like what was the what was the boulder or you know snow bank that started to to come down the mountain to start all this and usually it's the non-competitive investment environment that sent the capital fleeing to better jurisdictions in terms of you know tax friendliness and then people followed so I think of the property tax as a capital a tax on capital attacks on investment and I think of capital as tools and I look at the tools that are fleeing and I just think this is this is the source of those lower incomes that Jim was pointing to and the poverty rates when when you chase capital away it reduces opportunities for people and eventually the the people who stay are less productive and therefore earn less because they have a restricted set of opportunities and the opportunities that are available to them are have have lower productivity than in a tool rich environment and and that starts a cycle where other kinds of social indicators you know in this avalanche you know things like uh poverty and family breakup and and all the stressors the trauma of of you know that are imposed on families when when incomes uh income growth is lower so that's why I think this is such a crucial issue it's a it's a necessary condition for a viable economy to start with a a an inviting environment for capital investment um you know dr albrick pointed out that we have we have a lot of natural advantages and that's that's a great point but we've had those natural advantages for as long as there's been a state capital here and as long as there's been a university here but if you look at the census numbers the choices that people are making are they're going to other environments and and I would argue that they're going to those other environments because this environment is a little less receptive at the margin to that capital investment that investment in tools that will give people the leg up the the job opportunities and so forth and and the and the status uh that that will lead to wealth creation that that is part of the american dream and and you know this is this is where it starts you've got to you've got to create that economic fundamental uh that that investment climate that is competitive across the board and you know when we don't change the the other things that have been determining choices you know we see that nevertheless when we change this factor this is what happened in california this is what happened in nasaachusetts this is what happened in other states that that adopted a more competitive property tax approach tools capital investment started to flood in and and people prospered and and other people were retracted to those environments and then the fiscal capacity of the locality improved because you know when you've got more jobs and higher incomes you you can you can fund better schools and you can fund you know more affordable housing programs and so forth so this is where it starts this is this this gets the ball rolling so to speak and and like i say you can do it without doing any violence to the existing programs what you're hoping for is that as the tax base expands over the years you have more fiscal capacity to expand those services and contribute to an attractive choice set for people so that i mean if you look at the 25 population increases to some other cities in in south carolina over this last decade and what was it five percent in in columbia we're we're we're seeing that the attractiveness of the state capital or other other kinds of things that that's that's a constant and and what we need to change here to attract more investment is that you know the green eyeshade sharp pencil work that people do before they they plunk down money to buy that first house or invest in that business and so i'm you know i agree with dr elbrich the really big challenge is is going to be that lincoln institute report on on the on the state tax policy but i'm just shocked at at the treatment of renters vis-a-vis homeowners in terms of the property tax that is an extraordinarily regressive tax policy and it's exacerbated by the fact that that local local rates in in columbia might not be competitive that's got to be changed i don't you know i defer to the to the political experts here in terms of what the chances are that anything will happen at the state level to change that but all of this is is of a piece and and like i say you start with making the environment receptive to capital investment and lots of other good things start to happen after that dr walters it's not only renters it's the business owners both all of them in the six percent so they're in the same boat that's leaking that the renters daniel will want to give you opportunity to speak yes thank you um thank you all three of you dr walters have all brought dr london for taking the time um it's um it's probably the first study that i've seen being on council that really gives us the true data and really gives us the opportunity to address the issue and i do believe that we're the largest city in the county and we're the state capital city and we ought to be the leader in this and yes we need to bring other folks to the table but we got to drive the train on this and it's very important i did want to comment on a couple things we talked several times that was brought up about the non-tax paying entities but when you take fort jackson out of the mix here in columbia because we don't provide them service like the university other we're really pretty comparable to charleston and greenville so act 388 as we know is across the city so we got to deal with those challenges that are before us and and you know the school if you look at the millage rates of school school district in the county are the highest there we'll have to deal with that we have to have a fine balance of that as well as as as we have those challenges to make sure because we need our cook you know we need our schools to be strong as well so you know for me i think you know the chances of changing act 388 are slim to none but we ought to go after the options that we have as a county and a city and a county and working together and you know we've seen industrial rates change in the state through act 90 i mean we go from six percent to five percent on the non-owner occupy that that makes us competitive so we need to be looking at that capping um and and doing some fiscal budgeting and creating that fiscal bridge that was discussed earlier these are the type of things that we need to be moving forward because we're not going to change act 388 and so we've got to be a leader here and i think we've got a great opportunity um and and taking some of the lincoln institute taking uh dr. good logs and study and really digging deep and working together because we ought to be the number one city in south carolina we had the opportunity we have a great quality of life but we're just we're competing against the surrounding counties as you saw in there we're competing across the river with other cities so you know we want to have jobs with opportunity we want to have growth that positive we want more home ownership i mean 46 percent of our our homes are owned by owners that's it you know we can't subsidize our way out of it so we got to fix the tax structure and that's the only way to do it is to fix the overall tax structure and get investment in here and with jobs and creation so that we're creating more wealth for more people um so i'm i really appreciate y'all the time all three of you have put in it's not an easy issue but we actually have a toolbox now to use in real data to try to work forward forward thank you Daniel um we've talked a lot this afternoon from my point of view the problems the solutions to the problem come from two different areas one of them is dealing with the state legislature uh modifying act 388 or using act 98 that Daniel talked about i think the easiest thing to modify might be the 15 cap on uh praise value that we are losing millions of dollars a year on the 15 cap during a reassessment year that it even made a student housing complex one of our top taxpayers because some of the traditional taxpayers in the city were capped off and weren't paying nearly as much as they should have had the cap not been there i think that is something that if we work with other organizations and other cities has a possibility of sure when a summer leaves the other the other pot that i would say that we need to bucket that we need to be working on is the school tax uh the city of columbia 16 percent of the tax the property taxes in richmond county 16 percent so 84 percent of the taxes belong to the county and the school district and we need to have a meeting with all three groups the city of the county and the school district probably school districts because we do have that there's some we need to have both school districts at the table but we've got to figure out how to share the the scarce resource of property taxes to make sure all of our entities of municipal government school and county are getting a share of the the limited resource of property taxes in richmond county the lincoln study is something that we certainly don't have time to get into this afternoon but i think it's something we need to start moving towards soon after this election and we can reconstitute this tax study committee any any of the two council members have any final words to make them just just to your point about having that conversation you know that that's the one thing um you know when we first got dr glotzen's study you know i shared it with uh the members of the superintendents from richmond one and two and their finance directors also shared it with uh richmond county tax assessor um paul brawley none of them had seen the study and i just think that if we're going to actually solve the issue we've got to bring everybody together and it has to be more of a working group um i think that it might be helpful i know miss miss hamond does a wonderful job with our minutes and everything but it might be helpful to have the comments by um the three economists transcribe and that we start at least with uh information sharing uh with the other entities and then i agree i think at the appropriate time we need to start having some work sessions to work through this i don't think we need to you know give up on addressing it at the state level because i think that you know that is where the biggest um impact is going to be made um but i think locally to the point you know the councilman recommend about you know driving the train yes we the city could be the leader but when we're only 16 percent i mean we we got to have those other folks in in the you know in the driver's seat with us and i think having an opportunity to reach out to them give them the right data in a non and i i guess i'll say it honestly you know i think the conversations have have made everybody defensive about their portion of the taxes and that nobody's going to come to the table willing to work if everybody feels defensive about it so i think we need to present the data make sure everybody feels part of it and then um have the conversations about some real solutions thank you during the meeting i did have a text message from one of the school districts and they want to have the video sent with them so they are looking at us today and i think they do want to talk so we will get together with them again i want to thank dr walters and dr london and dr olbrick for your time this afternoon and your knowledge of the subject we are starting off a long journey but it's something that we need to do we've got the data and as they say all the time on the tv we've got a file of the data they're talking about health and i'm talking about economics though but thank you for your time today and we wish you well and jim i'm coming to eat dinner with you soon than in charlton thank you thank you all so much for your time thank you very much enjoy it thank you and i will call the meeting adjourned thank you