 The mayor has started a great tradition this year starting meetings on time, so I'd like to preserve that that tradition Let me just take a minute and welcome everybody I Think today could begin Frankly one of the most important discussions That we've ever had in the city of Columbia as far as is growing our city creating opportunities for our young people Attracting new things to do and just this and frankly and and even Raising incomes and from all across in every level. I think I think what we'll see today is a perfect example of how a rising tide can lift all boats and We're fortunate to have Dr. Stephen Walters dr. Rebecca Gunn-Logston and Attorney Charlie Terini here with us today to to advise us on everything and Mr. Mayor you normally run these things. I do we need to call the roll for just posterity purposes Miss Erica, or you can use do we need to do that or can you just visually do that? Good morning Chairman Taylor, I'm here. Mayor Rickam in here. Mr. McDowell. Yes, Mr. Canty. Mr. Taylor. Yeah, mr. Bennett Here, this is Hughes Thank you and we're welcoming James Bennett who is the president of the Midlands Business Leadership Group and is on our committee who is in with us remotely today and Scotty Smith Hughes Had a previous commitment. She was unable to be with us today and she'll but she will be here for the rest of the committee meetings You know, let me just start by saying having built a business in Columbia and And and develop things throughout here over over time when we look at the things the items that that are Detriments to our economic growth here the number one thing you constantly hear about or the property tax rates On 6% assessed property But what the where the misconception has been first too long is that that's 6% is just on businesses And frankly it's on rental homes and apartment buildings, you know anything that's not an owner occupied home Or planted in corn is assessed at 6% in South Carolina and and frankly as As growing our economy is important delivering affordable Affordable housing certainly is today too So basically on that note If any of the other committee members have any comments or questions to ask before we get started I would probably then call on On Dr. Stephen Walters to come up and begin our presentation. Thank you, Joe Thanks to everyone for having me Timed out I think though My my plan here is to sort of tip things off and introduce Introduce three topics and then I'll I'll I'll hand off to dr. Gunn-Lexen and Charlie Terenny and and they'll give some details, but the three things I want to talk about our Whether we have a problem or not what what's really the problem and And What if we don't recognize the problem and and therefore don't do anything about it? What will happen then and then I will introduce the topic of what we should do about it. I will try to be brief. I Appreciate everyone being here as a holiday weekend of important holiday approaches and here you are listening to tax policy discussed And I'm an economist. I'm reminded of the old story from French president Charles de Gaulle when he first took office He got his first economic briefing all afternoon and he came out and and the press asked him Mr. President, what have you learned today? And he said I've learned that I will never ever spend three hours in the company of economists ever again I won't spend three hours. I won't hopefully We'll we'll go out of here in an hour and we'll we'll feel better about Columbia and its future because I think we have a very upbeat message to give today Even though we have a problem. So let's let's let's get to the problem So this is this is my tale of two taxpayers In the left hand side of the slide. I have The taxpayer who probably thinks we don't have a problem. So this is a hypothetical a dr. Gunn-Lagson Develop the numbers. I'm free riding off of her her hard work on a lot of what I will say today This is for a hypothetical $250,000 property, but it's owner occupied housing So if you do that if you crunch the numbers and you look at the tax liability there The annual tax bill on that property if you're in Richmond school district one Hypothetically is one thousand eight hundred and seventy three dollars and that's that's below one percent of market value That's that's very good. That's less than the state average. That's less than the national average So everybody who's in that situation Will probably think that Columbia really doesn't have a property tax problem At least from a personal perspective that that's going to be a Political issue that that's going to get discussed But I'm going to talk today about why it should be an economic worry for even the people who think they don't have a problem on the right-hand panel is the The crux of the problem if you're If you're an owner of that two hundred fifty thousand dollar property that is A rental dwelling an apartment building or a business Then then you pay Seven thousand two hundred eighty eight dollars in your annual tax bill. That's almost three percent of market value per year That's just about four times The amount that the residential property owner will pay and it's it's more than twice the National average property tax rate That's a problem because it's going to fuel a disinvestment crisis that's a problem because it's going to fuel flight of investment capital and I've been studying cities for roughly 40 plus years and I Appreciate the councilman Taylor Distributing the book that I've written recently about it boom towns how to restore the urban American dream The one conclusion that I kept coming back to that I learned very slowly over those 40 years was investment Capital is the lifeblood of any urban economy that without a healthy Investment climate a city will wither away very very slowly. It'll be it'll be almost imperceptible at any point in time And so we'll mistake the nature of the problem if we're not careful But but that disinvestment crisis is crucial to everyone's destiny in the city. It's not just a business problem It's not just a landlord problem. It's an everybody problem So let's let's continue with with the specifics of this problem here in in Colombia I know it's common for people to say well This is part of this disparity this tremendous disparity between business and rental housing and owner occupied Residential is is Act 388, but everybody deals with Act 388 in the state of South Carolina and other jurisdictions are less Conducive to this investment problem this disinvestment crisis than than here other jurisdictions are experiencing greater flows of investment and Therefore greater prosperity and and job growth and income growth and and that's the the nature of this beast If if you're going to engage in kind of an aggressive tax policy At the local level what you're going to find is that that kicks off a Rearrangement of local economic activity that that induces people to look very closely at the at the at the map And say where is the investment climate more or less favorable to this particular investment? I've said on many occasions that aggressive tax policy is a little bit like trying to be Robin Hood and Redistribute and and and say well I'm just going to you know do God's work here by robbing from the rich and giving to the poor and so forth But what you find is it's pretty easy at the local level to avoid Sherwood Forest and avoid that Redistributive effort at the local level if you want to be Robin Hood at the federal level fine Very few people will say well I'm leaving the country because of that But if you do it at the local level what what they're going to say is I'm going to rearrange my investments And I'm going to I'm going to place my bets on places that are more friendly to my intimate to this investment and and that's what I think Columbia and Richland one and two and so forth have been experiencing over these years that table on the right-hand panel shows that the Significant discounts in your tax bill if you locate your investments in some of these other more more tax-friendly environments So that's that's the problem. We've we've got a disinvestment crisis going on here again It's a slow-motion problem, you know, it's not like a fire You know burning out of control that that's visible that you can see it on a daily basis So you have to you have to look over years and decades to see its consequences But its consequences are severe and that that's why I want to talk about what happens if we ignore it What happens if we do nothing? well The obvious manifestations will be reduced job opportunities reduced economic growth You'll also see it in the in the rental housing sector because of the peculiarities of this particular Law or Act 388 and so forth You won't see it necessarily if you're a renter because it's not itemized on your on your rent bill But there'll be a reduced supply of rental housing and therefore higher prices for rental housing and the buyers of the renters of that Of that housing will pay as as they're as part of their monthly rent check. They'll pay that confiscatory tax rate The as job opportunities wither There will be more poverty as the capital stock declines in the high-tax jurisdiction You know economists use these bloodless terms like capital stock and really what we're talking about tools I mean that's what capital is it's it's it's the tool of production and it's it's the tool that we use to Work more efficiently and more productively Things like restaurants and other things those are tools of our leisure time. We like to enjoy, you know productive Leisure hours where we enjoy ourselves and so forth when when the disinvestment crisis takes root and those tools start to flee and investment falls Elsewhere then we get poorer because we're less productive in our labor in our leisure So when we when we're less productive in our in our labor We we see our salaries fall and so forth and poverty results again slow motion We don't sometimes we don't blame the real perpetrator here for this but but that's that's the core of the problem That's what starts the avalanche You know and it grows in force over time the other thing is You know this this imbalance that those gross disparities in tax rates and the disinvestment crisis in the business and rental sector Just makes the place less fun. I mean it reduces the amenity level in the high-tax jurisdiction And and people will find that gee there there's a virtuous cycle that gets kicked off when when When those kinds of amenities are taxed in a in a more friendly fashion They tend to come more frequently and then the people who are in that residential housing thinks think that gee This is a good place to live and that increases their property values over time so The longer we We delay the the less Aggressive we are about taking action here The greater these problems will will develop The the other thing That's worth mentioning here aside from the amenity level is that the school quality issue That if you're paying for your schools Exclusively through business and rental tax receipts if the school operating Millage rates come exclusively from from them and they are fleeing then that's going to make it harder to have high quality schools And that's also going to spill over into the The quality of the of the life that you lead in that in that lightly taxed residential housing So so even if you you pay that 0.75 percent residential property tax and you think I don't have a problem I shouldn't have to worry about this. You should be worrying about this because it if The people that are paying those high millage rates and so worth are there the consequences of their investment decisions are going to affect you over time It's gonna it's not gonna be a short run visible Issue for you necessarily but it's gonna it's going it's going to hurt you in the long run And you have to be aware of it. The other problem here is something that I call the Detroit problem Detroit as you know went through bankruptcy a few years ago and you have to ask well, why did that happen? Well Detroit's an extreme example I'm not suggesting that Anything like that is likely here But what Detroit found was that as a result of investment flight and subsequent population flight It couldn't pay its fixed costs the cost of street maintenance and the cost of pensions for retired government employees And so those are all fixed and they're not going away But as tax payers flee you have fewer and fewer resources to pay those fixed costs And so you you you get into a vicious cycle where you start taxing the remaining taxpayers much more aggressively And then they go away and and and before you know it you've you've got a fiscal crisis on your hands So you want to avoid that as well? Okay, what do we do about this? But there's good news here This is fixable. This is this is a fixable problem And I'll shortly turn the stage over to dr. Gunn-Luxen and she can give some specifics about the plan That has been developed to address this problem That's the good news. We should be optimistic this this can be fixed And it can be fixed without doing terrible violence to To municipal budgets municipal spending service flows and so forth That's the good news the the other news. I don't know whether it's good or bad It's just a fact of life you got no choice about this If you if you want the city and the locality to prosper You've got to have a competitive tax environment The investment climate has to be favorable or this these long-term consequences Will will come to roost There's just no way to to avoid it It's tempting to think that it's it's safer to sort of do nothing or you know Sort of preserve the status quo Or maybe you know do a piecemeal approach with with narrowly focused Incentives for for investment and so where I I can testify I come from baltimore where we keep shrinking We've been shrinking for seven decades. We've been trying those narrowly focused incentives for a long time They're not enough. They're never enough and they're just not fair If you get some of the special incentives, you think you're okay But there are lots of people who don't have the political throw weight to get those incentives and they're they're left behind And and it's just not fair to them If they pay higher effective rates than somebody who just came along and and worked the system and then they've got a beef And I think it's a justifiable one. So to be fair and to be efficient. You just have to be competitive I'm going to skip this aside fairly quickly because I just want to show that it can be done So these these are these are the population numbers for four cities up until 1980 the post world war two era was it was it was an era of urban crisis most major cities, especially in the Northeast what was called came to be called the rust belt most of them were shrinking for the for the several decades after world war two And a lot of people thought it was inevitable It's not inevitable I could I could marshal a lot more cross sectional evidence You know on different cities over time and and and so forth I my favorite stories about san francisco and what happened, you know in in in the late 70s. I chose oakland here um Because you know that that seems to be a more realistic example for people But oakland was shrinking just like boston and cleveland and baltimore and san francisco and a lot of cities What happened in the two cities that started to grow? Well a competitive tax environment happened nothing else changed in this in that inflection point there nothing no great policies Eliminated any of the problems that were causing shrinking cities for those several decades the only thing that happened in those cities was A a significant new tax policy that leveled the playing field for everybody and gave everybody a favorable investment climate And those cities started to grow in the cities like my baltimore or cleveland or other cities that didn't do that They kept shrinking My city continues to shrink. It's tragic All right, so What do we do? The plan that we're going to unveil today involves Building a financial bridge before you have to cross the river A lot of those cities on the on the previous overhead that that adapted with a competitive tax climate had no warning These were state level tax limitation initiatives that voters wanted very very badly And they imposed them on the cities and the cities had no advanced planning time or transition period to adapt They just had to grow up and deal with it fast and they did Um My favorite example san francisco had to cut its budget for three years in a row But but the dynamic growth in the tax base that that the tax reform of prop 13 fueled san francisco is spending about 60 percent more By the fourth year after prop 13 as it had been before The dynamic growth in in the tax base and the budgets was significant But that transition period was was rather painful for those cities because they just they were given no advanced warning that this would happen They were given no time to to build this financial bridge. Well, we don't have to do that We can have a transition period during which you announce you announce your new tax policy as soon as you can And you make a credible commitment to a competitive tax policy And then you allow a transition period of a certain number of years during which you you have some budget discipline But you really don't have to cut the budget You can you can allow the budget to grow by a modest amount What you'll see is there's going to be some dynamic growth in the tax base almost immediately Investors like favorable tax climates and they want to get in on the ground floor So they will so that even as the rates start to fall in this gradual Transition the tax base will start to grow and and so some some of the surplus revenues You put in an escrow fund or a lock box to invoke Al Gore's terminology And and then you have some some of that escrow can be used each year to accommodate The tax cuts as they arrive. I'll leave it to dr. Gunn-Lexin to fill in some of the specifics, but Like I say it the good news is this can be done and it can be done in an orderly fashion so that so that The spending that that we all hold dear and the programs that we all hold dear don't have to be sacrificed in the effort So I'll just sum it up before I kick it off I mean this is this is the vicious cycle that that you get into if you chase capital away if you have a bad investment climate Everything else declines with it again, it's not just an issue for business It's not just an issue for landlords or or their tenants It's an issue for everybody if you care about a viable Vibrant city you've got to have a healthy economy. You can't have a healthy economy with a bad investment climate The the the data here are fairly graphic that for business and rental property the investment climate In in in columbia can be improved and can be improved substantially if you if you don't do it That that downward cycle is a clear and present danger But the good news is if you do it it can be transformative. I mean my favorite urban Analyst is the great jane jacob's And and you know she points out that but this is what cities are supposed to do They're supposed to be transformative. They're they're They don't lure the middle class. They create the middle class But they only do that if you've got a favorable investment climate in which to do it So so that's what i'm inviting everybody to do and with that i'll just Turn the stage over to dr. Gunn-Logson Well, thank you dr. Gunn-Logson before dr. Gunn-Logson comes up um I was remiss and not uh Not introducing you correctly and and all your academic successes He met dr. Gunn and dr. Wolters mentioned he wrote the book boom towns, which a lot of us have had a chance to read here He's the chief economist at the maryland public policy institute A fellow of the institute for applied economics global health and the study of business enterprise at john hopkins Well professor emeritus of economics at loyal university in maryland You've seen his Editorials and articles in the wall street journal the washington post investors business daily the national review They were very fortunate to have you have you come Come work with us on this on this project. I think it's even for columbia as we saw yesterday. We're a sports town very enthusiastically and He's also served as a consultant And uh with the baltimore oils in the chicago cubs Not the manager though, right And uh, like I say, he's a resident of baltimore. So again, thank you Thank you so much for joining us I also wanted to take a second and mention that What our mission is of this committee is to Is to take I think the previous committee did a very fine job of establishing the fact that High commercial six percent assessed rental and apartment property taxes are an issue here So this this this sessions model is not to Determine whether it's a problem or not But to to see what solutions are there And and I want to make it very clear We're only going to consider solutions That don't raise taxes or fees on any other group and uh And I think we're going to find that that's uh That's that's that can be done. Um Billy any questions of dr. Dr. Walters Daniel There he is. Dr. Walters, let me ask you a question We comparatively looked at the four municipalities cleveland bolston um The four municipalities that you did a comparative analysis Included in this report will there be concerns that will sort of Look at very forensically how this affects persons who are Say in columbia What's the human experience? well, I'm gonna Defer some of that question to dr. Gunn lux and she's gonna she's done the the initial study that i'm sure all of you Have seen by now about the the the comparative Impacts of a bad investment climate. She's done some of the Some of the local comparisons the um the effects on things like incomes. That's great. Um Job growth the growth of Your property values one of the great great ways that americans typically Start to develop wealth is with small businesses rental properties and and actually their own homes and and so in a in a more Viable investment environment in a in a better tax climate. It's just easier for everybody to build wealth And it's just easier for everybody to prosper and the the social Issues that the the other consequences that that you're Deeply concerned about Tend to follow from that healthy environment. I mean that's again. I didn't come to this tax issue Frankly quickly or willingly It just was like forensic work Tracing back. Okay. Well if i'm talking about poverty, what am I really? How do I find the root cause of that if i'm talking about crime? How do I find the root cause of that or school quality? How to and it all it was like the the commonality for a lot of the cities that i've studied those four were just sort of a quick off the top sample it it generally Traces back to this investment crisis disinvestment crisis and and um I've just never found a city that was healthy on social or economic grounds That had a bad investment climate relative to its neighbors If you know of one bring it to my attention I haven't found it in 40 years But that's and it's just hard for people You know to want to give up. Well, I want to talk about this social question First and I want to solve that problem first Then we can talk about frilly stuff like taxes And unfortunately that's that's putting the you know the cart before the horse. This this is the horse This is or more modern. This is the economic engine that drives Local conditions that affect so much of what else happens for people Mr. Chairman Thank you so much for that and I guess what i'm sort of leaning towards Is that whole issue of disinvestment? Within the geographic community geographic communities that find themselves in real critical situations Yeah, and how do we move beyond that? To see a journey of quote-unquote prosperity How do we create the kind of For lack of a better word generational wealth? Yeah And I guess the second part of that. I know i'm probably putting the cart before the The horse And the second part of this report, of course, we'll probably answer some of that but there he is A social line that I think That needs to be lifted up in such a way That it increases That we tear down the disinvestment piece And we understand that it's really about expansion Yes, does that does it yes? So we're gonna have a longer conversation probably either after this or maybe by Email or something i'm going to send you an article that I wrote about detroit And wealth creation so much of this happens at the small small individual entrepreneur level and it's Unfortunately involves a lot of arithmetic that I don't want to bore people with right right now About about how taxes affect that generational wealth Creation process but it's Again, i'm not saying we're we're detroit We're not approaching bankruptcy and population isn't fleeing columbia columbia's Fundamentally sound in a wonderful city every time I visit it but Sometimes these little test tubes like what detroit has done can teach us a lot and and I think it it gets directly at what you're What you're what you're talking about and I think Dr. Gunn-Lachson is going to have a few more details about some of these How do you how do you make that process? start Organically so that we we we create a situation where where that it opens up opportunities within this jurisdiction that right now are Endangered frankly Okay Yeah, let me say thank you for that. I mean Oh james Yes. Yes, mr. Chair Just one one other question for dr. Waters I guess it's been 10 plus years since I last been to baltimore But the one thing that kind of Stuck out to me in baltimore was I saw So many boarded up houses, which I assume was remer houses and again that was 10 15 years ago I was wondering from an investment property point of view Uh, did baltimore Get its arms around that situation Uh, and if so How did you do it and it wasn't a part of the tax plan but and and had that Situation been resolved today No, not at all We recently had a terrible tragedy where one of the one of the we have 15 000 abandoned properties in baltimore as as we speak here Three firefighters died recently fighting a fire in one of those abandoned properties another one. There was another fire somebody was injured This is an unbelievable problem when you think about what it must take For a property somebody to own a property And depreciate it to the extent that it's no longer habitable And then walk away from it and abandon it. That's that's a really really extremely hostile investment climate And and baltimore has not figured out That it needs to do something about that. This is one of the reasons i'm so happy to come here today Um baltimore has a fairly simple problem to solve but no will to solve it Columbia's problem as dr. Gunn-Lagson will soon explain is more complicated, but the will to solve it is obvious I mean You folks have jumped on this and said if there's something we can do to be better We want to do it fast and that's that's great Where I come from that's I I would I would love to have that That kind of Orientation but we don't and and and so we continue to suffer from it. It's a terrible tragedy It's not just leading to loss of life and flight It's leading to continued impoverishment and so we're then i'm working up there, but i'm i gotta tell you It's it's a much much bigger lift than than than it is down here and and that's thanks to you really Thank you. Thank you james. Anything else on any other I'm good james Well, thank you james. Um, let me just a couple of things I would just add before for for our next expert is You know one of the things that has intrigued me And why I think it warrants The reality of what happens when you do get competitive tax rates is When you look at our what what's been one of our biggest success stories in developments in columbia whether you like them or not is student housing And the key was they reduced the property taxes by 50 percent And we went from no student housing probably owned basically To it being the largest pair of property taxes in the city in five short years And I've always wondered if it worked that well for student housing What would it do for the small business community in our town if we could do the same thing? So I mean, I think we have some empirical evidence here that that reduction of taxes or property taxes Yep creates opportunities and I would say the second piece of that and we were fortunate to have Of two panel two of our committee members who are in the in the house business And and mr. Taylor and mr. Canny and you know, it's interesting as we talk about appearance throughout our town and and neighborhoods Wanted to become more attractive and things I think what we see in columbia for today is sometimes in many cases it takes Three or more months of rent to simply pay the property taxes And that basically eliminates Number one the profitability and the wealth creation But number two the ability for upkeep and to maintain these things to where they become very very attractive You know parts of the neighborhood, so I think that's a second a second thing and then And then I would remind everybody that uh, I heard the story not too long ago on the radio Uh with one of one of the podcasts of two elected officials that we're talking about Uh when they were little and worked for their uncle and father who were both attorneys and had to drive from columbia To the election and county courthouse 25 years ago and what they saw on each side of the road then compared to what they see today Uh, we we need to we need to keep that economy in columbia south carolina and put ourselves in the ability To compete for those and those investments Any other comments or questions will we Let me tell you our next expert dr. Gunn locks and what a delight it is to have you with us um She was the chief economist for the department of commerce MIT undergraduate and masters of mechanical engineering phd and economics from michigan Perhaps I think the smartest person that i've ever had the opportunity to work beside in the state of south carolina, so Um And you are going to give us a presentation on how we might Lower our property taxes to a competitive level without raising other taxes and fees. Yes, that is correct The floor is yours dr. Gunn lock. Okay. Well, thank you very much. That was very kind Thank you very much for having me here. It's truly an honor to be Um here and talking about such an important issue and it's really a privilege to go after Dr. Walters and uh, he explained the nature of our issue and how important it is to Our future and our long-term growth Unfortunately for you my presentation is really going to take a turn for the boring and i'm going to go through some calculations and some numbers Um, but you know, I think it's it's very important because I want us to walk through and understand how we can achieve This vision of self we a self reinforcing cycle of economic prosperity so Okay, so just if you'll indulge me. I just want to do a refresher on how we calculate Property tax here in south carolina. So first we take the taxable value of the property Which if I just bought a house for $250,000, that's the taxable value If I've owned it for a long time is probably going to be a lot less than the market value But we take that taxable value then we multiply it by an assessment rate now in south carolina The assessment rate is built in our constitution If you are an owner occupied property is four percent So four percent times two hundred fifty thousand we're assessed at ten thousand dollars If it's a rental property or commercial property or an apartment It's assessed at six percent. So it's that assessment rate is $15,000. So right right off the bat you see that that tax is going to be one point at least 1.5 times higher than an owner occupied property Now the next thing we do is we actually multiply it by the millage rate That's the actual tax rate that's set by the city and the county and the school and the school has two millage rates They have the operations millage rates. So that keeps the day to day running of the school And then the debt service millage rate. So if they float a bond to pay for capital improvements or build a new school That's what that millage rate is And then finally If your area has a local option sales tax Seventy one percent of that all the collections get refunded to property owners. So we subtract that out Okay, I know so let's um, show you an example So here, you know on the left hand side, you see the property tax formula the taxable value Times the assessment rate times the millage rate Minus the lost the the local option sales tax credit So for an owner occupied house say two hundred and fifty thousand dollars First times the assessment rate four percent. We have a ten thousand dollar assessed value Then next we add up all those millage rates. We add up our city millage rate of nine three eight Our our county millage rate of one two five seven Now you'll see for school ops. There's it's zero if you're an owner occupied Property you don't pay for school operations And then finally the school debt millage and I should say this is for richland district one, which is most most of the city limits Okay, so before that lost credit. We have two thousand eight hundred and thirty five dollars in taxes and now We subtract out the local option sales tax credit And there's a there's a factor for the county and a factor for the city so And you multiply it by the taxable value. So The the homeowner gets to save nine hundred and sixty three dollars. So it comes to one thousand eight hundred seventy two or seventy three dollars This is one of the lowest property tax rates in the nation Now the same house If I was going to rent it out Or if I had an apartment that was worth two hundred fifty thousand or I had a little storefront that was worth two hundred and fifty thousand dollars This is how we would calculate the exact same tax We have first the assessment rate is six percent. So it's one point five times higher Next you'll notice when we look at the millage rates, we're adding in School operations. So the house doesn't pay it but all the businesses do So you'll see once we And then we get to subtract out the lost credit, which is the exact same amount that the homeowner pays We have seven thousand two hundred and eighty seven or eighty eight dollars So this is one of the highest property tax rates in the nation And um, you can I mean, this is a great example. You said three or four months worth of Rent goes to pay to property taxes. If you think how much you could rent a two hundred and fifty thousand dollar Home for you see that you really do absorb almost, you know, one quarter to one third of your income In just that and the worst thing is that it discourages property owners from improving the property If the more depressed the value is the better Because as soon as you improve it you get reassessed and you have a higher Value taxable value and therefore a higher tax rate Now so again the key points that are coming out of all of this boring Calculation that I just took you through is number one In south carolina all these commercial apartments rentals second homes, they're all classified as all other real property And they're all assessed and at six percent, which is 1.5 times higher than an owner occupied housing Third if you're an owner occupied house, you're exempted from school operations You don't pay for the schools that your children go to all of the businesses carry that load And then fourth South carolina has one of the lowest tax rates for owner occupied properties and One of the highest for commercial and rental properties And and in fact in charleston in in south carolina charleston actually has the lowest commercial and rental tax burden in our state And and i want you to see how we compare with other peer cities So charleston significantly lower than us greenville also Or lexington actually pretty on par with us For columbia you see i showed you richland school district one But you can also see richland school district two which is Even more significantly higher than school district one and the interesting thing is that Act 388 we often we often talk about act 388 driving a lot of our property tax problems and and yes it does as a state But you can see all of these peer cities are subject to act 388 just like we are Yet we see them with much lower property tax rates and many of them thriving with economic development And it is because their combined high their combined city county and school millage rates are lower than us Now i know Back in that 2020 study We really focused on how we're stuck in this negative feedback loop where our high taxes Are leading to slower growth and poor property valuations Which result in smaller tax revenues which prompt our leaders to increase tax rates which further Deters growth and depresses valuations And i know we went through a lot of um Statistics in that study also on how we're lagging In GDP growth we're lagging lagging in business formation We're lagging in employment. We're lagging in wages and we're lagging in population and and here's just you know an update With that that study took us through you know 2018 data and um and this we have for City we have through 2020 the county population just came out with 2021 And we have you know student populations in richland one and two and you know if we compare Columbia with others these other pier cities rock hill lexington charleston greenville They are far outpacing us in terms of population growth The same thing with richland county and and just looking at 20 to 21 um the state of south carolina grew hugely During that time period 1.2 percent Yet richland county is one of the laggards In terms of counties that grew just from 20 to 21 at only 0.4 percent And then students again, we do see the same continued pattern of students declining in richland district one But in increasing in district two But again lexington, we're we're seeing these other except for york, which is um Losing pocket students also, but they're one of four districts and and there's a lot of play interplay between the districts We see that we're generally lagging as a county wide in student growth as well Um, but the good news is that we really really can do something about this now so i want to go through a plan and um, the thing is It's built on these three. I wanted to call them foundations. So first um because property the terror property tax burden is so disproportionately falls on those commercial and rental properties The tax reduction, I guess plan would really try to be targeted at those properties that are assessed at six percent and so First number one component We would offer a credit or an exemption to these six properties Which would have the effect of reducing their assessment rate from six percent to four percent Over a period of 10 years Now this would be identical to something that the state has already done So this is I want to say this is not brand new the state's already done this they in act 40 of 2017 They implemented a an exemption Exactly for manufacturing properties statewide and they phased it in over six years and this exemption or this credit what? Uh had the effect of reducing the manufacturing assessment from 10.5 percent To nine percent. So we would use the exact same template that the state general assembly used in reducing the assessment rate on manufacturing Now the second component of this is we would need legislation to Um have this done and and and I'm not a law a lawyer or an expert, but I know someone who is but um It's it see it would appear that we would need legislation at the state level In order to enable counties the opportunity to implement this plan And then we would need legislation at the county level to opt in to this opportunity And then the third component of it is the actual rate reduction plan which would be modeled After the one that dr. Um walters put together for baltimore and I think is is you know, hoping to use at some point in the future So it's a little modified because we're doing a longer phase in period But what we would do is we would announce an eight year schedule Of incremental tax rate reductions that would begin in two years So for these first two years, we would start building up an escrow account from any new investment that comes in And or by slowing or halting spending um, and then in year three We would Then implement the first portion of the rate reduction And we could use escrowed funds to fill in um The escrowed funds and revenues from other sources to fill in as the gaps while the new investment escalates Um, oh, and this would again continue over the course of the next eight years Another part of this is that we would oh, yes Go ahead question. Oh, yeah, absolutely. Yeah under the legislative piece Time parameters and I just asked this chairman Um question relative to that and I want you to kind of if you would elaborate more On the time parameters attached to that legislative piece And when you say the time parameters, you mean like how long it will take legislation to pass. Yes Um, so some idea of how and I'm not a legislative in the time parameters, of course that That could probably involve itself in A pro not approximate, but just an idea Of what are the time parameters? You mean like during a legislative session? That's correct. That's correct I might defer to Listen to a terini on that one Okay, mr. Terini is our legislative expert And uh charlie just We're looking to give us. Yeah, give us some idea. I mean it's intriguing to hear this conversation but it For me it involves. I know it's a legislative process We know that but when we talk about When we talk about taxes and the And and and and sort of restructuring some of that But what possibly are the time parameters involved? Well, Councilman, let's stipulate that i'm not a legislator And so we would obviously need to enlist the The assistance of legislators and I think we have some that would be willing to work with us Uh, the general assembly begins a new session a new two-year session next year And While it's not known for Moving quickly and you're always competing for space on on On the calendar with other measures I would I would hope that within a two-year session if this bill was Vetted drafted we it could get passed with one or two-year session Okay, so you'd be looking at 2023 2024 At snail's pace I understand. Well, that's that's quick Thank you Thank you, charlie and uh Irrevernment I would just add like I say it is the beginning of a new two-year session for the general assembly next year And I would dr. Gunn-Logs and was saying earlier. I think it's important We're really not invent re you're not suggesting that they reinvent the wheel here It's almost a modeling of the same The same credit that they issued on industrial taxes when they passed the gas tax. So We're just looking at something here that they would enable counties To have the option to opt in to this program In other words, they would create the option and then the county would individual counties Would be able to decide. Yes, we want to do this or no, we don't and that's what I was Thank you. Okay. That's what I was just I kind of chuckle a little bit. I probably should have said this earlier It took us about two decades to get in this This situation it's going to take a decade to get out. It is And uh, yeah, okay But it helps. Thank you Thank you. Hey, mr. Bear Mr. Chair, before we go further with the plan can I ask a question? What what did? Charleston do to get their tax rate on the business and the commercial solo You say what did they do why it's so long? Yeah. Yeah, yeah Why oh why is Charleston? Well, so I think you know the same I guess negative feedback back loop that we're currently stuck in where we have high taxes the depressed growth and depressed property value which lead to lower tax revenues which Prompt us to raise tax revenues and and just again this negative cycle Charleston's in the opposite of that They have low tax rates which lead to more economic growth which lead to more revenues Which again lead to the ability to to grow and prosper at that these low Tax rates. So I I think it's just we're two sides of a different Dr. Gunn logs and do you think the fact that keel was in Charleston County? And those second homes were assessed at six percent And don't carry many school children with them and things like that. I think makes a oh, absolutely a huge difference um And again, I would echo what you the fact that they have a very competitive tax rate has allowed them to attract you know industries like almost like no other part of the No other part of the state of South Carolina seen that's why their school taxes are Significantly less that's why they are here in richland county. I mean it's significant. It's over 40 difference. Yeah Yeah, but the joe and and um in kiewa or charston county A second home tax rate is higher than the commercial and the business, right? No, it's the same as business If it's if it's the second home, it would be the same as a business or yes Yes, yeah, yeah, charston just has very low millage rates. Um overall which is is Like to say his compound compounded in a positive way their their ability to be successful. Um They have a lower rate of more to tax. That's right. Yeah, they do. That's exactly right. Yeah, that's the best way to put it That's right Thank you And if anyone has any other questions, please feel free to jump in at any time and I will defer them to charlie as well So So, um, yeah I think the last part of this was that We have the option to enact triggers which can adjust the tax rate Either slower or faster. I'd modeled the scenario based on a very very modest scenario But if we see much more rapid growth We can escalate the time the uh phased in reduction and if we see much slower growth for some reason or we hit in a recession We we could have the option to do that. Although there are plenty of other options on the spending side as well I only modeled the Revenue side so you could see Yes, we go back to that last slide and Just ask you to clarify. Sure So what's yours what you're suggesting in this slide is Years one and two what would happen? Years one and two we we we can carry on the same Um, but we take all of the additional we we instead of spending the additional the new investment that we get We um save it in a rainy day fund or a escrow fund that can then be spread out Over, you know the next couple years We're kind of we're capping the spending at a certain number and then we're taking that growth money A portion of it and it's going into almost like an escrow account for rainy day I think it's it's important that you do um have exercise. Um, I guess some Level of restraint in spending during this and don't take all of the new revenues and spend them Because you have to realize that this is going to be phased in over 10 years and that the spending policy is going to have to be Set to match the revenue policy Okay, and if I'm if I'm looking at this correctly So when I look at the new effective assessment rate, what you're basically saying in year three You believe that we would drop the rate on our six percent assessed apartments Businesses and rental homes would drop from six to five seven five Yes, you're for it. So so you but you're not we're not waiting until the very end to get To get the reduction is being phased in over the course of 10 years. That is correct. Yes. Yes It's an incremental phase in yes, miss Wilson Then or you build the escrow account The more you have to fill in gaps should they occur And if you enact a program with triggers such that if the investment comes in more rapidly Then again the the full 10-year phase you will have additional revenues to speed that cycle along Indeed you could yes Yeah No, you please ask away Do we talk about an escrow? Are we talking about escrowing or are we talking are we talking about because dr. Walters talked about the disinvestment How do we Is it is it escrowing or is it a reinvestment of those funds the first two years? You're only escrowing the difference So you still have your revenue coming frozen that rate Everything of that level so everything new goes into that account. So this that there's no Disinvestment Yeah, you're building up your reserve account essentially with all new investments in which then gives you the bridge To start building down over the period of time. So it's more escrow. It's a reserve account It's kind of like if you if you have a job and you get a raise and you say well I'm not going to spend any of my raise. I'm just going to put my raise in a savings account And let it build up over a few years and then You know I I have you know my my rainy day fund that I can then use to spend in in any way that I need I mean what you're basically saying is we're taking the first two years of growth putting in an account So we get to year three or four and we have a there's a maybe an income issue There's a reserve to offset the thing so we can that's exactly right And then you're you would add triggers in your final deal to where Could be more could be less depending on on what the revenue exactly that's what I found most interesting Are the triggers? Because it'll adjust with the economy. I think that's That's a big factor to consider. I think one of the things that scares people when you do this type of thing is Well, what if there's a recession or what if you know some you know And they come up with a worst-case scenario and the triggers Is what mitigates that issue Let me just add we're at the podium up here because this room has the better Video projections and recording This is a committee meeting really more than anything else. So I mean the exchange of questions and information I encourage as as much as you as you're willing to do Yes, and I know I just talk and talk and talk but interject anytime. Tell me to stop And ask questions at any time Okay, so don't miss think what you would you know The projection would be at the end of 10 years we would be at a 4% And that's so we would be at a 4 assessment rate So so we commercial property apartments rental properties They would all be on par except for the school operation millage But they'd be on par from an assessment rate with owner occupied properties And that's very important because the Lincoln Land Institute a couple of years ago Did a very big study on South Carolina property tax and really came to a lot of the same You know conclusions that all of you know here that we all know here today And one they had a couple of recommendations and the biggest recommendation was the first and foremost was You need to get rental properties and owner occupied properties on the same Level of taxation. They are at completely different levels and in fact in their their annual property tax Study that they come out with rankings And they have wanted they have the best property tax study ranking because most most times you see a property tax study And it and it just lumps all property tax together But they actually break it out because they know the the different the importance of the different property types So charleston has the second lowest owner occupied property tax rate in the nation Us we ours is about fourth or fifth In columbia, um, they have the 19th highest apartment Rental apartment unit Tax rate in the nation and and you saw how much higher we are than theirs. I Well, I don't have a ranking on it. I'm willing to bet we are first Now what they are first in is the difference between apartment and homeowner Tax rates, so that's how much more apartments are they have the highest differential in the nation They have the fourth highest differential in the nation on commercial. So again Colombia is so much higher than charleston. We are putting our People who rent people who um live in apartments. We're putting them in and people who own, you know, small businesses or commercial Storefronts. We're putting them in such a greater disadvantage than anywhere else Dr. Gunn-Logs, just if you know it off the top of your head, what's the percentage of people in the county and the city that Rent versus on well in the city and so cities typically have um higher rental rates And we I want to it's right around 46 of people who own their own home and live in the city of columbia So it's more than half so over 50 percent of the folks that live in the city of columbia live in a unit that they rent So he started talking about equity and fairness, I mean And again, I would like to just reinforce again. We're talking about a program That lowers the six percent assessed property and we're not raising the fees or taxes on any other group. That's correct But joe the next question is what what is the percentage that rents in charleston? I'm sorry. Can you repeat that? What is the percentage of individuals that rent in in charleston if columbia is right at 47 percent? What what is that same figure in charleston? It's going to be roughly the same I don't have the stats off the top of my head, but I think It's a little it's a little bit lower than in charleston, but it's it's about the same And that's in the city limits Yeah So so I guess my question is is it okay to I'm charleston is raising the taxes on folks who live in apartments Um, I'm thinking in columbia, maybe the most the majority of our low income renters are probably in Family housing um But but but at the same time, I guess low income folks will be affected If we raise the rent On apartments to mirror something that's done in charleston Or are we saying it's okay that it's a good model to raise the the taxes On the rental apartments. I was having a hard time here in james. Oh, I am sorry Yeah, so let me let me try that again daniel uh What uh, the gunslock is just saying that in charleston county the taxes on apartment complexes They are higher Yeah, they're at the same rate across the state everybody in the state has the same formula james They're just they're No, no, you're you're correct. Go ahead. Yeah, so everybody has the same formula But they're They're millage rate and everything is much lower than ours for multiple reasons. And so we had had while we're Uncompetitive with greenville and charleston per se by 38 and 48 percent is for multiple factors And what we're having to account for in this plan is a reduction over an a we're really a 10-year period So that we can become competitive and by doing that without affecting the home ownership rate and and so we're at a disadvantage because we're so far ahead that where it's going to take us that long of a period to reduce it so It's that there isn't a different rate anywhere. This is all together Okay And that was a that was a good explanation. Thank you. Yeah, thank you I may just say councilman mcdowell has had to leave to go Groundbreak on an affordable housing project, which is very relative to this discussion It is and I would further add Just so you know that the slides And the tape will all be on the youtube This evening So he's he will catch that then but for anybody that like say call if you want access to these all these slides You'll be able to get them on the website and everything afterwards Sorry about that including the appendices if you want even more data so Okay, so the last slide I Ran several scenarios, but I tried to um, you know, I tried to put it into something that we we could Take a look at and understand So this would be a scenario an example of the city of columbia over, you know this 10 year period With the phase in of these tax reductions For the commercial and rental and apartment properties Now what what I did is I assumed that we had a continuation of historical growth rates So that it's a very modest assumption. So because one we would expect And we have you know seen in other cities that when the tax rates are Reduced that we see an increase in investment, but we did not assume that we just assumed we had the exact same level also for for growth rates for revenues Also assumed the very, you know modest Historical growth rates and I took out there. There were some it looks like some changes in Accounting methods and it looked like there were several, you know sale of cap capital assets took all of those out any special revenues So we just see, you know base revenues And so we start with the current, you know year 20 the 2021 fiscal year of the columbia city of columbia revenues And you see the dark blue that's what really what we're focusing on that is the commercial property tax And that's how much we took in In commercial property tax And then, you know the light blue above that that would be all other property tax Which totaled around 39 million for city of columbia then all of the The beige above that That would be all other revenues of the city of columbia So so one you can see how the The commercial property tax relates it's a small portion of all of the city of columbia Revenues and property tax in general is is a smaller portion of the city of columbia tax revenues than other cities And so so so we see our current year then again, we assume year one and year two Nothing nothing changes in terms of the assessment rate And and so we would see this would be our historic for based on historic growth trends. We could see How revenues grow there Then year three we have our first Reduction in the assessment rate down to 5.75 percent and so you do see the reduction in Revenues from commercial property tax, but we still have an increase in revenues from the other property tax And from all all of the other revenues And then that continues and you can see it we do see a slight decline all the way through year 10 Where we stop implementing the reduction in the assessment rate So and that over that 10 year period the average annual Total revenue growth would be 2.2 per year Again, you know We have some years During all of this you see prop commercial property tax rate does Fall an average of 1.7 per year But it is made up by other property tax and other revenues and again This is if you this does not address the spending side at all and it is a it is a very very modest Estimate Again based on no new No, no real new growth. I just said the same Very low growth that we've had in the past so you can't again if you if It shows you that you can do this and still increase revenues at an average of 2.2 percent a year total revenues for the city It is a very very modest And slow implementation over time But It it's surprisingly Something that is very doable Now we could run this for richland county and for the school districts and I did The charts look almost identical Because we're phasing in over the same, you know, basically same property tax base a little bit different for richland one richland two but But I didn't want to trade you for of the same charts But but this is but I can run any other different scenarios that you want We can throw in spending if you want to throw that into so you can see that overlaid So there's any number of scenarios that we can run But you know, this this is just kind of the base case of a very very conservative estimate So this chart showing that as the rate goes down it promotes growth So This is not even showing that okay Because if the rate goes down it will promote more growth and I'm assuming that it doesn't even promote more growth So I I almost think this is like I don't want to say it's a worst case scenario, but it is it's a it's a very low base case scenario This is assuming that there's no growth in over what we have That's exactly right. So that the theory is that If it's promote more growth, right? If if with no more growth we can do this It it would be very easy to do it with more growth, which you know is most Assuredly going to happen Other gun logs and I mean part of our mission is going to be to to deliver to mayor recommend You know our recommendation so he can sit down with the leaders of county council and school district boards and and so forth. I mean Can we run this for for all the just just so we have it as a reference for the county for the school districts and so I've already run it for them. Yeah, absolutely. Yeah, so because I mean we again, you know While I like to think the city of columbia is the beacon on the hill The county council does control the property taxes and the general assembly controls the you know The legislation so I want to make sure that we're we're looking after everybody on this this plan This plan protects the mom and pops and the little guys This truly helps. It's not just the big investors. It's it's it's the small business folks Folks that have small rental units for their future retirement income This creates opportunities for generational wealth To me, this is a historic plan that that can monumentally change People's lives in columbia James do you have a comment? Yeah Daniel and joe So when it's time to go to the legislature for this I would assume that we would Go out and recruit like-minded cities that suffer from the same situation and work with us To approach the legislature or do you plan to go alone as I mean, I think Again, you're getting into legislative issues and I want to throw it off to somebody else, but Um I if you want to find like like-minded cities or cities that have the same issues that we do Yes, I happy I can find plenty of them are from around the state And james, I think strategically we would we would want this and I'll yield to mr. Terrini if he's got comments We probably would want to make this a statewide option and that way county by county bases They could opt in I mean, let's just you know while we're talking about Competing against our our neighboring counties and across the state I would simply tell you if we get our property taxes right And everybody lowers theirs at least against us on a national level where we can where we can attract those new investments and new things New things to do Yeah Go ahead james No, I agree with you joe. I agree with that. Dr. Walters you would comment Comment that gets to councilman mcdowell's question earlier about timing And I think it was related to your question a little bit about timing A little bit disputatious about what something councilman taylor said that this is going to take a decade You know to solve and so forth The the legislative timing the delivery of the of the rate cuts on a particular schedule and so forth Those have to do with budgetary realities that that the council and the mayor are going to have to deal with But it's not related necessarily to the visibility of a solution I would argue that you're going to start seeing cranes As soon as a credible commitment is made to this plan If if you tell developers that well, you know Five years from now the the assessment rate is going to be one sixth of Below what it is now and then 10 years from now. It's going to be one third what it is below now The the careful green eyeshade sharp pencil work is going to happen Immediately and then they're going to say well, I'm not going to wait around for five years I'm going to put the plans on the board now. I'm going to get in on the ground floor The benefits of this plan will be visible immediately The the 10 years sounds like oh You know this is this is a very heavy lift in terms of the financing and those are sort of the details But I got I have a warning the commitment has to be credible It for the for that get in on the ground floor mentality to to really come with force It has to be something that's not a political promise that can easily be broken And that's another thing that that we leave to those strategists and the lawyers and the way How do you make sure that the commitment is credible? And and and secures in effect secures the property rights in an investment that will last You know 50 or 100 years People have to be absolutely convinced that you know you mean it and you're going to stick to it That's what some of those great stories of you know urban revitalization had in common It was an inviolable principle of their tax policy that they weren't going back once once they had done this Thank you. I I think um, I think the mayor will probably concur. We've been We've been uh, we've been told by the commercial real estate community in colombia that You know with a credible plan. We don't have to we don't have to wait 10 years that they will they will come And I mean and and dr. Gox and where you are you? um Just want to mention, you know, I again, I think one of the one of the things that's That I personally like about what we're doing is having been the secretary of commerce for the state What I always saw was people who moved here from somewhere else Got the incentives and the tax advantages whether it was a fee in lieu of our ssrc But our local businesses our local businesses that grow organically one two people at a time Add number one piece of machinery don't get anything and they carry the load For for everybody and and candidly when you look at the headquarters that we we've we've lost Not just in colombia, but it but elsewhere in the state over the last 10 to 15 years It's just almost impossible to recruit headquarters So if you want corporate headquarters that make the giving and the community investment, you almost have to grow your own And I think this is a unbelievable good step for richland county the city of colombia to begin to to grow our small businesses into big businesses and And that make a real difference in the community. I think Again, and while we're talking about small business, I will tell you I think it attracts capital Like dr. Walter said earlier from all around the country Whether it's new office buildings new restaurants You know it encourages many of our Frankly our tax our non-tax paying Partners in the city Who've gone to great lengths and sometimes to avoid paying these high taxes to participate in the tax load And and and spread the burden a little bit more than we've seen in the past. So I'm totally excited about about this any up billy comments before we Businesses I deal with this every day people Not wanting to invest because Steve I would just concur with that. Absolutely Well there There the reality is is the growth is coming to the southeast We've seen our sister cities and in similar situations grow by double digits We have the ability to do this and I think dr. Walters is correct. I think what we've heard from institutional investors Other folks in the financial world saying if we're having this conversation and there's a concrete commitment The investors will come and we've seen that they've avoided columbia over a period of time and the growth has gone around us We are positioned correctly if we make a hard commitment to really see monumental growth Here and we've got a built-in workforce that's going to attract other businesses And part of that is building those relationships and keeping The young talent that's here here because we have options and investment. So, you know, I think without us Making this commitment and moving forth. We'd be foolish and and we would really do our our community a disservice Dr. Gunn-Lodgson, do you want to go over any of these appendages? They're awfully good information I know we're we're pushing an hour and a half now, but Is there any anyone that I mean It's just they're more general informations. But then anything it's just for our media friends in here I would encourage you to take a look at them. There's some unbelievable slides that would Will be very telling in your paper or on your tea on your nightly news It is, you know, I'd had some questions about, you know Well, since the 2020 study how are the trends the same or are we seeing the same type of thing? And so I went through several of them and put them in there And yes, we actually are still seeing the same continued trends so that was it Then maybe we'll touch on some specifically in the next meeting. Mr. Trini any comments on the legislation side today or you want to wait till Till the second or third before you get into the how-to's Okay, I don't know All right. Thank you, sir Let me just go over a couple of things number our next meeting Will be Tuesday May the third at 10 a.m. In this chamber We'll be soliciting public comment From the general public for folks who've had successes or had issues with with the property tax here So whether it's our economic development staff It's good to have mr. Blackstone. Who's with the chamber of the chamber of commerce here James perhaps you can relay that to the mlbg But we'll be having public comments on on from folks who've had some some Like I say successes or issues Any last comments for we Will we wrap it up? Yes, ma'am We've presented a schedule that indicated that you all would meet on thursday may 19th at 2 in thursday june 2nd at 2 I would like to Respectfully ask if we could hold those two meetings at 11 a.m. Instead of And I can send out an email after yes, ma'am, but I just wanted to bring that to you. Okay what what Erica has asked it on thursday may 19th And june 2nd For the committee will check their schedules and our experts We would like to reschedule those same day to 11 a.m. And she'll send an email out and if you'll let her know Again public comments next meeting. Thank you all for your patience I'm reminded of what my dad told me the whole time growing up. He said he always used to tell me son Businesses don't pay taxes. They just collect them And what that means is we haven't even really talked about that is The higher the property taxes the higher the goods and stuff that we have to pay for In our stores and grocery stores and everybody else So I mean when we talk about those secondary benefits, uh, that's just something to think about how Again, this is a program. This is not designed for the rich You know or or frankly for the developer it it it's As the mayor said, I mean it lifts our our our little guys up. I think foremost and more than anything else There are no other comments Steve you want to move to adjourn? I think we adjourned bill. Are you on second? adjourned