News

March 8, 2017

Benjamin’s Apartment Tax Break Was Both Smart and Legal

Last week I recounted some of the real estate follies of Columbia City Council. It’s a target-rich environment.

But this week I’m going to discuss something in that realm I think they did right. Someone should brace Mayor Steve Benjamin in case he starts to faint.

Kidding aside, this is not the first time I’ve sided with the mayor on a major real estate project. I backed him big on the plan to allow a developer to convert the former Palmetto Center on Main Street (SCANA headquarters until they jilted us for Cayce) into The Hub apartment complex, writing this at the time:

“The conversion of the Palmetto Center into a private dorm is a project I’ve strongly supported in this column and am glad to see gain approval from the city’s Design Development Review Commission.

“This is a big step forward in bringing back Main Street and I applaud Mayor Benjamin for pushing it, especially after the city’s Planning Commission initially rejected the dormitory re-use as not appropriate for Main. Indeed, the project will fill downtown’s largest vacant hole in one fell swoop, and help fill the area with much needed energy, activity and commerce.” – City Watch, Jan. 23, 2013

I also felt Mayor Benjamin was smart and savvy in offering the plan to give major tax breaks in return for major investments in downtown apartment complexes (essentially private student dorms) by developers who would take the risk in return for the incentive.

That incentive, a 50 percent property tax break for 10 years, did the trick. Four projects, each with an investment of $40 million or more and a minimum property tax bill of $750,000 before the tax break was applied, went up in less than three years. All were required to build 400-space parking garages as part of their contract.

Critics of the incentive said it favors big developers over small ones. And they’re right. They also said the incentive creates selective rather than equitable taxation. And they’re right.

Finally, they said the incentive was illegal under S.C. law. And they’re wrong — at least according to Circuit Judge Casey Manning, who recently issued a summary judgment upholding the tax break.

The S.C. Public Interest Foundation and conservative activist Rusty DePass had sued the city (along with co-defendants Richland and Fairfield counties), claiming that residential apartments did not meet the guidelines for a tax break that can be given by cities and counties for industrial or commercial development.

But Manning pointed out that the apartments are charged property tax at the commercial rate, something that seems hard to argue with in terms of qualifying for the commercial development tax break. S.C. Public Interest Foundation attorney Jim Carpenter has not said whether that organization will appeal the decision.

As quoted by The State, leading critics of the incentive are people I know and have great respect for, including former S.C. Commerce Secretary Joe Taylor and former Richland County Assessor John Cloyd. Why do I say they are right on those important points yet still offer my support for the tax break? Two reasons:

1. Tax incentives are a common part of the tax code, both individual and corporate; there is nothing unusual about giving tax incentives to lure business (think Boeing, Volvo, BMW, etc.) or to spur charitable giving, home ownership, historic preservation and other positive actions.

2. Fifty percent of a very big number is way better than 100 percent of a very small number; these apartment complexes will still pay at least $375,000 annually in property taxes during the 10-year incentive period (a huge increase over what the properties that preceded them paid), after which they will double their contribution to the tax base.

The conversion of low or no tax properties into significant tax-paying properties is an enormous boost to a city in which over half of all real estate is tax exempt as a result of being state government, federal government, universities, hospitals and churches.

It’s as simple as that, and to oppose the apartment tax incentive is to cut off the city’s nose to spite its face.

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By Kevin Fisher
Fisher is president of Fisher Communications, a Columbia advertising and public relations firm. He is active in local issues involving the arts, conservation, business and politics.

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