The Price of Liberty is Eternal Vigilance
No enthusiasm for Kiawah River Plantation TIF
We also wonder about the School Board supportWarwick Jones
After last night’s special Finance Committee meeting, we’d say the Beach Company’s request for a TIF District covering its Kiawah River Plantation (KRP) project is going nowhere. Two Council members were plainly hostile to the idea. We won’t attempt to describe the attitude of other Council members except to say there was no show of enthusiasm for the request. Most likely a vote will be taken at the Council meeting on May 7
The purpose of last night’s meeting was to view a series of presentations on the proposed TIF district. These were designed to fully inform Council members of details and implications of the proposal, preparatory for a vote at a future Council meeting. Presentations were made by staff, a principal of the Beach Company and a spokesman for MuniCap, a public finance consulting firm.
Firstly a recapitulation. The KRP project is a $1.34 billion development that will entail the construction of 1,285 dwellings, 450 guest rooms, 80,000 ft2 of retail and office space and two golf courses. This is all part of a Planned Unit Development (PUD), on a 2000 acre property close to the existing Kiawah River development. The PUD has already been approved by the County. What the Beach Company was seeking last night was the reimbursement of some $81.8 million that it would spend on the project. The reimbursement was specifically for a number of projects –
- $14.05 million for “Civic Redevelopment Projects” which included Fire District equipment and facilities, community facilities, off-site traffic improvements, and others.
- $67.75 million for “Developer Constructed Redevelopment Projects”. These included $8.9 million for a wastewater treatment plant, $49.665 million for “internal infrastructure”, and other items such as roads, sewer and water mains.
The reimbursement would be derived from funds generated by the proposed TIF District. ie a Tax Increment Finance District. Under a TIF, the property taxes that accrue each year above those in a defined base year, are funneled back to the benefit of the TIF District. The growth of tax revenue reflects the benefits of development and the increase in overall property values. A TIF District has a specified life and the one proposed for KRP was originally 40 years. Typically, the sponsor of a TIF, such as the County, will issue bonds to cover spending, usually for infrastructure or a major construction project. The funds derived from the TIF are used to pay interest on the bonds and provide for amortization.
A TIF must be approved by the governing body such as the County. But the entities in the County that share in the property tax revenues such as the School and Public Service Districts have an option to decline participation.
Staff kicked off the presentations and it wasn’t long before the questions started flowing. Planning Director Pennick noted that TIF was created by the state and was “intended to promote redevelopment of blighted, conservation and sprawl areas”. OK, but how does the KRP development fit into any of these categories, a Council member asked? He was told “sprawl” and it depended on definition and the intent of state law. The dialogue was cut by an abrupt comment from Council member Rawl who stated that it was Council’s job to determine whether the KRP project qualified.
Mr. John Darby of the Beach Company spoke of the benefits the County would derive from the project – the property tax base would increase from $2,900 a year to $16.3 million a year at build out, generate $560,000 in additional revenues for the County by build-out, create 850 to 900 permanent jobs within the County and another 1400 to 1500 jobs statewide. There would be no up-front funding for the development – reimbursement would occur only after the “construction of the project” and the TIF District had been created.
The presentation also included assumptions as to how much of their share of the TIF entitlement each taxing entity would be giving up under the proposal;
Charleston County - 43.9%
St Johns Fire District - 40.5%
School District - 95%
PRC - 100%
We understand that these assumptions were made after discussions some time ago and may no longer apply. But if the TIF is approved then the percentage pertaining to the County shown above is likely to apply. Following staff and other recommendations, the County will be asked to finance the $8.9 million waste water treatment plant. The Beach Company estimates that 43.9% of the County’s entitlement to the TIF funds will be necessary for this financing. County Public Works Director Neal in an earlier presentation endorsed the proposed waste water treatment plant. He expected the annual charge would be comparable to that of Charleston Water Services for customers outside the City area.
Mr. Darby spoke of the very limited demand on the school district. As 90% of the dwellings are expected to be retiree or second homes, there will be few children attending schools. The Beach Company estimates a total of only 51 students at build-out. The implication, though not stated by Mr. Darby, is that the School district won’t need the funds to which is entitled as it will need to spend only lightly on education services, hence the assumption it can give up on 95% of its entitlement.
The burden on the School District stuck in the craw of a number of those attending who opposed the TIF. Considering the heavy demand for funds and the recent tax increase, how could the School District give up this funding? We’d add that if every community argued as does the Beach Company that because we have few school children we should pay less in taxes, there would be few schools in the poorer sections of the County.
Council member Qualey asked a number of times during the presentations about the viability of the KRP project should Council reject the TIF proposal. He did not immediately get straight answers but finally Mr. Darby said that the project would proceed but most likely in a different form.
The final presentation was given by Thad Wilson of MuniCap Inc. He said that the request of Charleston County – for the waste water treatment plant - was reasonable and viable. But any other requests of the County such as the financing of roads, was not. He also suggested that the County let the other taxing entities decide on their participation.
Mr. Wilson’s presentation was short but as the final speaker, he was a long time at the podium as he had to field all questions left over as well as those arising from his presentation. Perhaps strangely, his comments may have done more harm than good to the cause of the TIF proposal. Council members were concerned about the County’s liability if bonds were issued. What if the project failed? What of the School Districts liability? They were told that there was no liability for the County. As revenue bonds, the interest and amortization would be linked only to TIF revenues. (We wondered what would happen to the County’s bond rating if the County let interest and amortization payments slip.)
Mr. Wilson noted that he had been retained by the Fire and School Districts for advice on the TIF. He had not made any study at this stage on their behalf, begging the question for Council as to whether it should proceed until it had an indication of interest from these entities. He also said that bonding details still had to be worked out. The Beach Company was also looking for reimbursement of interest, and interest on interest, on its outlays.
Council member Qualey had the last comment when asked rhetorically why the County couldn’t build the waste water treatment plant independent of the Beach Company.