Tax break for private dorms breaks new ground in Richland County

dhinshaw@thestate.comMarch 10, 2014 

The owners of a 600-bed student apartment complex at Blossom and Huger streets could see their property taxes cut in half for the next 10 years under a first-of-its-kind economic development deal approved by Richland County.

Council members say they are willing to extend tax breaks to new projects beyond traditional manufacturing to include not only private dorms but big retail developments and shopping centers – a practice one S.C. think tank called “a terrible idea.”

Manhattan-based Park 7 Group is the first beneficiary of the council’s more generous policy. County Council members say two similar deals await approval in coming weeks, potentially saving the owners of the three downtown student apartments more than $10 million in taxes they normally would pay to support basic services such as police, parks, libraries and schools.

Historically, counties have used tax breaks to lure corporate headquarters and manufacturers that create large numbers of new jobs.

But Richland County’s economic development committee members say because local tax rates are high, they’re prepared to deliver incentives for other multimillion-dollar investments.

“The discussion is not to do it or not to do it, but how best to do it,” committee chairman Councilman Paul Livingston said last week.

Added Councilman Torrey Rush, another member of the three-man committee leading the charge, “Sometimes we get locked in to the way things have been done, and we never want to challenge the status quo.”

“We need to look at economic development from a comprehensive standpoint,” Rush said. “Not just manufacturing is economic development; it’s larger than that. And maybe providing incentives doesn’t just mean tax incentives.”

Last year, the county was poised to approve an incentive package for membership retailer Costco when the developer called off the deal, saying the county had taken too long.

County Council members, meanwhile, said it was the developer who had dallied in providing a specific request for help. Details of the county’s offer were never disclosed beyond the fact that they involved improving traffic flow into the company’s property, off Piney Grove Road.

News of the failed project generated howls from disappointed residents.

“We got beat up a little bit,” Rush acknowledged.

Now that same developer, Paul Holder with AVTEX Commercial Properties, of Mount Pleasant and Greenville, said last week a Costco at that same site, near Harbison, is back on the table – and that he still needs taxpayer assistance to make the deal work.

But Ashley Landess, president of the S.C. Policy Council, said tax cuts for retailers are “among the worst” subsidies.

Public officials justify tax breaks by saying the incentives create jobs and boost salaries – and that if they didn’t give them, new industry would go elsewhere.

But her privately funded group, which advocates for limited government and free enterprise, maintains there’s no proof the strategy works, in large part because the deals are made behind closed doors.

“In the case of some incentives, such as those for retailers, it forces private businesses to actually subsidize their competition,” Landess said.

She dismissed the deal Richland County put together for private dorms as “pretty sketchy.”

“They can’t just designate it as USC student housing,” she said, “so you’re talking about a private developer who’s getting an incentive to build apartments.”

Martin Moore with CBRE in Columbia is handling the sale of local developer Ben Arnold’s land to the Park 7 Group for the project.

Moore said he approached County Council with a request for a tax cut, which Livingston said was endorsed by Columbia Mayor Steve Benjamin. “It’s a very unique situation with a specifically crafted incentive for student housing,” Moore said.

The new policy requires an investment of at least $40 million to build a private dormitory that would pay at least $750,000 in property taxes, said Nelson Lindsay, Richland County’s economic development director.

If a project’s bill reaches $750,000 a year for property taxes paid to Columbia, Richland County and Richland 1 combined, the bill will be cut in half for 10 years. That translates into $375,000 a year.

In any case, the most the owner would pay is $400,000 a year, Lindsay said.

Livingston said he’s working with the committee on a written rule or law to outline the additional groups qualifying for tax credits. It’s still in the works, he said.

“The city was interested in us working together,” Livingston said. “That was a factor.”

City governments in South Carolina do not have authority to negotiate tax breaks. Counties and state government do.

Last week’s Richland County vote on the tax cut for Park 7 Group was unanimous, with Councilman Damon Jeter absent. There was no discussion.

Two other projects are coming up for consideration:

• One of them has received two votes of approval, at which time council rules require it be identified publicly.

It is for student housing on an Assembly Street parcel that council members referred to as “the Bernstein property,” between Senate and Pendleton streets, joined with parcels at 1000 and 1016 Park St.

State Rep. Beth Bernstein, D-Richland, said Monday the family property is under contract and she has no details about the buyer’s project. She did not disclose the buyer.

• The other has received just one vote of approval, with council rules allowing the county to keep paperwork secret.

However, more than one council member said the tax cut involves the Edwards Communities project for 700 student apartments on either side of the Palmetto Compress warehouse.

Councilman Seth Rose and others said an upcoming dorm construction project by USC was an impetus for the new policy.

Projects done by the university, like the one planned for a parking lot at Blossom and Park streets, do not pay taxes. Private projects do.

Greenville County does not provide job-creation incentives for new retail or apartment projects, said Kevin Landmesser, interim president and CEO of the Greenville Area Development Corp.

“I don’t think there’s any appetite to do so, because there’s a strong belief by my board and council that retail is consumer driven; the market and demographics drive retail development,” Landmesser said.

He continued: “Right now, Greenville has a ton of apartment complexes coming out of the ground downtown and the city hasn’t had to do anything (to attract them). The concern is overbuilding.”

Reach Hinshaw at (803) 771-8641.

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