SC Supreme Court halts Richland County penny tax spending, citing misuse

The state Supreme Court on Wednesday questioned “dubious” spending in Richland County’s transportation penny sales tax program and ordered a halt to further spending until the county ensures the money is being spent legally.

The justices directed a circuit court judge to require the county to establish safeguards assuring the money is spent only on transportation-related capital projects and some administrative costs, as required by state law. The circuit court also can order the county to repay any previous improper expenditures.

A county spokeswoman said the ruling is being reviewed by attorneys. But County Council member Greg Pearce said county officials were taken by surprise by the ruling.

“We thought we were going to win,” he said. “We thought we were on extremely solid ground. There’s been no contingency on what would happen if we lose.”

The penny sales tax, passed by voters in 2012, was expected to generate more than $1 billion over 20 years. It is being used for projects such as the widening of Bluff Road near Williams-Brice Stadium, a new plaza on Lincoln Street near Colonial Life Arena, a new greenway along the Saluda River and the widening of Clemson and Hardscrabble roads in Northeast Richland.

But the money also has been used on the county’s Small Local Business Enterprise program and to hire two public relations firms to educate the public about the transportation program. The court’s ruling questioned those expenditures, noting that money from the penny sales tax must be spent on transportation-related capital projects or the “administration of a specific transportation project.”

More than $554,000 in penny tax funds were used to organize and staff the county’s Small Local Business Enterprise program. Also, the county had been paying each of the two public relations law firms $25,000 per month.

The Supreme Court also questioned the spending of $38,000 on a “vague and duplicative mentor-mentee arrangement.”

The issue landed in court after the state Department of Revenue, which is charged with collecting the taxes and distributing the proceeds, questioned how Richland County was spending the money. Department officials withheld the money from the county when county officials disputed the department’s position. The County Council then voted in May 2016 to sue the department.

On Wednesday, the Supreme Court said the Department of Revenue did not have the authority to withhold payments to the county. But the justices also said that the department’s request for a court-ordered injunction preventing the county from spending the money should have been granted.

The revenue department did not comment on Wednesday’s ruling. But it issued a statement saying officials are “committed to working with Richland County to ensure penny tax expenditures” comply with state law.

Pearce, the county councilman, said if the circuit court orders repayment of any misspent funds from the county’s general fund, the action could have wide-ranging effects on the county’s ambitious Richland Renaissance building program.

That long-range plan calls for selling the current Richland County Judicial Center on Columbia’s Main Street, demolishing the Harden Street administration building and replacing it with a new courthouse. Administrative offices would be moved to Columbia Place, where the county is finalizing the purchase of three former anchor stores. A wide range of services also would be established in other parts of the county.

County officials have said the program, which they say would cost $144.2 million, would not increase property tax rates.

Being forced to pay back some of the transportation expenditures from the general fund “could have significant implications on not only Renaissance, but the overall operation of the county,” Pearce said.

Councilman Seth Rose said it is “unfortunate that it may take a Supreme Court ruling to” force the county to enact measures ensuring proper spending.

County Council Chairwoman Joyce Dickerson had no comment, saying she was waiting to be briefed by attorneys.