Richland County might have to repay millions of penny tax dollars

Millions of dollars meant for transportation projects that were spent for a small-business program and public relations work may have to be reimbursed by Richland County, the state’s highest court said this week.

On Wednesday, the S.C. Supreme Court ordered Richland County to stop spending money collected by a one-percent sales tax until county officials adopt appropriate spending safeguards. The justices also said the county could be required to repay from the county’s general fund “any improper expenditures.”

Specifically at issue are at least $3.6 million in transportation penny sales tax funds that were used to established a Small Local Business Enterprise (SLBE) program and to pay two public relations firms for work related to the county’s billion-dollar transportation improvement program.

The state Department of Revenue flagged those two expenses as illegal uses of money collected for transportation projects after a seven-month audit of the transportation penny program in 2015.

In a December 2015 letter to then-county administrator Tony McDonald, the revenue department cited an estimated $619,457 paid to establish the SLBE program, which serves “all facets of county operations,” not just transportation projects.

The revenue department also criticized two $1.5 million, five-year contracts – for a total of $3 million – awarded to two public relations firms, Campbell Consulting Group and BANCO Bannister Co., to educate the public about transportation penny projects. A county spokesperson did not respond to an inquiry Thursday afternoon about whether the public relations contracts had expired and whether they were paid entirely with penny tax funds.

In Wednesday’s ruling, the Supreme Court referred to spending on the business enterprise program and the public relations agencies as “dubious.” But the court did not say whether the expenditures violate a state law requiring penny sales tax money to be spent only on transportation-related capital projects or the administration of a specific transportation project.

Rather, the justices said a lower court could order the county to reimburse the penny tax program for any money deemed to be misspent.

And, the Supreme Court said, if a lower court decides that additional penny tax money was misspent while the case was tied up on appeal for the past year and a half, the court “shall order” the county to repay that money from the general fund.

When asked Thursday about the possibility of repaying penny tax dollars, county administrator Gerald Seals said, “I don’t deal in speculation. I deal in facts. I have a county I am responsible for running. It’s important we deal with things without alarming people, that we deal with things in a factual way.”

Richland County voters passed the $1 billion, 20-plus year penny tax program in 2012. 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.

County Councilman Paul Livingston, the longest-serving member of council, said both the SLBE program and the public relations firms “have had a tremendous positive impact on the overall penny program.”

“We wanted to make sure there was public involvement, that was clearly stated, and we wanted to make sure local, small businesses were involved in the process,” Livingston said. “I think it should have been done, whether it was paid with the penny or not, because that’s what the public demanded.”

They are so important, Livingston said, he would have been willing to pay those expenses out of the general fund from the get-go.

At least half of the ongoing operations costs of the SLBE program are now being paid from the county’s general fund, rather than solely the transportation penny fund, Livingston said.

The general fund pays for the county government’s operations. Property taxes account for about 60 percent of the fund’s revenues.

The county and the Department of Revenue have been at odds over the transportation penny program for more than two years.

In addition to accusing the county of illegally spending some penny tax dollars, the revenue department alleged potential public corruption and fraud in the establishment of the program.

The State Law Enforcement Division began an investigation into the program 2015, and in 2017, the state grand jury became involved in the investigation.

Richland County Council members will meet at 4 p.m. Friday, when they are expected to be briefed by attorneys about the Supreme Court’s ruling.

This story was originally published March 8, 2018 at 6:16 PM with the headline "Richland County might have to repay millions of penny tax dollars."