Richland County to repay millions in misspent penny tax funds

After South Carolina’s highest court scolded Richland County for “many suspect expenditures” of dollars that were meant specifically for transportation projects, the county will begin to repay those funds out of another pool of taxpayer money.

The county will start with a $1 million withdrawal from its general fund balance — which is, essentially, the county’s reserve funding account. That money will be transferred to the transportation fund. County Council members approved that transfer Tuesday.

The $1 million is only a partial reimbursement. The county will continue to transfer money from the general fund to the transportation fund in the coming years to repay expenses that the state Department of Revenue and S.C. Supreme Court said should never have been paid for with money collected from a 1 percent sales tax for transportation projects.

In a resolution approving the $1 million transfer Tuesday night, County Council members promised to continue to make transfers from the general fund “until the transportation fund is completely reimbursed.”

About $3.4 million in already spent penny tax funds are at stake, according to county transportation director John Thompson. They include the $25,000 a month that was paid to each of two public relations firms, Campbell Consulting and BANCO Bannister Co., plus money that was spent to establish a countywide Small Local Business Enterprise program, some attorney fees and a mentor-protege program.

Last March, the S.C. Supreme Court declared Richland County had made “many suspect expenditures of Penny Tax funds” and ordered a lower court to require the county to repay any illegally spent transportation dollars.

That ruling was based on an extensive audit by the revenue department that flagged numerous expenses it said violated the S.C. Transportation Act and also accused the county and penny tax leaders of possible public corruption. As a result, the State Law Enforcement Division was called on to investigate the penny tax program, but no charges have come out of the investigation.

With the transportation dollars being reimbursed from the county’s general fund, Richland County property owners essentially are subsidizing the penny program and transportation projects. Property taxes paid by residents and businesses account for the majority of the general fund, whereas the transportation penny sales tax is paid by anyone, including nonresidents, who buy things within the county. The general fund is the pot of money that pays for most day-to-day operations and services in the county.

The transportation penny sales tax, passed by voters in 2012, was expected to generate more than $1 billion over 20 years. It has been 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, widening Clemson and Hardscrabble roads in Northeast Richland and paving dirt roads throughout the county. The penny tax also provides millions of dollars in funding to The COMET public bus system.

Also on Tuesday night, County Council members voted to commission an independent audit of all spending by the transportation penny program since the program began in 2012.

Editor’s note: This story has been edited to more precisely define the county’s general fund balance.

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Sarah Ellis has reported on Columbia and Richland County since 2014. She graduated from the University of South Carolina with a degree in journalism. She’s probably skipping happy hour to go to a County Council meeting.