Lawsuit brings increased scrutiny to Richland County penny sales tax

Penny sales tax will raise $1-plus billion
Penny sales tax will raise $1-plus billion

Richland County’s handling of millions of taxpayer dollars raised and spent as part of the transportation penny sales tax came under increased fire Friday in the form of a lawsuit that seeks to halt any further spending of penny money until the county complies fully with the law, the suit says.

The suit was filed by Richland County resident Rusty DePass and the S.C. Public Interest Foundation.

Last month, the S.C. Department of Revenue halted the flow of all penny sales tax proceeds to the county until and unless County Council complies with various state laws governing local option sales taxes.

The State Law Enforcement Division, meanwhile, continues to investigate potentially criminal aspects of the penny sales tax operation, which was passed by voters in 2012 and already has generated tens of millions of dollars.

The lawsuit, mailed to county officials Thursday, echoes many of the same criticisms lodged by the revenue department. But while DOR and SLED could reshape how the penny is managed – and identify any possible criminal behavior – a lawsuit takes the issue into the courts and could raise the issue of whether the penny tax itself is legal and should continue.

The suit was filed by Richland County resident Rusty DePass and the S.C. Public Interest Foundation.

Although based in Greenville County, the foundation has for some 20 years filed more than 100 lawsuits statewide that seek to open public records and bring spending by public agencies into compliance with the law, said foundation lawyer Jim Carpenter. DePass is a Columbia businessman who has lived here since 1972 and is active in community and Republican issues. He campaigned ardently against the penny referendum in 2012.

DePass and the foundation earlier sued Richland County and the city of Columbia over tax breaks given to a half-dozen student apartment complexes in downtown Columbia.

The two also are behind another lawsuit filed in February against Richland County and the city of Columbia that alleges the governments misapplied state law in allowing lucrative tax breaks that attracted a half-dozen privately owned student apartment complexes to downtown in the past few years.

The lawsuit made public Friday accuses the county of violating its own ordinance by failing to audit penny tax spending annually. It cites the ordinance, which says that “all spending shall be subject to an annual independent audit to be made available to the public.”

A county spokeswoman had no comment Friday.

Richland County doesn’t comment on pending litigation.”

County spokeswoman Beverly Harris

“Richland County doesn’t comment on pending litigation,” said spokeswoman Beverly Harris.

However, last week, Richland County Council members said publicly they resented DOR’s suspension of its funding, blamed DOR for taking actions that they say could cost taxpayers money and authorized a private attorney to consider suing the agency. Council members have charged that DOR has not been specific in its concerns.

The lawsuit alleges that County Council has failed repeatedly to adopt “prior to the beginning of each fiscal year” a budget for expenditures of penny tax revenues for that year. It also asserts that the county has failed to follow state procurement rules in granting transportation projects.

Voters approved the penny sales tax in November 2012, and the first revenues starting coming in in May 2013.

As of April, $156.8 million has been raised, and $87.6 million has been spent, much of it on various transportation-related projects. The money raised was to go for the costs of developing and building “highways, roads, streets, bridges, greenways, pedestrian sidewalks, bike paths and lanes” and other transportation-related projects. The tax is expected to raise some $1.2 billion over 22 years.

The lawsuit also asserts that “millions” raised by the penny sales tax have gone to public relations contracts and other various non-transportation-related projects, including a project to create a Small Local Business Enterprise Program.

During an interview Friday, foundation lawyer Carpenter said his plaintiffs’ goals in the lawsuit of more transparency and compliance with state laws overlap with the goals expressed by DOR in letters DOR has sent to the county since December. For eight months last year, DOR conducted a detailed audit of county expenditures. It turned those results over to SLED.

We are addressing a lot of the same issues, just from different perspectives.”

Foundation attorney Jim Carpenter

“We are addressing a lot of the same issues, just from different perspectives,” Carpenter said.

“The DOR is addressing this from a government regulatory standpoint,” Carpenter said. “We are approaching this from the perspective of the taxpayer – the taxpayer who has shelled out this money and has a right to see that the public officials spending this money follow the law.”

Asked if he discussed his action with DOR before filing the suit, Carpenter declined comment.

DOR officials, asked whether they had talked with Carpenter, said Friday the lawyer had sent them a copy of the lawsuit but that was all.

In recent months, DOR has demanded that the county repay penny sales tax money that has been spent to establish and operate the Small Local Business Enterprise (SLBE) program, repay all penny sales tax money that has been spent for public relations purposes not directly related to transportation-specific projects and immediately hire an independent accounting firm to audit each year of the penny tax.

A letter from DOR to the county claims the agency has “uncovered millions of dollars of potential fraud, waste and abuse" resulting from illegal uses of the penny tax.

If the county is going to have a penny program, “It should follow the law.”

Richland County resident Rusty DePass

DePass told The State newspaper Friday he was against the penny sales tax in 2012, but if the county is going to have such a program, “It should follow the law.”