As property tax bills are sent out across The T&D Region, homeowners are finding the tax relief they long have sought.

Conversely, local governments and school boards are finding themselves scrambling to deal with the effects of the property tax relief bill in funding operations.

Orangeburg County Auditor Roger Cleckley said he was on a cruise with a friend when the subject of property taxes was brought up.

"Roger, my tax bill is substantially lower than last year. Are you sure it is right?" the friend asked Cleckley. The auditor told the man he received the correct bill.

Cleckley believes the tax break is a blessing for the taxpayers of the county, He notes that higher-valued legal residences will experience a dramatic change from last year's tax bills.

Owners of homes valued at $100,000 or more have seen the biggest drops in their tax bills, while those with homes valued at less than that amount see only modest savings.

For example, the owner of a $50,000 home in Orangeburg Consolidated School District 3 will only save $59.80. By comparison, someone residing in a $200,000 home in the same district will reap $731.20 in savings from 2006. These figures are according to projections made by Orangeburg County Treasurer Steve Summers.

Despite the savings for taxpayers, Cleckley said the property tax relief bill, also known as Act 388, is hurting local governments.

Orangeburg County Council Chairman Harry Wimberly is one of the local officials feeling the hurt of Act 388, which places a cap on how much local governments can raise property tax millage. Wimberly calls the cap an unfunded mandate from the state.

"It caps our ability to go forward with the needs of the county in a way that limits the quality of life that we can provide our citizens," Wimberly said.

The millage cap is based on the consumer price index, which measures inflation, plus the amount of population growth a county or school district has had in the past year. This year, Orangeburg County had a CPI of 3.2 percent and no population growth, which made it difficult for Wimberly and other council members to construct the county budget.

Wimberly said the county had to work hard to find alternative ways to fund the county budget, such as raising the cost of business licenses.

Orangeburg Consolidated School District 4 Superintendent Dr. Darrell Johnson says Act 388 has placed a burden on him and staff. Johnson said he understands the need for tax relief but wonders if it comes with the hefty price tag of not being able to fully fund education in the state.

Johnson also said the law reinforces the disparities between poor and wealthy school districts by relying on their tax bases. He believes the law makes the faulty assumption that districts were adequately funded at Act 388's inception.

Johnson said the tax burden has been shifted to small business owners, a move he fears may drive more out of business, further jolting the tax base.

"This was not a well-thought-out plan. It was an election year plan to say we understand that many people need property tax relief. However, a fundamental principle of being American is that we support education," Johnson said.

How relief works

Act 388 was passed last year during an election year for many members of the General Assembly. The law eliminated the school operating component from tax bills on owner-occupied homes. To fund the tax break, the state voted to increase the state sales tax by a penny on each dollar spent. The penny increase first took effect in June.

The money from the penny sales tax increase is used to reimburse school districts the funds they previously received from the school operation component of property taxes.

The tax break does not apply to any commercial, vacation agricultural or rental properties. Some people thought all property would receive a tax break, according to Bamberg County Auditor Margaret Meyer.

"People didn't understand the exemption was only on their legal residence. A lot of business owners complained that they got no exemption," Meyer said.

Calhoun County Administrator Lee Prickett said his office has not received any complaints. Aside from the property tax relief, Calhoun County residents reaped the rewards this year of not seeing a millage increase by either the county or the school board.

Will it be enough?

With homeowners happy and local governments displeased, the question Orangeburg County Treasurer Steve Summer poses is will the state be able to sustain the tax relief over time.

For the moment, Summers projects it will be enough.

He said the amount the county is expected to take in from the extra penny on the sales tax is about $10 million. That is the roughly the same amount that is going to be divided between the county's three school districts.

Around 1998, the state could not sustain the property tax relief it granted three years earlier. That law capped owner-occupied residences from being taxed on school operating costs on the first $100,000 of a home's value. The relief was made through a surplus in the state budget, which did not last.

The result of that inability was the General Assembly had to cap how much it could reimburse school districts.

"Will the penny be enough?" is the multimillion-dollar question, according to Summers.

The future of 388

Next year, Orangeburg County will undergo its first run of property tax reassessment under Act 388. The reassessment process takes place every five years to determine if an individual property has gone up or down in value. Under 388, as long as the owner of any property retains the property, the reassessment for tax purposes will be capped at a 15 percent increase over the previous assessed value.

For example, the owner of a property last assessed at $150,000 can only be see the property assessment rise to $172,500, no matter how much its market value increases. As long as the owner continues to own the property, the cap will stay in place. If the property is sold or transferred, the new owner will not be subject to the cap and would have to pay taxes on the full value of the property.

Calhoun County Assessor Steve Hamilton calls this process a reverse Robin Hood because it allows many individuals with higher-value properties to be exempt from being taxed on a sizable portion of them. At the same time, individuals with lower-value properties will be taxed on the majority of their value.

"Equity is a thing of the past. It also saddles new buyers with higher tax bills," said Hamilton about the cap.

Orangeburg Consolidated School District 5 Assistant Superintendent for Financial Services Donnie Boland says schools will continue to struggle financially next year. Boland said the distribution for homestead exemption funds will change next year in accordance with Act 388. The homestead exemption capped school operating taxes for homeowners 65 years or older from being included on the first $50,000 of their residences.

Next year, instead of the state giving school districts back an exact reimbursement from the homestead exemption, the state will now use a formula. That formula will be based on the weighted number of students plus the number of them in poverty and will be used to determine how much money districts will get.

"Our initial assessment shows we're getting less," Boland said.

With the pros and cons of 388, Cleckley thinks the Legislature will have to look at tweaking it within three years and making adjustments.

"The economy is not that great presently. When the economy goes bad, how do they fund the needs of the schools? Where are they going to get the money from?" he said.

T&D Staff Writer Lee Tant can be reached at ltant@timesanddemocrat.com and 803-534-1060.

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