SC sales-tax baseline bill for roads could be reality

dworthington@heraldonline.comJanuary 14, 2013 

If former York County Manager Jim Baker’s idea becomes reality, it’s unlikely the required legislation will be called the Baker bill. It is also unlikely that anything built using his idea will bear his name.

But if his idea is adopted by the state, it is a legacy that could affect many South Carolina residents, creating jobs while building needed roads and bridges.

As proposed, his idea is 11 pages long. Baker, who is trained as a lawyer, crafted the idea in the language of the Legislature with all the right sections and subsections, all the A’s, B’s and C’s, the ones, twos, and threes, and the appropriate citations and legal histories.

The idea, however, is really quite simple. If a project such as a road, bridge or even a power line results in the state collecting more sales tax from an area, then a percentage of the new sales tax could be used to pay for the project. The state already allows this type of financing to be used when increased property tax is the source of revenue.

His bill would establish a sales-tax baseline in the area where the improvements are planned. Each year the baseline would be adjusted for inflation. The state would collect what it has collected in the past, plus whatever increase is attributable to inflation.

Baker has also written restrictions so that counties and school districts would not see a decrease in sales-tax revenue because of a project. The 1-cent school tax and the 1-cent infrastructure tax – called Pennies for Progress in York County – would be exempted.

The new revenue would be based on the 5-cent general sales tax. But Baker goes a step farther, proposing a limit on the amount of incremental sales tax that could be applied to a project at 75 percent of the sales-tax growth. The additional 25 percent would go the state Legislature.

And the 75-percent figure could even be less as the plan would allow the Legislature’s Joint Bond Review Committee could lower the percentage. The committee would consider all projects proposing to use this type of financing to make sure they create jobs, that the revenue projections are valid and, most important, that the project is not just shifting sales tax receipts among competing jurisdictions.

The resulting funds could pay off the bonds used to finance the new road or bridge.

His idea comes at a critical time as the Legislature debates how South Carolina should pay to build and maintain its roads. No one seems to want to increase the state’s gas tax – the usual source of revenue for road improvements. Having one of the lowest gas taxes in the country is as sacrosanct as the state’s first-in-the-South primary. It’s untouchable.

State Sen. Vincent Sheheen, of nearby Kershaw, and Harvey Peeler, who represents a portion of York County, want to get rid of the state’s Infrastructure Bank. The bank, created in 1997, has steered between 60 and 70 percent of the road funds it controls to three counties: Charleston, Horry and Greenville, records show. Supporters say the bank has funded badly needed, large projects beyond the scope of normal state funding.

Baker, whose last day as county manager was Friday, has worked hard to push his idea. The idea was conceived as a way to fund the extension of Dave Lyle Boulevard east to U.S. 521. While many say the project has merit, it lacks funding.

Just last week a study by Winthrop University said extending the road has the potential to capture sales tax revenue that is now being collected in North Carolina from South Carolina residents. The assumption is that if the road is built, people will shop closer to home.

Baker said the numbers in the Winthrop study help validate his idea.

The Winthrop study did not consider any business growth because of an extended Dave Lyle. That was beyond the scope of the study. But the researchers acknowledge there indeed would be business growth, and that’s what Baker’s idea is based on.

He acknowledges it’s not a new idea. About 13 states and the District of Columbia have some form of tax incremental financing using sales tax. It’s generally used to pay for public improvements around sporting venues, he said.

Had it been in place years ago, it could have been used to make the road improvements around Carowinds.

The idea faces tremendous hurdles.

One, it lacks its primary champion, Baker. But even if Baker had stayed, he could not have sold it on his own. This idea needs to be embraced by people from Charleston, Greenville, Myrtle Beach and all points in between. As state Sen. Wes Hayes, R-Rock Hill, said there are lots of projects that could benefit from the idea. “There are allies we don’t know about,” he said.

Second is the Legislature’s long-standing aversion to letting anyone else spend sales tax money. While collected locally, it is to be used for the good of all residents, they say.

Yet when you consider that the proposed plan would increase, not decrease, sales tax from a specific area, that the result would be better roads, bridges and other infrastructure, and jobs would be created, it would seem that the positives outweigh any negatives.

Don Worthington 803-329-4066

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