Taxes are going up. Why a York County lawsuit is costing Fort Mill, Tega Cay schools

File video: Fort Mill School District residents ask for higher impact fees

Residents showed up for a public hearing before the York County Council in June over impact fees in the Fort Mill school district. Impact fees are charged on new residences built within the district. The new fees were approved on July 16.
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Residents showed up for a public hearing before the York County Council in June over impact fees in the Fort Mill school district. Impact fees are charged on new residences built within the district. The new fees were approved on July 16.

A lawsuit between home builders and York County is costing taxpayers in Fort Mill and Tega Cay.

The Fort Mill school board voted to increase its tax rate for the repayment of debt, due to uncertainty from the lawsuit. Builders have sued, challenging the development fee raised in July for new homes and apartments within the Fort Mill school district.

“We really have no choice,” said school board chairwoman Kristy Spears. “We are back in the same boat that we were in before.”

The board had hoped its tax rate for debt repayment would decrease when, in July, York County upped the development fees, known as impact fees, which are charged on new homes and apartments.

The cost to that new construction has been $2,500 per residence since 1996. The county set it at more than $18,000 per new home and $12,000 per new apartment built.

But then, state and county home builder groups, along with builders Shea Homes and Soni Construction, filed suit with the state supreme court, arguing the impact fees shouldn’t be allowed. The case argues the costs are too high and were come up with arbitrarily.

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Attorneys for those plaintiffs said they are waiting to hear back from the county and county council members, all listed as defendants. Spears said the school board can’t get into details about the suit.

“With the pending lawsuit outstanding, there’s really not a lot that we can talk about,” she said.

The board can and must discuss funding, which is needed with or without the impact fee revenue. The board voted to increase its debt service rate by six mills, having anticipated it might have to go as high as 14 mills. The district is collecting impact fee revenue but can’t operate as if they have it yet, due to the lawsuit.

“Essentially, it’s as though we don’t,” Spears said.

The school board heard several debt millage options at its Aug. 28 meeting. They also heard updates on student enrollment, which just topped 16,000 for the first time and created two more enrollment freezes starting Sept. 1. Considering the ongoing lawsuit, the board decided to increase millage from 115 to 121 mills.

“The board understands, as with any other lawsuit, it is not possible to know how long this challenge will remain unresolved and the district cannot prudently use the impact fees collected while their validity remains in question,” said Joe Burke, district spokesperson.

The district worked with its financial advisers to come up with a “reasonable plan” for building the new schools from a bond referendum earlier this year, Burke said, with “as minimal impact on the millage rate as possible.”

In the “tax implications” section of information provided by the district on its website, and used to inform the public as the county debated impact fees, the stated idea was that increased fees would mean reduced debt services taxing.

“The passage of the impact fee could have a large effect on the residential and commercial taxpayers,” it reads. “Depending on the amount of the fee approved by the county council, tax payers could see up to a 54 percent reduction in their current debt service tax assessments. The money collected from the impact fees will go directly toward building projects, resulting in a debt millage reduction for taxpayers.”

Council then proceeded to recommend the highest amount allowed by state law.

County estimates showed the 2018 bond referendum, without the impact fee increase, would add 14 mills of debt service. The bond was projected to cost someone owning a $250,000 home $12 per month the first year, $8.30 per month for following years.

The latest millage increase is a little less than half of that estimate.

Even with the higher fees, more people are coming to Fort Mill, Tega Cay and unincorporated York County. Already since the change in July, impact fee collection totals top $2 million.

“It has not slowed down,” Spears said of residential growth. “The houses and the apartments are proceeding.”

If the lawsuit is resolved in favor of the higher impact fees, the district will have a revenue pool to access in addressing its capital costs.

“If and when this gets resolved,” Spears said, “then we would have that revenue source to pay for those needs.”

Since 2004, the district has passed six bond referendums to build new schools. Those decisions total almost $629 million.

John Marks: jmarks@fortmilltimes.com; @JohnFMTimes
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