The TIF Lawsuit
By Alex Saitta
June 18, 2012
The Pickens County School District and Pickens County government joined together and filed a lawsuit against the City of Clemson concerning the city’s misuse of surplus revenue from the TIF agreement between the three parties.
“TIF” is short for Tax Increment Financing. First, a city creates a TIF area. Second, within the limits of the TIF plan, county government, school district and city tax revenue generated from the appreciation of property in that area is diverted from those taxing districts (county, school district, city), and is invested in redevelopment projects in the TIF area.
In 1998 a TIF was approved that created a TIF area in downtown Clemson. Seventeen redevelopment projects were listed in the plan with a construction cost of $9.4 million. In 2003, the Morrison Annex project was added with its cost of $1 million, boosting the total cost to $10.4 million.
There are two reasons why I voted to file the lawsuit.
One, the law says a TIF plan must list the total estimated cost, the cost will be paid for by the TIF revenue and the difference is considered surplus and that surplus is to be returned to the taxing districts.
Because of the tremendous growth of Clemson University, property in Clemson has appreciated significantly. As a result, the TIF revenue has sky-rocketed, and will total about $21 million.
There is $21 million in school district, county and city tax revenue flowing into the TIF. Under the plan only $10.4 million was to be spent on projects. The issue is, what will happen to the difference or the $10.6 million surplus?
Clemson is out to spend it all. Examining the plan, $800,000 was supposed to be spent on expanding Clemson city hall. In the end, $2.8 million was spent on the project. Clemson spent $1.7 million on Keowee Trail Park and it wants to spend another $1.3 million on “miscellaneous bike path construction.”
The county and district have countered, $21 million is coming in, but the plan limits the spending to $10.4 million, so the $10.6 million is surplus and must be returned to county and school district.
The second reason I supported the lawsuit is the law also states, when the annual TIF revenue is greater than the annual bond payment, that difference is considered surplus and that surplus must be returned to the taxing districts each year.
The city of Clemson floated $8 million in bonds to help fund the projects and the city is using the TIF revenue to make the bond payments. In 2010, for example, an $816,000 bond payment was due. The properties in the TIF area generated $1,630,000 in revenue that year. Thus, in 2010 the surplus was $814,000 ($1,630,000 revenue less the $816,000 bond payment). That surplus should have been returned to the county and school district. Clemson spent it all -- $816,000 on the bond payment and the $814,000 surplus on expanded projects.
In total, to payoff the bonds and interest will cost about $10.2 million. The TIF revenue will be about $21 million. Looking at it from this angle of the law, it also points to a $10 million surplus that should be returned to the taxing districts.
The district and county met twice with Clemson officials in hope to settle the disagreement. In the meeting I attended I said, either way we look at it, we see about a $10 million surplus or dispute. You want to spend it all. We feel it should be returned. How about we split the difference — the taxing districts get $5 million and Clemson keeps the other $5 million? Clemson rejected the compromise.
For the Pickens County taxpayer the issue is simple. Do you want more of your education and county tax dollars spent on constructing bike paths in Clemson and sidewalks to nowhere? Or do you want it spent on hiring teachers and improving county roads?
The county and school district was generous giving Clemson $10.4 million of its revenue to help revitalize downtown Clemson. Allowing Clemson to spend another $10 million is beyond the pale and the scope of the plan and violates the law.