TIF Money: Where Should It Go?
By Alex Saitta
November 15, 2014
In July the school district received $1.5 million of the $3 million Clemson TIF settlement. That $1.5 million was deposited in the general fund account.
The districtís total property tax rate for this past year was 160 mills, which 108 mills or 67.5% is for operations and that tax revenue goes into the general fund account. 52 mills or 32.5% is for debt service and that goes into the debt service account to pay down debt.
I believe 32.5% of the roughly $1.5 million payment (about $485,000) now in the general fund account should be transferred to the debt service account. Simply, that is how the money was intended to be divided harking back to the state TIF law.
The way the TIF law reads is this: When the annual TIF revenue rises above the bond payment, that amount is considered surplus and the TIF is supposed to turn that surplus over to the county treasurer, and he then allocates the surplus to the city, county and school district.
The Clemson TIF was generating annual revenue of $1.7 million, and its bond payment was only $825,000. Each year the difference of $875,000 was surplus under the law.
The law states the annual surplus of $875,000 should have been given back to the school district, county and Clemson city. Those allocations are determined by the relative millage rates. Looking at the millage rates, the school district would have gotten 55%. Of that 55% or the school districtís share, 67.5% would go to the school districtís general fund account and 32.5% to the districtís debt service account.
With the county government, they would have gotten 20% of the annual surplus, and that money would have been divided into their general fund, debt service account, the library system and Tri-County Tech. (Look at your tax bill and its relative millage rates to see the allocations and their proportions.) The City of Clemson would have gotten 25% of the annual surplus, and it would have been allocated by law to their debt account and their general fund account.
That didnít happen each year, because the Clemson TIF violated the law and spent the surplus. The school district and county sued the Clemson TIF and asked the judge to restore some of the past surpluses and made sure the future surpluses are allocated to the county, school district and City of Clemson..
The way the settlement reads, the remedity is the county, school district and city of Clemson were restored the surpluses of 2011-12, and 2012-13. Then the surplus for this year of 2013-14, and the next three years will be given to the district as well.
The $1.5 million the district received -- the 2011-12, 2012-13 and 2013-14 surpluses, was put in the general fund account only. No money was put in the debt service account. The county, on the other hand, took those surpluses and divided them up to the general fund, debt service fund, library system and Tri-County Tech.
The county did the right thing in my book. If Clemson would have followed the law from the start and paid out the surpluses annually like they were supposed to, the countyís share of those annual surpluses would have gone to their general fund account, debt account, library system and Tri-County Tech each year. To their credit, the county divided up their restored surpluses that way.
The school district administration under the advice of the attorney put all the money into the general fund account. None was put in the debt account. The district administration is urging the board keep all of this TIF money in the operations account. Thatís wrong in my opinion.
Because of the legal wording in the order, I recognize it is a bit gray with the 2011-12, and 2012-13 surpluses, much less so with the 2013-14 surplus, but the right thing to do is divide those surpluses the way the county did, and the way they would have been divided had Clemson followed the law from the start.
My position is the district should divide the $1.5 million, with 67.5% ($1,015,000) going to the general fund and 32.5% ($485,000) toward paying down debt.
Next year the districtís bond payment will rise about $1.9 million from $24.8 million to $26.7 million. When the Greenville Plan was passed in 2006, the board passed the plan with a rising bond payment schedule. I wrote about this months ago, saying that big jump would happen in 2014. I was off by a year. Either I was given wrong information or I looked at the schedule wrong. The big jump in the annual payment will occur in 2015.
This is another reason why I think the districtís share of the surplus should be divided between the general fund account and the debt service account. That allocation would help soften the blow of that additional tax increase coming down the pike next year.