Last summer, counties in South Carolina were put in the unenviable position of facing the loss of a revenue stream they have long dedicated to the needs of the public. The S.C. Supreme Court’s Burns v. Greenville County decision restricted our ability to rely on user fees that have been in place for more than three decades.
These fees, though nominal in cost, have made significant impacts on communities throughout the state.
The Home Rule Act (Section 4-9-30) gave counties the authority to impose uniform service charges. Prior to the Burns decision, the courts had specifically allowed road fees in Brown v. County of Horry (1992) and Campbell v. City of Charleston (1997). Following Campbell in 1997, the General Assembly enacted Section 6-1-300(6), which specifically defines a service or user fee. And until 2021, counties were imposing such fees in good faith, relying on the widespread interpretation of state law and Supreme Court precedents.
Counties are responsible for maintaining county roads, which in some counties cover as many miles as state-maintained roads. The uniform user fees have been widely accepted as the fairest and most equitable way to provide for local roads. These fees are accounted for and kept separate from other county funds, making it clear to everyone that they are used only for the stated purposes for which they were adopted.
In the Burns decision, the Supreme Court said the law actually required that fee payers must receive a different benefit, not merely a greater benefit, than people who don’t pay the fees. This opinion effectively outlawed many user fees, particularly road use fees. As a result, counties appeared to have no recourse but to raise property taxes to replace the revenue lost.
In addition, plaintiff’s attorneys saw the Burns decision as an opportunity for class-action lawsuits and began seeking 10 times the fees collected in damages from county and municipal governments. These lawsuits subject taxpayers to potentially large judgements ordered by the court, which would have to be paid for by property taxes. The road use fees in jeopardy range in cost from $10 to $50 per vehicle.
This expense to individual taxpayers pales in comparison to the revenue that would be required to be collected via property tax increases if such judgements against counties were to be successful. In other words, plaintiffs are suing local governments and potentially subjecting taxpayers to an exponentially greater financial liability compared to the lesser financial burden that is currently imposed on them by the user fee.
Most counties in South Carolina do not have the tax base to satisfy these potential judgements or pay for the services without raising property taxes on their constituents.
Consider, for example, a county that charges its residents $15 per vehicle for a road use fee, which generates 3% of its annual budget. If this county lost a lawsuit challenging its road use fee, the county could face damages for a single year amounting to 30% of its budget (and the damages likely apply to multiple years of fees). Services provided to citizens would have to be cut, and the county would be forced to raise property taxes to pay off the judgement and provide services. The increase in property taxes would surely be a greater financial burden on citizens than the meager $15 fee that was in place.
The Burns decision forced local governments to work with the Legislature to find a legislative solution to a problem that was not foreseeable before 2021. S.233, which is awaiting Gov. Henry McMaster’s signature, is not a tax increase. In fact for many counties, it is the only option available to avoid a potentially catastrophic property tax increase on their citizens.
Joe Passiment is chairman of the Beaufort County Council. Butch Kirven is a member of the Greenville County Council.