As the Pickens Sentinel and Easley Progress reported last month, county council is also threatening legal action against the City of Clemson. County officials contend that Clemson has exceeded the bounds of the original TIF contract.
School board members voted unanimously to join that legal action against the city of Clemson.
Board Chairman Alex Saitta said the move is “a last resort.”
At issue is an estimated $10 million in collected property appreciation, a surplus over the original TIF agreement – and just who controls those funds, board members contend.
William F. Halligan of PA firm Childs & Halligan spoke to the board about the issue during their April board meeting.
Tax Increment Financing is a method used by cities to finance the construction of desired improvements in ordered to encourage economic development.
Under the agreement, a TIF district is created and that area is placed under the TIF property value agreement.
Under a TIF agreement, the taxing bodies agree that any county or school district revenue generated from appreciating property within the confines of the TIF district will not come back to the county or the school district, but will be reinvested in the TIF district to fund projects.
“The school district and the county give up some of their future tax revenue to the city of Clemson to help them develop that section of downtown,” Saitta said.
In 1998, the City of Clemson adopted a redevelopment plan describing the TIF district area, 17 specific projects with an estimated cost of $9.4 million, a TIF bond limit of $8 million to be repaid within 15 years, and many other non-potential sources of revenue, Halligan told board members.
With the interest on the bonds added to the $9.4 estimated project cost, the adjusted project cost is $11.4 million, Saitta said.
“We believe that when a judge looks at this agreement, they’re going to see the pledge coming from the county and the school district was $11.4 million,” Saitta said. “The first $11.4 million of appreciation that occurred, the school district wouldn’t take and neither would the county. We’d put it back on the project.”
Clemson has been experiencing tremendous growth over the past few years, Saitta said.
“All of the property in Clemson’s appreciated substantially ,” he said. “The TIF revenue is turning out to be substantial. It’s not $11.4 million – it’s probably $21 million."
Clemson officials argue that the redevelopment plan calls for - and state law allows – the city to use all of the surplus for the projects, regardless of project descriptions, project cost and sources of funding.
Halligan said the statute requires that surplus must be redistributed back to the original taxing entities.
“The school district would get a portion, the county would get a portion and the city (of Clemson) would get a portion, depending on millage,” Halligan said.
Over the life of the TIF agreement, which expires in 2017, between $8.6 million and $10 million in surplus would be generated, he said.
Clemson officials have said they intend to spend the entire surplus generated each year until the TIF expires in 2017, Halligan said.
“That excess or surplus $10 million we believe the law says should be returned to us,” Saitta said. “They believe they can spend it all.”
The school district is entitled to about half of the surplus, Halligan said.
“Our view is that the redevelopment plan limits the city’s discretion over the tax increment,” Halligan said. “The city is restricted to the TIF bond proceeds of approximately $8 million and the other additional sources of funding that were listed in the plan to pay the TIF project cost of $9.4 million, as represented to the city, the county, and the school district.”
The plan’s “key purpose” is to notify the public and establish the terms by which Clemson is allowed to use the tax rates of other entities to fund those TIF projects.
“The plan restricts the ciy and is not a license for the city to take all of the incremental TIF revenue and use it for any city capital improvement,” Halligan said.
“In our view, the city has not acted lived within those limits, and that has injured the district financially,” he continued. “We recommend to you that you participate in conjunction with the county to asset your legal interest in this case.”
Trustee Dr. Herb Cooper urged the district resolve the issue with city and county officials through mediation.
“I think all of us would like to make sure we have a fair settlement,” Cooper said. “I would hope that the three groups can come together and come up with something fair in a settlement. I disapprove of filing suit against the city of Clemson.”
Saitta said district and county officials had met with Clemson city officials and offered to “split the difference,” accepting $5 million of the surplus.
That offer was rejected by city officials, Saitta said.