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Is S.C. Poised to Enter New Incentives Waters?

In what might be a first for South Carolina, a private developer and contractor hope to get at least $3.5 million in taxpayer-supported incentives to help build an upscale residential community on Hartwell Lake near Clemson University.

The S.C. Budget and Control Board voted 3-2 vote in February to allow the Oconee County Council to issue up to $5.5 million in special source revenue bonds for Pointe West, a proposed development the property owners say would include 375 single-family homes, an assisted-living center and a "town center" with several stores.

The bonds would be repaid with fee-in-lieu-of-taxes (FILOT) revenue generated from four "phase two" buildings and three yet-to-be-built "phase three" buildings in the adjacent Highpointe of Clemson student condominium development, said Tom Winkopp, the project co-owner and project developer.

Together, the Highpointe and Pointe West projects – located on 335 acres on the lake’s west bank about two miles from the Clemson campus – would be valued at about $350 million when completed, Winkopp said in a 2008 press release.

"We’ve spent a lot of money out there and will continue to spend a lot of money out there," Winkopp told The Nerve in a recent interview. "This (the bond sale) will hopefully help us get over the hump."

"It’s spending money to make money," Neal Workman, the project’s general contractor and project co-owner, told The Nerve. "This is nothing more than the private sector and the public sector coming together to make something happen that wouldn’t otherwise happen."

Workman told the Budget and Control Board at its Feb. 23 meeting that he anticipates the site will have about 3,000 residents within four years.

But Gov. Mark Sanford, one of five Budget and Control Board members, said during the meeting that approving the bond sale – which he noted normally is reserved for industrial projects – would be "opening up a Pandora’s box."

"I can guarantee you it will be replicated," Sanford told Workman. "I’m not begrudging your project at all, but it does set precedent."

Neither Workman nor the project’s bond attorney, Dan McLeod of the McNair Law Firm, could name another residential project in the state that received a similar deal.

Sanford said he didn’t believe it’s good public policy to "to have one retail developer favored over somebody two miles down the street." At one point during the approximate half-hour debate, he referred to, though not by name, the proposed Okatie Crossings shopping mall in Jasper County.

The developer of the project, Florida-based Sembler Co., had sought a change in state law to allow it to receive refunds of half of the state sales taxes generated at the proposed $400 million mall. But the bill died last month after stiff opposition from a coalition of groups, and a local sales tax has been proposed as an alternative.

Sanford and state Comptroller General Richard Eckstrom voted against allowing the Oconee County Council to issue bonds for the Pointe West project. S.C. Treasurer Converse Chellis; Senate Finance Committee Chairman Hugh Leatherman, R-Florence; and House Ways and Means Committee Chairman Dan Cooper, R-Anderson, voted in favor of it.

Like Sanford, taxpayer advocate Cary "Bo" Horne of Seneca doesn’t approve of the proposed bond sale. He sent a letter to the Budget and Control Board before the February meeting that included the names of more than 40 other Seneca residents opposed to the sale.

"The designated purposes for bond proceeds are considered frills by the average citizen," Horne wrote. "Unemployment is approximately 15% in Oconee County. We believe making an outright gift of tax money to a private developer for use in this project is offensive to the jobless and those losing their homes to foreclosure."

"This whole project sets a terrible precedent for the state," Horne told The Nerve in a recent interview.

County Council has given first-reading approval to the bond sale, according to Horne and Workman. The Nerve sent a written list of questions about the project and bond sale to council Chairman Reg Dexter, Interim County Administrator Gene Klugh and County Attorney Thomas Martin.

Martin in a written response declined to comment, referring questions to Klugh and Dexter, who didn’t respond.

Both the Highpointe and Pointe West projects would be located in a designated "multi-county business park," Winkopp told The Nerve. Under state law, that allows property owners and participating counties to enter into FILOT agreements that typically result in substantial property tax savings to the owners.

The designation also allows counties to issue special source revenue bonds for park projects, to be repaid with FILOT proceeds.

FILOT agreements usually lock in millage rates and allow property to be assessed at reduced rates for the life of the agreement. Winkopp said the proposed agreement for the Oconee County projects likely would run 15 or 20 years, adding that although the millage rate likely would be fixed, the normal property assessment rates wouldn’t change.

Workman said he couldn’t estimate the property tax savings under the proposed FILOT agreement, noting that county officials have not "given us any documentation whatsoever yet."

Workman said the county council and school board support the proposed bond sale. He said the bond proceeds will help to build roads and make other infrastructure improvements, which he contends would quickly raise the market value of the undeveloped Pointe West property from about $6 million to $22 million.

That, in turn, would result in more property taxes to the county and school district, along with increased property taxes from homes that are built, Workman said. The Pointe West project is expected to take 15 to 20 years to complete, according to Winkopp.

Workman said he and Winkopp are not seeking the bond sale because the project is in any financial trouble, noting that the bank "looks at it as a great partnership." Although the wording of the bond sale proposal allows the county to issue up to $5.5 million, Workman said the sale would be limited to $3.5 million so that the bonds can be repaid with anticipated FILOT revenue.

"That’s just a drop in the bucket of what’s being built out there," said Winkopp, noting that a 1-million-square-foot abandoned textile plant had to be demolished and the site cleaned up before construction can begin.

Critics contend that the wording of the proposed bond sale allows the proceeds to be used for such things as landscaping, streetscaping and walking paths for the development.

The single-family homes would sell on average in the range of $200,000 to $400,000, Workman said, adding that lakefront homes usually command higher prices. As a comparison, the four-bedroom, four-bath condominiums in the adjacent Highpointe student housing development are selling from $194,900 to $206,900, according to an online price list.

That community currently serves 542 students in the "Bridge to Clemson University" program, with the number to grow next year by another 100 students, Workman said during the February meeting. The program allows accepted students to start their freshman year at Tri-County Technical College, then transfer, if they meet academic requirements, to Clemson for their remaining years.

Besides nine existing student condo buildings, Highpointe also features a 7,000-square-foot clubhouse overlooking Hartwell Lake, along with a "lagoon-style" pool connected to the "first Lazy Lagoon River in South Carolina," according to sales literature. It touts the project as a "unique master-planned walkable waterfront community unlike any other student housing development."

Reach Brundrett at (803)779-5022, ext. 106, or rick@scpolicycouncil.com.

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