February 1, 2023

The Nerve

Where Government Gets Exposed

Would Sanford Veto Local Retail Subsidies?

The NerveIt’s a very big “if.”

However, if proposed tax subsidies for a large retail development planned for the Lowcountry make it through the General Assembly, the incentives would pose a philosophical quandary to Gov. Mark Sanford.

On the one hand, Sanford has taken a well-documented stand against incentives for retail projects. He contends that such subsidies shift, rather than increase, buying patterns.

On the other hand, the governor likewise has advocated for deference to home rule. He believes that local decisions are best made locally.

So, what will Sanford do if the incentives, written into Senate bill 1054 in the form of a potential 1 percent local option sales tax, clear the Legislature when lawmakers reconvene in Columbia next week to tie up loose ends from the legislative session?

The House and Senate have passed different versions of the bill and must agree to a compromise edition for it to advance to the governor.

Sanford’s spokesman, Ben Fox, says the governor is reserving judgment until the legislative process concludes.

“We very rarely come out definitively on a bill at this stage in the process,” Fox said in an e-mail.

But, elaborating, Fox acknowledged the dichotomy that the legislation could create for Sanford.

The governor has said “that he has serious concerns about any kind of taxpayer-funded retail incentives,” Fox said, “while at the same time pointing out that this administration has often been a local/home-rule administration, letting the local level (closest to the people) decide what to do for that sphere of governance.”

A separate legislative proposal that was folded into S. 1054 could present a similar dilemma to the governor.

That measure would allow municipalities in certain counties to impose a 1 percent local sales tax. The provision would apply only to jurisdictions within counties that have a per capita income of at least $40,000 and that collect a minimum of $5 million in state accommodations taxes in a fiscal year.

Revenue from the levy would be earmarked for tourism projects and property tax offsets.

Local voters would have to approve both the retail and tourism sales tax increases in a referendum.

Generally speaking, though, Sanford opposes tax hikes.

S.C. Sen. Tom Davis, Sanford’s former chief of staff and a legislative ally of the governor, cites the home rule side of the equation in guessing that Sanford would “probably be OK” with the bill if it passes.

If so, he could sign it or let it become law without his signature.

If not, Sanford could veto the measure.

In that case, it would be up to the Legislature to override the governor, an action lawmakers have taken with the great majority of Sanford’s vetoes.

In the interim, attention on the issue will be fixed on the Legislature. Lawmakers are scheduled to go back into session for up to three days beginning Tuesday to wrap up their work from the regular session, which ended Thursday.

One day before that happened, the House finalized its version of the bill and sent it to the Senate for concurrence with changes the House had made to it after the Senate passed the legislation March 30.

The Senate did not agree to the House draft before the clock ran out on the regular session.

So, senators could opt to concur with the House version next week. Or, a conference committee with representatives of both chambers could be appointed to try to broker a compromise bill that both bodies would be asked to approve.

Accurately predicting what lawmakers will do on this one arguably is more difficult than trying to foretell what Sanford might do with it.

The Legislature’s actions thus far on the bill illustrate the point.

Indeed, S. 1054 has been a strange, on-again-off-again odyssey through the sausage-making factory of the State House.

Sen. Clementa Pinckney, D-Jasper, is the chief sponsor of the bill. He introduced it early in the session.

The legislation originally was designed to funnel state sales tax rebates to the Florida-based Sembler Co. to subsidize a gigantic, upscale mall the retail developer was planning to build in the Lowcountry.

Dubbed Okatie Crossings, the mall was to be located on the Jasper-Beaufort counties line, mostly in Jasper, at the intersection of U.S. 278 and S.C. 170. The site, off Interstate 95, is near existing retail outlets not far from the towns of Hardeeville and Bluffton in a region with historically high poverty and unemployment.

But the idea of Sembler receiving subsidies from state sales tax revenue – one of the main funding sources for basic operations such as education and law enforcement – for a shopping mall that would compete with established businesses provoked withering opposition.

It started with Sen. Greg Ryberg, R-Aiken, and grew into a broad coalition that included Sen. Davis andThe Nerve’s founding organization, the South Carolina Policy Council, as well as the Coastal Conservation League and other nonprofit groups.

With Davis running point, the opponents vanquished a group of lobbyists and other State House insiders, whom Sembler had hired to try to secure handouts from the Legislature, and defeated the company’s would-be sweetheart deal.

The bill that emerged from the Senate is a very different animal.

It would allow for a local option sales tax to support a large retail project, but only if voters in a county or municipal election approve, and only if proceeds from the tax hike pay for public infrastructure.

The legislation contains additional requirements, too, including a $100 million capital investment by the developer and full-time employment of 1,250.

Davis says the House stripped out the protections for taxpayers that the Senate had put in the bill.

Nevertheless, he says Senate leaders on both sides of the aisle have assured him “that it’s going to be the Senate version or nothing” should the legislation go to a conference committee next week.

“It was a tremendous reversal of something that had tremendous momentum,” Davis says of the path the bill took through the Senate.

Along the way, Sembler reportedly allowed an option it had to purchase most of the project site to lapse.

But Sembler still plans to develop part of the area that the company controls, according to the Hilton Head Island Packet. And the owner of the rest of the land, Tennessee-based Horne Properties, has decided to develop that real estate itself.

Meanwhile, folks in Hardeeville, the most widely speculated jurisdiction for a local option sales tax under the bill if it becomes law, are keeping their eyes on Columbia to see what happens next week.

“I’m not sure,” Hardeeville Mayor Bronco Bostick says when asked if Hardeeville City Council members would support a referendum to decide the matter. “I’ve never polled them about it.”

What’s the general consensus among his constituents about the idea?

“I’m not sure,” Bostick says. “But I have to tell you what – we need jobs. We need Sembler. We need that mall, and everybody’s just waiting to see what’s going to happen. And the only thing we’re doing is wishing and praying for the best.”

Reach Ward at (803) 779-5022, ext. 117, or eric@scpolicycouncil.com.


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The Nerve