Inside the Penny Tax: What Went Wrong?

December 23, 2015

Investigative Reports

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pennies

Embroiled in scandal, penny problems began immediately

Like any county, parish or borough, Richland County has a professional, functioning procurement department with rules, procedures and protocol governed by law that ensures fairness and transparency.

Unlike any county, parish or borough, when the penny sales tax passed in 2012 thanks to the most controversial, mismanaged elections in living memory, County Council wrote an ordinance – No. 039-12HR – giving it project award authority on its own and allowing it to create a separate, independent Professional Development Team (PDT) to run the billion-dollar project.

Now the focus of a SLED investigation and allegations of corruption, misappropriation and fraud thanks to a Department of Revenue audit, the PDT team has operated since its inception out of sight and out of mind, playing by its own rules and overseeing its own procurement outside existing channels and without requiring the approval of the county legal department, sources inside the county tell The Nerve.

AN ENTITY UNTO ITSELF

Not only does the PDT operate outside the rules of the county government oversight, it operates literally outside the county building, in a separate location rented specifically for them, a snazzy brick building at 201 Arbor Lake Drive in the Fontaine Business Center well away from downtown.

According to the PDT contract, $560,878 was authorized as a “mobilization fee” to “locate, lease and set up office space” with a minimum of 20 individual offices to include:

  • Senior Program Manager
  • Deputy Program Manager
  • Public Information Officer
  • Program Administration
  • Construction Engineering Manager
  • Assistant Program Manager (2)
  • Right-of-Way
  • Program Controls Manager
  • Procurement
  • 4 Project Managers
  • Financial Manager
  • Utility Coordinator

Additional space for “up to” four interns and “space for support staff” also is requested, as is the requisite furniture, computers, copiers, supplies, etc.

The marching orders for the use of penny tax money is clear. According to Section 1 (c) of the ordinance, the tax should be used for “financing the costs of highways, roads, streets, bridges, greenways, pedestrian sidewalks, and bike paths and lanes and other transportation-related projects facilities, and drainage facilities related thereto, and mass transit systems operated by Richland County or (jointly) operated by the County, other governmental entities and transportation authorities.”

There you go.

As DOR director Rick Reames stated in his letter to the county alerting them of irregularities dated Dec. 3, that language is a “clear indication by both the referendum and the ordinance that Penny revenue expenditures be limited to specific transportation-related projects.”

Not intended, Reames believes, was the use of revenue approved by voters to set up a Small Local Business Enterprise (SLBE) program, a $614,457 expenditure with $219,378 in personnel costs, another $250,231 in attorneys fees, $122,760 for a software system and $13,000 worth of website development costs, among other expenses.

The SLBE has a staff of five – two certification/compliance specialists, an assistant procurement director, an outreach specialist and an education specialist. Assuming all were paid evenly, which they almost certainly were not, the average salary would be $43,875. A Freedom of Information Act request for their salaries from Richland County has not yet been responded to.

The PDT team also has a large payroll budget, with $400,000 approved for seven management personnel:

Sonny Timmerman, M. B. Kahn, Senior Program Manager

David Beaty, ICA Engineering, Deputy Program Manager

Dale Collier, Brownstone, Procurement Director

J. C. “Clem” Watson, ICA Engineering, Inc., Construction Eng. Manager

Jennifer Bragg, Davis & Floyd, Assistant Program Manager

Anthony Lawrence, Brownstone, Assistant Program Administrator

Ross Tilton, M. B. Kahn, Program Administrator

Additionally, the hiring of two public relations firms was questioned by the Dept. of Revenue audit, specifically two $1.5 million contracts to Campbell Consulting Group and BANCO Bannister Company. On the same invlice, “Exhibit J” in the contrct, the entire contract with the PDT is estimated at $81.9 million, including $27.5 million for Brownstone Construction Group and a $30.1 million “lump sum” payment to the PDT as of Oct. 28, 2014.

The DOR letter, addressed to Richland County administrator Tony McDOnald, concludes with stern language and a warning.

“As outlined above, Council has misappropriated a significant amount of Penny revenue and is scheduled to spend millions of additional dollars over the next several years for expenditures falling outside the parameters of the transportation tax laws.

“The County should take action to correct these expenses both prospectively and by reimbursement for previously paid amounts.”

THE BLAME GAME

Inside the halls of Richland County government, the DOR letter’s impact has been enormous.

“People were shocked. Beyond shocked,” county council chairperson Torrey Rush said. ‘We were surprised there was an audit to begin with, but we complied with everything (DOR) asked of us.

“We had no idea that this would be the result. I can tell you candidly that it was a total surprise, the strong verbiage in that letter.”

Rush said the criminal investigation is particularly troubling, especially since no information about individuals or charges was shared with county council.

“I haven’t heard anything about any investigations from law enforcement, Rush said. “That’s above my pay grade and is between SLED and DOR for the criminal component. I’m sure they’ll let us know.”

Rush said some problems with the program were to be expected.

“From my perspective, when you look at a program of this size, it’s going to be a fluid process,” Rush said. “It’s going to be, ‘how do you get better?’ We’re three years in, knew it was going to be a fluid process rather than a set one that can function the same way for 20 years.

“We put things in place then fine tune. That’s how you have to look at it.”

As for what steps the county will take, everything is on the table right now as the public information side deals with an avalanche of FOIA requests and politicians privately tell The Nerve they’re concerned about the political damage this does to the body’s credibility and public trust.

Behind closed doors, sources tell The Nerve that finger-pointing already has begun.

“The Richland County procurement department has had nothing to do with the Penny tax solicitations,” a source who asked not to be identified said. “They (PDT) have their own team in place that handles the road bids and does not include the procurement department.

“The PDT team is operating off their own procurement procedures that they wrote that to my knowledge wasn’t approved by the county procurement office or our legal department.”

That practice is specifically against the language of the original PDT contract with the county under the heading “Task 13,” which allocates $105,000 to establish procedures whereby “The PDT will coordinate with County Procurement, SLBE staff and County Attorney’s office to begin the implementation of each of these procurement activities.

“This will include extensive coordination meetings with the County’s Procurement Department to develop streamlined strategies and documents for the Penny Tax Program. These efforts will be led by the Team’s Procurement Director (Dale Collier) and Procurement Manager (Nancy Hilliard).”

The guiding principle of PDT’s procurement process, the agreement reads, is that “procedures will be established to expedite Owner signature of documents, pay application reviews, etc. so as not to slow down payment processes.”

Multiple insiders tell The Nerve problems that problems with that process arose immediately and suggested that the resignation of former county procurement director Rodolfo Callwood in April of 2014 was tied in part to the traditional procurement process having been circumvented from the beginning.

Attempts to reach Callwood at his home number were unsuccessful.

For now, all eyes will be on the PDT.

“Another check we put in place was even though it’s a 5-year contract with the PDT team, technically every year it’s reviewed,” Rush said. “So we could get out of it.”

Now under fire as the focus of intense media scrutiny, public pressure and state law enforcement interest, the shiny veneer of the Penny Tax’s promise has cracked.

“People are scrambling starting to point fingers at each other trying to figure out where the breakdown is,” anther source tells The Nerve. “The whole thing is a mess.”

Reach Aiken at 254-4411. Email him at ron@thenerve.org. Follow him on Twitter @RonAiken and @TheNerveSC.